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The question

I have questions about spousal RRSPs. First, I understand there is a three-year period of non-contributions to any spousal RRSP before the spouse can withdraw the money without attribution rules applying. My question is: When does the three-year rule start? Is it based on the calendar year or the date of contribution or the year the money was claimed?

For example, if I make a spousal RRSP contribution on Feb. 1, 2012, and claim it as a deduction in 2011, when does the three-year window expire? If I make the same contribution but claim it on my 2012 taxes, is there a different three-year window? And if I make a spousal RRSP contribution on Dec. 1, 2012, when does the three-year window end?

My second question is: Is there a limit on how much the spouse can withdraw from a spousal RRSP per year, and if so, what is that limit based on?

Chris, Calgary

The Answer

Dear Chris in Calgary,

As you know, the spousal RRSP allows you to contribute to your wife's RRSP and use that contribution to reduce your own taxes. In cases where one spouse is in a much higher tax bracket than the other, this can be a good strategy.

As an example of how it would work, let's say a couple has $20,000 between them to contribute to an RSP, and one makes $100,000 and the other makes $50,000, it makes sense to have the full $20,000 contribution be used for tax purposes by the one earning $100,000. They can do this by contributing some or all of the $20,000 to their own RRSP and/or contributing some or all of that amount to a spousal RRSP. The reason to contribute some to a Spousal RRSP is so that in retirement, you are able to better manage taxes by doing something called income splitting. While income splitting in retirement is now easier to accomplish than before because of newer rules, a spousal RRSP can still help in some cases to ensure that a retired couple have equal incomes and thus pay the lowest amount of taxes. This is especially true if there is a large age difference between the couple.

To answer your specific questions, there is a three-year restriction on the owner of a spousal RRSP making a withdrawal. This is based on calendar years, not the three years from the last contribution. This means that if you make a spousal contribution on Feb. 1, 2012, your wife can't withdraw the funds (without a negative tax impact to you) until Jan. 1, 2015. That is calculated as the year you make the contribution plus two more calendar years. This also assumes that you make no more contributions to the spousal RRSP in 2013 and 2014. If you make a contribution any time in 2013, then your wife would have to wait until Jan. 1, 2016 to make a withdrawal without adverse tax consequences to you.

After the three-calendar year wait as described above, your wife can withdraw anywhere from $0 to her entire RRSP at any time. There are no restrictions. However, she would need to remember that all withdrawals are taxed as income to her, and to make withdrawals accordingly.

Mr. Rechtshaffen is the president and CEO of TriDelta Financial Partners, a firm that provides independent financial planning advice. He has an MBA from the Schulich School of Business and is a certified financial planner. He also writes a weekly column for Globe Investor.