INCOME SPLITTING BEFORE RETIREMENT

Here are some ways to split income before retirement:

• Hiring Spouses and Children – If the higher income spouse is running a business they can hire their spouse or children and pay them a wage. The spouse or children actually have to do work, and the value you ascribe to it must be reasonable and supportable  
• Prescribed Rate Loan - The Income Tax Act (ITA) has attribution rules to prevent a higher income spouse from transferring assets to a lower income spouse but the higher income spouse can lend money to the lower income spouse at a prescribed rate, currently at an all time low of 1%. Once established, the loan rate does not need to be reset.  
• Spousal RRSPs – As described under the RRSP section, this strategy is less attractive because of the pension income splitting option. Having spousal RRSPs adds unnecessary complexity to a portfolio, so I generally wouldn’t bother with them anymore.  
• Savings by lower income spouse - The higher income spouse can pay all the household expenses and the lower income spouse can save all their income to build-up non-registered savings. This can help even out the capital positions of both spouses and thus even out their post-retirement income.