From: sharx35@hotmail.com   
      
   "Alan Baggett"  wrote in message   
   news:ffeed03c-f7bb-4e50-b332-d456faf11f2c@googlegroups.com...   
   > Four ways single seniors lose out : CRA SOTW   
   >   
   > Ted Rechtshaffen | Oct 13, 2012 8:12 AM ET   
   >   
   > Given the fact that so many more single seniors are female, this   
   > unfairness is almost an added tax on women.   
   >   
   > Becoming single in old age could cost you tens of thousands of   
   > dollars through no fault of your own. The current tax and pension   
   > system in Canada is significantly tilted to benefit couples over   
   > singles once you are age 65 or more.   
   >   
   > I don’t think it is an intentionally evil plan of the Canada   
   > Revenue Agency and other government agencies, but something has   
   > to change. Given the fact that so many more single seniors are   
   > female, this unfairness is almost an added tax on women.   
   >   
   > StatsCan recently came out with census data that said that among   
   > the population aged 65 and over, 56% lived as part of a couple.   
   > This 56% of couples was split out as 72% of men, and just 44% of   
   > women. Among those aged 85 and over, 46% of men and just 10% of   
   > women lived as part of a couple. This gap is made up of two   
   > factors. Women live longer than men, and men tend to marry   
   > younger women.   
   >   
   > Here are four ways that single seniors lose out:   
   >   
   > 1. There is no one to split income with. Since the rules changed   
   > to allow for income splitting of almost all income for those aged   
   > 65 or older, it has meaningfully lowered tax rates for some. For   
   > example, in Ontario, if one spouse has an income of $90,000 and   
   > the other has an income of $10,000, their tax bill would be   
   > $22,571. If instead, their income was $50,000 each their tax bill   
   > would only be $17,774, a pure tax savings of $4,797 per year. If   
   > you are single, you are stuck with the higher tax bill.   
   >   
   > In a couple who both pass away at age 90, as compared to one   
   > where one of them passes away at age 70 and the other lives to   
   > 90, the estate size was over $500,000 larger when both lived to   
   > age 90 – even with higher expenses   
   >   
   > 2. Let’s say the 65-year-old couple both make $50,000, and   
   > qualify for full Canada Pension Plan. In 2012, that would be a   
   > total of $986.67 per month at age 65 for both of them or $23,680   
   > annually for both combined. If one passes away, the government   
   > doesn’t pay out more than the maximum for CPP to the surviving   
   > spouse. They will top up someone’s CPP if it is below the   
   > maximum, but in this case, they simply lose out almost $12,000 a   
   > year. They would receive a one-time death benefit of a maximum of   
   > $2,500, but that is all.   
   >   
   > 3. RSP/RIF gets folded into one account. This becomes important   
   > as you get older and a larger amount of money is withdrawn by a   
   > single person each year — and taxed on income. Let’s say a   
   > husband and wife each have $400,000 in their RIF and they are age   
   > 75. They are forced to withdraw $31,400 each or 7.85%. If the   
   > husband passes away, the two accounts get combined, and now his   
   > wife is 76, with a RIF of maybe $775,000. At that amount, she   
   > would have a minimum withdrawal of $61,923. As in the first   
   > example, her tax bill will be much larger when she was 76, than   
   > the combined tax bill the year before, even though they have   
   > essentially the same assets, and roughly the same income is   
   > withdrawn.   
   >   
   > 4. Old Age Security. The married couple with $50,000 of income   
   > each, both qualify for full Old Age Security — which is now   
   > $540.12 a month or $12,962 a year combined. If the husband passes   
   > away, you lose his OAS, about $6,500. On top of that, in the   
   > example in #3, the wife now has a minimum RIF income of $61,923,   
   > and combined with CPP and any other income, she is now getting   
   > OAS clawed back.   
   >   
   > The clawback starts at $69,562, and the OAS declines by 15¢ for   
   > every $1 of income beyond $69,562. If we assume that the widow   
   > now has an income of $80,000, her OAS will be cut to $414.50 a   
   > month or another $1,500 annual hit simply because she is now   
   > single. In total, almost $8,000 of Old Age Security has now   
   > disappeared. As you can see, a couple’s net after-tax income can   
   > drop as much as $25,000 after one becomes single.   
   >   
   > On the other side, there is no question that expenses will   
   > decline being one person instead of two, but the expenses don’t   
   > drop in half. We usually see a decline of about 15% to 30%,   
   > because items like housing and utilities usually don’t change   
   > much, and many other expenses only see small declines.   
   >   
   > In one analysis our company did comparing the ultimate estate   
   > size of a couple who both pass away at age 90, as compared to one   
   > where one of them passes away at age 70 and the other lives to   
   > 90, the estate size was over $500,000 larger when both lived to   
   > age 90 – even with higher expenses.   
   >   
   > So the question becomes, what can you do about this?   
   > If two single seniors get together and write a pre-nuptial   
   > agreement to protect assets in the case of a separation or death,   
   > you can both benefit from the tax savings   
   >   
   > I have three suggestions:   
   >   
   > 1. Write a letter to your MP along with this article, and demand   
   > that the tax system be made more fair for single seniors. You may   
   > also want to send a letter to Status of Women Minister Rona   
   > Ambrose, as this issue clearly affects women more than men.   
   >   
   > 2. Look at having permanent life insurance on both members of a   
   > couple to compensate for the gaps. Many people have life   
   > insurance that they drop after a certain age. The life insurance   
   > option certainly isn’t a necessity, but can be a solution that   
   > provides a better return on investment than many alternatives and   
   > covers off this gap well. If you have sufficient wealth that you   
   > will be leaving a meaningful estate anyway, this usually will   
   > grow the overall estate value as compared to not having the   
   > insurance — and not hurt your standard of living in any way.   
   >   
   > 3. Consider a common law relationship for tax purposes. I am only   
   > half joking. If two single seniors get together and write a   
   > pre-nuptial agreement to protect assets in the case of a   
   > separation or death, you can both benefit from the tax savings.   
   > Ultimately, the status quo is simply unfair to single seniors,   
   > and that needs to change.   
      
      
      
   CRA is well aware of the fake marriage scam. Besides, why should I   
   care if someone's final estate is only $200,000 instead of   
      
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