Income splitting
Pension income splitting If your spouse has a lower marginal tax rate, consider splitting eligible pension income with them to reduce your family’s overall tax bill. Eligible pension income includes, but is not limited to, life annuity payments from a pension plan and, when you’re age 65 or over, it also includes withdrawals from your registered retirement income fund (RRIF), life income fund (LIF), restricted life income fund (RLIF), locked-in retirement income fund (LRIF) and prescribed RRIF accounts. Generally, you can allocate up to 50% of eligible pension income to your spouse.
Withdrawals from your registered retirement savings plan (RRSP) are not considered eligible pension income. Please note that you must be age 65 or over to split eligible pension income for Quebec tax purposes.
Spousal RRSP contributions
If your income at retirement is expected to be higher than that of your spouse, consider making a spousal RRSP contribution. If you have unused RRSP contribution room and your spouse has not reached the year in which they turn 72, you can continue to make spousal RRSP contributions even if you’re over age 71. Making a spousal contribution will provide you with a deduction on your tax return and may help to equalize your family’s future retirement income.
Pension sharing
If you and your spouse are both age 60 or over and are receiving or are eligible to receive Canada Pension Plan (CPP) or Quebec Pension Plan (QPP) benefits, consider sharing your CPP or QPP benefits. If only one of you is eligible for CPP or QPP benefits, it may still be possible to share the benefits. If you apply for pension sharing, Service Canada or Retraite Québec will recalculate the pensions paid to you and your spouse. Pension sharing may be beneficial where some of the higher-income spouse’s CPP or QPP is paid to the lower-income spouse and taxed in their hands at their lower marginal tax rates.
Tax minimization strategies
Forgotten RRSP contribution If you’re turning age 71 this year and are still earning RRSP contribution room or have unused room carried forward, consider making a final RRSP contribution (based on your earned income for 2025) by December 31, 2025, before your RRSP matures. Although you’ll be subject to a 1% over-contribution penalty tax for the month of December, the benefit of the tax deferral and compounding growth in the RRIF may outweigh the penalty.
Tax-free savings account (TFSA) contributions Consider contributing to your TFSA. The annual TFSA contribution limit for 2025 is $7,000. If you lived in Canada since 2009 and were eligible to open a TFSA but have not yet contributed to one, your contribution limit would be $102,000 as of January 1, 2025. Any income earned or capital gains realized in the TFSA as well as any withdrawals you make from the account are generally tax-free and do not affect your federal government income-tested benefits such as old age security (OAS) and the guaranteed income supplement (GIS). The income you earn or the withdrawals you make will also not impact your entitlement to federal tax credits such as the age amount.
The TFSA can also be used to shelter money you may not currently need. For example, if you don’t require your entire mandatory minimum RRIF payment to fund your living expenses, consider contributing any excess after tax amount to your TFSA.
Use your spouse’s age for RRIF minimum payments
If you choose the maturity option of converting your RRSP to a RRIF, starting in the year after the year you establish the RRIF, you have to be paid an annual minimum amount. Among other factors, the minimum amount is based on your age at the beginning of the year. If you have a younger spouse and do not need the mandatory annual minimum RRIF payments based on your age, you can elect to use your spouse’s age when setting up the RRIF. Doing so will reduce your annual minimum RRIF payments.
Government benefits
OAS
OAS benefits are available to individuals who are age 65 or over where certain eligibility requirements are met. The amount of your OAS pension is determined based on how long you’ve lived in Canada after age 18. You can postpone receiving your OAS payments for up to five years with the benefit of receiving a higher OAS monthly payment.
Assuming you previously didn’t defer your OAS payments, the maximum benefit for January to March 2025 is $727.67 per month. If you are age 75 or over, the maximum monthly OAS benefit is $800.44 in the first quarter of 2025. OAS is an income-tested benefit that’s subject to a recovery tax, more commonly known as OAS claw back. For 2025, the claw back is at a rate of $0.15 for every $1 of net income over $93,454. The net income you report on your tax return for the prior year is used to estimate your OAS clawback amount for the current tax year. If your income in the prior year was uncharacteristically high due to a unique one-time taxable transaction (for example, a large severance payment or a large capital gain from selling your business), you can submit a request to reduce the amount withheld on your future OAS pension payments if you expect your current year’s income to be lower. You can submit the request by completing CRA Form T1213 (OAS) – Request to Reduce Old
Age Security Recovery Tax at Source.
CPP and QPP
If you’ve ever worked in Canada, you may be eligible to receive CPP or QPP benefits. The CPP and QPP payments are based on your past contributions to these programs and are not income-tested. You receive your entitlement based on what you’ve contributed and there is no clawback. You can start receiving CPP and QPP as early as age 60, but you’ll receive a reduced pension if you choose to receive the payments before age 65. You’re also able to delay your CPP or QPP pension payments to receive an increased monthly amount in the future. Your pension payments will be increased by a certain percentage for each month you delay receiving it, up to age 70 for CPP and 72 for QPP. For additional information on these pension plans, please ask your RBC advisor for separate articles on CPP and QPP.
Tax credits
Age amount
If you’re age 65 or over, you may be able to claim the age amount on your tax return. The age amount is a federal non-refundable tax credit of $1,354 (15% of $9,028 for 2025). The credit is reduced by $0.15 for every $1 of net income above $45,522, and is eliminated when your net income is $105,709 or higher. You may also be able to claim a corresponding provincial or territorial age credit.
If you don’t need to use all of the age credit to reduce your federal taxes to zero, you can transfer any unused amount to your spouse. If you and your spouse can’t use the amount because you have no taxes to pay, the age amount unfortunately can’t be carried forward or back to other tax years and will be lost.
Pension income
You may be entitled to receive a federal non-refundable pension income tax credit on the first $2,000 of eligible pension income you receive in the year. Eligible pension income includes, but is not limited to, life annuity payments from a pension plan and, when you’re age 65 or over, it also includes withdrawals from your RRIF, LIF, RLIF, LRIF and prescribed RRIF accounts. OAS payments and CPP and QPP payments do not qualify as eligible pension income. You may also be eligible to claim a corresponding provincial or territorial credit. If you don’t need to use all of the credit to reduce your federal taxes to zero, you can transfer any unused amount to your spouse. Any unused amount can’t be carried forward or back to other tax years and will be lost.
Trust planning
Inter vivos trusts
Consider the benefits of setting up an inter vivos trust, such as a family trust. An inter vivos trust may be used to income split with your family members or to simply provide ongoing financial support for them. An inter vivos trust can also be used as a discrete means of transferring assets to your beneficiaries outside of your estate. Since assets in an inter vivos trust do not pass through your estate, you may be able to avoid probate taxes in most provinces and territories.
If you are age 65 or over, an alter ego trust or a joint partner trust (for you and your spouse) may provide you with additional tax and estate planning opportunities. Speak to a qualified tax advisor to determine if these types of trusts are right for you. Consider creating a testamentary trust in your Will. A testamentary trust is an alternative to an outright distribution of your estate assets. It allows you to control the timing and distribution of assets to your beneficiaries. Testamentary trusts may be used to create solutions to complex family situations, for example, when planning for a child with a disability, a spendthrift beneficiary, minor children or a second marriage. You should consult a qualified legal advisor to discuss the merits of creating a
testamentary trust in your Will.
Gifting
Gift assets
Gifting assets to your children or grandchildren during your lifetime is a simple strategy that may help reduce the size of your estate and therefore possibly reduce probate and taxes on these assets during your lifetime and on death. For tax purposes, it’s important to recognize that when you gift assets, you’re deemed to have disposed of those assets at fair market value (FMV). Further, if you make gifts to minors, be careful of the attribution rules, which could result in the income earned on the gifts attributing back to you and being taxed in your hands.
Charitable donations
If you have philanthropic intentions, you may want to consider gifting directly to a qualified donee such as a registered charity, public foundation, or private foundation. When you donate cash, you will receive a charitable donation receipt which you can use to claim a donation tax credit and reduce your tax bill. When you donate securities with accrued capital gains, the tax on capital gains of the donation may be eliminated and you can also benefit from the donation tax credit.
Estate planning
U.S. estate tax
If you own any U.S. situs assets (which include, but are not limited to, U.S. real estate and U.S. securities, both in your registered and non-registered accounts), it’s important to examine your potential U.S. estate tax exposure. You may be subject to U.S. estate tax even if you’re not a U.S. person. Speak with a qualified tax advisor regarding strategies to minimize or eliminate your potential U.S. estate tax liability.
Estate planning
Ensure that your Will, beneficiary designations, and power of attorney documents (mandate in Quebec) are valid, up to date and still reflect your wishes.
Conclusion
This article covers some common financial planning considerations for seniors. Depending on your specific situation and objectives, you may want to consider implementing some of the strategies discussed to help in organizing and securing your financial future. For more information on any of these topics, please speak with your RBC advisor and a qualified tax advisor and/or legal advisor.