Mary (age 68, high income) and her husband, Paul (age 65, low income), are planning for retirement. Mary has substantial funds in a non-registered investment account, while Paul has minimal savings. They want to minimize their combined lifetime tax burden. Which tax planning strategy is likely to be the most effective for their situation, considering their ages and income levels?

Question: Mary (age 68, high income) and her husband, Paul (age 65, low income), are planning for retirement. Mary has substantial funds in a non-registered investment account, while Paul has minimal savings. They want to minimize their combined lifetime tax burden. Which tax planning strategy is likely to be the most effective for their situation, considering their ages and income levels?

Answer options:

• Mary should gradually gift money to Paul to invest, ensuring he pays tax on the income generated.
• Mary should designate Paul as the successor annuitant for her RRIF to defer tax on future withdrawals. ✅ Mary should maximize contributions to Paul's spousal RRSP if she has unused contribution room.
• Mary should invest in Canadian growth stocks in her non-registered account to prioritize capital gains over dividends.

Correct answer: Mary should maximize contributions to Paul's spousal RRSP if she has unused contribution room.

Explanation: Contributing to a spousal RRSP uses Mary's contribution room but results in a tax deduction for her, while future withdrawals will be taxed in Paul's hands, who is in a lower tax bracket during retirement. Gifting non-registered funds to a spouse generally triggers attribution rules for investment income. The RRIF option does not split current income or create new deductions. Investing for capital gains might defer tax but doesn't necessarily shift income to the lower-earning spouse.