Is Your RRSP Creditor Proof?
June 28th, 2008 | by Editor |Canadian financial advisors provide value when they anticipate estate planning issues long before the event occurs. Here’s one important area they can help advise on: RRSP creditor protection.
If you are expecting your RRSP to pass to your beneficiaries upon your death, your creditors might suggest another use for it.
And it appears that the courts might listen. A recent court case in Ontario confirmed that, in Ontario, RRSPs with a designated beneficiary are not a part of the deceased’s estate. In this case the widow of the deceased was the beneficiary of two registered plans. Upon his death, her husband had some unpaid debts. Creditors claimed that they should be paid from the RRSP plans before any money passed to the beneficiary. The creditors won the ruling, striking serious doubt into the notion that RRSPs are creditor-proof. If you die with debt, your RRSP assets may be available to your creditors, potentially reducing or eliminating the inheritance your beneficiaries will receive.
Related article: Pay off the Mortgage or Invest in an RRSP?