Q and A: My wife recently died and I am not clear on how this will change my government benefits or my income tax situation.

Question:

My wife recently died and I am not clear on how this will change my government benefits or my income tax situation. We had a significant portion of our funds in RRIFs and I also have a pension from my employer. So I believe I will still have sufficient income, but what are some the things I should be aware of?

Answer:

One of the major implications for you will be that you will no longer be able to split pension or RRIF (Registered Retirement Income Fund) income on your income tax returns. Let’s say you had significantly more pension/RRIF income than your spouse and you were using the pension income splitting provision on your income taxes to reduce your overall family tax bill. Going forward, even if you receive the same gross amount of pension/RRIF income before tax, the whole amount will now be taxable in your hands alone. As a result, the net amount to you after tax will be less than before.

You will also no longer receive your spouse’s Old Age Security (OAS) benefit – currently a maximum of $578.53 per month.

As for her Canada Pension Plan (CPP) benefit, if you receive the maximum amount – currently $1,114.17 – you will no longer receive her CPP. If you receive less than the maximum, you may receive a survivor’s benefit that brings you up to the maximum. Let’s say that previously you were receiving a CPP retirement pension of $900/mo and she was receiving $700/mo. Your new combined survivor’s benefit and retirement pension can only bring you up to the maximum of $1,114.17, it cannot exceed that amount.

There may be other implications too.Your RGF advisor can help you better understand your financial situation and how it might change going forward.