As I took a client to lunch a few weeks ago, something caught my eye while we were waiting to be seated. An elderly couple was in front of us waiting to be directed to their table. They appeared to both be well in to their seventies, based on their hunching backs, grey hair and overall appearance. When the hostess came to guide them to their seat, the elderly gentleman took his wife gently by the arm and helped her slowly along. The tenderness in his manner was as telling as the twinkle in her eye. This was a moment for them both. A date, perhaps one of thousands over their lifetime together.
I generally find myself amused by the corny photo's of ridiculously happy and good-looking senior couples on the brochures my industry produces. Many of them look like younger actors with grey-painted hair, and supermodel tans, sprinkled with a few wrinkles for good measure. Others appear to have undergone a sort of reverse-airbrushing, or to have been injected with an overdose of happy potion designed to plasticize their existence.
The story is told of an aging movie actress who posed for such an advertisement. When she saw herself in the touched-up photo, looking fifteen years younger than she should, she was deeply offended, and quipped: "Change it back. I worked hard for those wrinkles!"
The truth is I envy that old couple at the restaurant. They have earned that halted gate, that tender touch, that warm smile that speaks of their lifetime together.
Growing old might have its aches and pains, but it beats the alternative. If we all are headed there, we might as well do so paying as little tax as possible. Here's one strategy to keep in mind: Pension sharing.
The Canada Pension Plan (CPP) benefit plan allows married and common-law partners to share the pension benefits with each other. Spouses should consider sharing their CPP retirement pensions if the higher income spouse also receives a larger CPP benefit. By electing to share their pensions, a portion of the higher income spouse's retirement pension may be received by the lower income spouse and taxed in the lower income spouse's hands, thus lowering the family tax bill.
WHO IS ELIGIBLE FOR CPP SHARING?
To qualify for CPP retirement pension sharing, both spouses must be:
A spouse in an ongoing relationship;
60 years of age or over; and
A recipient of a pension benefit from CPP or a non-contributor to CPP
APPLICATION FOR CPP SHARING
The application form for sharing CPP retirement pension benefits can be downloaded from www.hrsdc.gc.ca/en/isp/pub/factsheets/sharing.shtml. Supporting documents that must accompany the application include certified copies of birth certificates and SIN numbers (if applying for retirement pension benefits at the same time) and a certified copy of the marriage certificate or proof of a common-law relationship.
THE EFFECT OF SHARING CPP
The pension sharing process combines both spouses' pension entitlements that have accumulated during the time the spouses have lived together, and reallocates 50% of the combined entitlements to each spouse.
TERMINATION OF CPP SHARING
The sharing of retirement pension payments ends at the earliest of:
The month in which either spouse dies;
The 12th month after a separation;
The month of divorce;
The month that the non-contributing spouse becomes a contributor; or
The month following the approval of a written request by both spouses to terminate the assignment.
When not to Share CPP Pensions
Assignment of CPP retirement pensions should be avoided where pension entitlement accumulated by the lower income spouse exceeds that of the higher income spouse during the time they live together.
This publication is not intended as nor does it constitute tax or legal advice. Readers should consult their own lawyer, accountant or other professional advisor when planning to implement a strategy.
Mark Ryan is an advisor in Prince George with RBC Wealth Management, Dominion Securities (member CIPF) and can be reached at [email protected].
