Summary: The spousal RRSP is a great way to reduce current taxes, but if you’re planning on using the money in that spousal RRSP soon, be aware of the rules concerning who declares the income!

Disclaimer: As this article will demonstrate, I’m not a tax expert, lawyer, CPA or anything else. Use with discretion, some assembly required.

I made substantial use of spousal RRSPs during my working life. Spousal RRSPs are a way for the higher earning spouse to take advantage of the lower earning spouse’s unused RRSP contribution room, thus leading to a lower overall tax bill¹. All good so far.

Some vocabulary will help with the next bit.

• The contributor is the person providing the cash for the spousal RRSP and is the one who gets the tax deduction. Usually this is the higher income spouse.
• The annuitant is the person whose name is on the spousal RRSP statements. This is usually the lower income spouse.

What most primers on spousal RRSPs don’t mention is that there is a restriction when it comes to withdrawing from the RRSP². Paraphrasing the source material:

If the annuitant withdraws from a spousal RRSP within three years of the last contribution, the income from that withdrawal is considered to belong to the contributor, not the annuitant.

What? Why?

As with all things, there’s no free lunch. CRA doesn’t want to make tax avoidance so easy³, so this little detail will prevent the purely hypothetical scenario of a higher earning spouse making a large spousal RRSP contribution in the last year of their employment, and then getting the lower earning spouse to take out that same money at a much lower tax rate when the calendar moves from December to January.

There is one, small, bone that CRA throws our way in this case. Paraphrasing again:

If the annuitant withdrawal is instead made via a spousal RRIF, and the payment is RRIF minimum, then fine, the annuitant can declare that income.

So, as long as our lower income annuitant spouse opens a spousal RRIF, and as long as for the three years⁴ following the last spousal contribution, that spousal RRIF only pays out RRIF minimums, then all is well. The annuitant spouse declares the income, as expected.

Now of course, this rule may not matter to you. If you’re newly retired and don’t have much in the way of income, then it may not trouble you that you have to declare the income from your spouse’s spousal RRIF/RRSP. It’s just a bit more paperwork (a T2205, looks like).

In my case, I’m only taking RRIF minimums for the time being. So no extra paperwork for me.

1. And future income splitting before the age of 65 when the option becomes available to all. ↩︎
2. I’ve never myself made a withdrawal from an RRSP. That would break my rule of keeping retirement savings firewalled. And it looks to me to be an expensive proposition — your provider will surely charge a deregistration fee, your provider will have to withhold tax, and you have declare the full amount as income in the year you grab it. ↩︎
3. I have learned to be guided by the humbling tenet of: “If I think I’ve figured out a way to outsmart the taxman, it’s probable that I’m simply demonstrating an incomplete understanding of how it actually works….” ↩︎
4. To illustrate/clarify: the rule applies in the year the contribution is made, and the previous two years. So the contribution I made in 2024 will be free from all constraints in the 2027 tax year. ↩︎