All About Estates

Gifts from RRIFs

I get regular inquiries about donating funds from registered retirement income funds or RRIFs. The value of RRIFs has grown through careful saving and market gains, and these funds may represent surplus wealth. Some RRIF holders resent the requirement to take steadily increasing annual withdrawals from their RRIF. Add a dash of altruism and the idea of donating RRIF property arises.

The Basics

There are a couple of factors to remember when considering donating RRIF assets.

First, any withdrawal is taxed as income. So there is no advantage to donate appreciated public securities from within a RRIF. The taxation rate is not the 50% lower capital gains rate. If there is no capital gain and it will not be eliminated if securities are donated in kind.

Second, plan trustees are obliged to withhold 30% of any withdrawal for tax purposes. The withholding tax creates cash-flow problems for the would-be donor. For example, a desire to donate $100,000 is frustrated by having only $70,000 available. There is, however, a tax liability on the full $100,000 withdrawal.

Offset Donation Plan

From a tax perspective, it is a bad idea to make direct gifts from RRIFs during life. These gifts are tax inefficient and the withholding tax causes cash-flow issues. Still, it may make sense for a committed donor to use an offset plan to achieve charitable goals.

One approach is to donate appreciated publicly-list securities held outside the RRIF and withdraw an equal amount from the RRIF. The tax credit from the donation will offset the tax liability triggered by the RRIF withdrawal.

This donation is more tax effective due to nil capital gains from a gift of public securities.  It also allows the donor to reinvest funds from the RRIF in a lower tax environment that provides higher control over cash-flow. It does not eliminate the withholding tax, so it is best to make the RRIF withdrawal in December to reduce the period when the donor is out of pocket.

AMT Proposed Changes

On January 1, 2024 it is expected that Alternative Minimum Tax (AMT) will be applicable to donations from individuals for the first time.  This is worrying news for donors and the charities that rely on major donations.

The proposal is to increase the base AMT rate from 15% to 20.5%.  For individuals with net income in excess of $173,000 tax savings from donations would be reduced under the proposal.  Donation tax credits may be reduce by 50%.  Rather than nil capital gains for donation of the public securities, a 30% inclusion rate would apply.  This rate is a roll-back to 1997 levels.  Moreover, it represents a profound change in the tax policy of the last 30 years.

Donors who have a large RRIF and taxable securities may want to explore the benefits of making a large gift of public securities in 2023, before the new AMT rules come into effect.  This will allow them to receive the tax benefits described above.

The AMT proposals apply to individual not corporate donors.  Fortunately, AMT would not apply to donations in the year of death.  In other words, estate donations will not be affected.

About Malcolm Burrows
Malcolm is a philanthropic advisor with over 30 years of experience. He is head, philanthropic advisory services at Scotia Wealth Management and founder of Aqueduct Foundation. Views are his own.


  1. Yolanda

    July 20, 2023 - 1:15 pm

    Thank you so much for this article. It is a topic that has been raised with me from donors now and then, going back many, many years. And thank you for referencing AMT. Yolanda

    • Malcolm Burrows

      July 20, 2023 - 2:41 pm

      Yolanda – Glad it was helpful. I think this topic is especially relevant in 2023 due to the proposed AMT changes that affect charitable giving. Malcolm

  2. Ryan Fraser

    July 20, 2023 - 1:15 pm

    Submitting a T1213 early in the year assists tremendously on witholding tax issues for planned RRIF donations.

    • Malcolm Burrows

      July 20, 2023 - 2:40 pm

      Ryan – Thanks for the helpful addition. Can you share more about you experience with avoiding the withholding tax when there is an offsetting donation? Malcolm

      • Ryan Fraser

        July 25, 2023 - 12:52 am

        Certainly. The donor/client needs to fill out a T1213 as early in the year as possible, and should have a good idea of the amount they intend to withdrawal, and donate. The T1213 is then faxed into CRA, and in 4-6 weeks (currently around 3-4 months), the CRA will send a letter back authorizing the financial institution to withhold a reduced amount of tax based on their calculations. In most cases they say something like “You may withdrawal up to $X amount with zero tax witholding at source required”. The client then orders their institution to undertake the withdrawal, and submits the letter to the institution at the same time, allowing (usually) the full amount to be sent tax free.

        The donor most then ensure they make the donation before the end of the same calendar year as the withdrawal.

        • Malcolm Burrows

          August 9, 2023 - 7:12 pm

          Ryan –
          Thank you for this excellent information. A good reason to do planning well in advance of the gift itself! Malcolm

  3. Doris Bonora KC

    July 20, 2023 - 1:49 pm

    this was a great article . thank you. cannot understand why CRA would target philanthropy???

    • Malcolm Burrows

      July 20, 2023 - 2:44 pm

      Doris – Thanks for your comments. Good question. Why indeed would the Federal Govt be targeting charitable donations? The number of ordinary donors are shrinking and charities are increasingly depending on large donations. Especially institutional charities that also receive government funding. Treating donations as a tax issue, not a community benefit issue, is bad public policy. Malcolm

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