Because tax information is such an invaluable financial-planning ally, we've compiled this
2007-2008 tax-treatment guide for RRIFs to help you "get your money's worth" out of retirement!

Tax Information and Regulation Summary
 

• Conditions and Age
• Mandatory Minimum Withdrawal 
• Source of Funds 
• Withdrawals from a RRIF Converted from a Spousal RRSP
• Contributions Made to a RRIF-Converted RRSP but not Deducted 
• Excess Contributions Made to a RRIF-Converted RRSP but not Deducted 
• Source Deductions on RRIF Withdrawals 
• Source Deductions on Non-Resident RRIFs 
• Source Deduction Exemption 
• Death of the RRIF Planholder 
• Administration Fees 
• Foreign Content 
• Pension Income Credit 
• Definitions:  
   
  • "Spouses" for RRIF purposes 
  • "Dependent Children" for RRIF purposes 
  • "Three-Year Rule" 
      

Conditions and Age
 

• Anyone with a registered retirement savings plan (RRSP) has until the end of the year in which he or she turns 71 to establish a registered retirement income fund (RRIF) -- there's no minimum age for doing so. The only requirement applies to the amounts that can be transferred into the RRIF (see section entitled "Source of Funds").
   

Mandatory Minimum Withdrawal
 

Source of Funds

The following monies are eligible for transfer to a RRIF:

Transfers directly from the financial institution that established the plan.

Transfers from an RRSP
Transfers from an RRSP that belongs to the RRIF planholder.

Transfers from another RRIF
Where the RRIF planholder is also the annuitant, the financial institution in question must pay the annuitant the amount (or balance of the minimum amount) to be withdrawn during the year before making a transfer to another institution.

Sums from a LIF
As regards transfers from a life income fund (LIF) where the RRIF planholder is also the annuitant, the latter must have withdrawn the minimum amount before transferring the remainder into his or her RRIF. The maximum that can be transferred directly into a RRIF is as follows:
 

• the difference between the maximum and minimum amounts the annuitant can or must withdraw over the course of the year.
  
  Example
  
  Minimum withdrawal:                    $1,500       Must be paid to annuitant
  Maximum withdrawal:                    $6,800
  
  Maximum withdrawal - minimum withdrawal = amount that can be transferred to RRIF
  $6,800 - $1,500 =  $5,300
   

In Quebec, the maximum amount that can be withdrawn from a LIF does not take account of the temporary income that can be earned, subject to certain conditions, by residents aged 54 to 64.

Transfers from an annuity purchased at RRSP maturity
An annuity purchased when an RRSP matures can be transferred to a RRIF either in whole or in part, annuity terms permitting.

Transfers from an RPP
A registered pension plan (RPP) can be transferred to a RRIF if they constitute a direct transfer of a single amount that does not include employer contributions.

Transfers from the RRSP, RRIF, or RPP of a former spouse 
Transfers to a RRIF can come from the RRSP, RRIF or RPP (provided the latter is a single amount that does not include employer contributions) of the RRIF planholder's former spouse if the two parties are no longer living together and the transfer is conducted pursuant to a decree, an order or a judgment of a competent tribunal or under a written agreement relating to a division of property between the member and former spouse in settlement of rights arising out of or on a breakdown of their marriage or common-law relationship.

Transfers from the Quebec RRIF or LIF of a deceased person
The Quebec RRIF or LIF of a deceased person can be transferred to the RRIF of the successor annuitant. A federal LIF, however, must be transferred to the surviving spouse's locked-in RRSP.

Withdrawals from a RRIF Converted from a Spousal RRSP
 

• Where amounts are withdrawn from a RRIF established pursuant to the conversion of a spousal RRSP, the "three-year rule" that would have applied to withdrawals from that RRSP then apply to any withdrawals from the RRIF in excess of the annual minimum.
   
    
  • The mandatory minimum withdrawal is always taxable in the hands of the annuitant.
    
    
  • Any withdrawals in excess of the mandatory minimum are subject to the "three-year rule".
    
     
• The "three-year rule" applies to spousal RRIF withdrawals made in the period following contributions to a spousal RRSP (and which must include three consecutive periods ending December 31). It determines whether the RRSP (RRIF) holder or the contributor is taxed on such withdrawals.
  
  Example:
  
  
  
  • December 28, 2006: Andrew contributes $5,000 to an RRSP for his spouse Marilyn.
    
    
  • April 15, 2007: Marilyn converts her spousal RRSP to a RRIF.
    
    
  • 2008: Marilyn's mandatory minimum withdrawal is $2,000. She withdraws $3,000. Who will be taxed on this amount?
    
    
  • January 4, 2009: Marilyn's mandatory minimum withdrawal is $2,500. She withdraws a total of $5,500. Who will be taxed on this amount?
     

Years
Action	2006	2007	2008	2009
Contribution made by Andrew to Marilyn's spousal RRSP	December 28 $5,000	$0	$0	$0
Conversion of spousal RRSP to a spousal RRIF		April 15
Mandatory minimum withdrawal	N/A	$0	$2,000	$2,500
Amount in excess of the mandatory minimum amount	$0	$0	$1,000	$3,000
Set period following the last spousal RRSP contribution so that Andrew is not taxed on withdrawals.	December 31, 2006	December 31, 2007	December 31, 2008
Person taxed on withdrawals.	N/A	N/A	Marilyn will be taxed on the mandatory minimum withdrawal. Andrew must pay taxes on the $1,000 excess amount.	Marilyn will be taxed on the entire withdrawal.

To avoid having to include the amount withdrawn * from the spousal RRSP by Marilyn in his income, Andrew must not have made any contributions to this plan during the withdrawal year or in the two previous calendar years (i.e., three consecutive periods ending December 31). Otherwise, as a plan contributor, he will have to include Marilyn withdrawn by Marilyn as annuitant in his income.

*Accumulated total of withdrawals in all financial institutions.

• The amounts that must be included in the contributing spouse's income under the "three-year rule" do not qualify for the other spouse's federal pension income credit (see section entitled "Pension Income Credit").
   
• Both spouses must attach a federal T2205 or Quebec TP-931.1 form to their income tax return (as applicable). These forms make it possible to determine that portion of the withdrawals that will be taxable.
   
• The "three-year rule" ceases to apply:
  
   
  • when the annuitant and his or her legal or common-law spouse separate because of a marriage breakdown;
    
    
  • as of the year the annuitant or the latter's spouse dies;
    
    
  • when one of the spouses is recognized as being a non-resident of Canada.
    
    In the above circumstances, all withdrawals will be taxable in the hands of the RRIF planholder.
     

Contributions Made to a RRIF-Converted RRSP but not Deducted
 

• If you have contributed to your RRSP because you had unused contribution room, and have not yet claimed this contribution as a tax deduction, you can do so even after you turn 71.
   
• When completing your tax return(s), you should deduct only the amount paid into an RRSP that