Wants to shelter severance payment

Question: I have been laid off recently and expect to receive a lump sum of approximately $30,000. I have worked at this company since 1996 and I am wondering whether it is still possible to direct my company to pay me as a “retirement allowance” (up to my limit), without tax being deducted at source. I have done this in the early 90s but my company claims it is no longer possible. Could you clarify this situation? – A.B.

Answer:

The rules of the game have changed but it is still possible to do this kind of tax-free transfer if you have unused RRSP contribution room available. Basically, you can ask your company to transfer a portion of your severance payment directly to your RRSP, up to the limit of your available contribution room. If you want to show this to them in black and white, get a copy of Gordon Pape’s 2003 Buyer’s Guide to RRSPs. You’ll find complete details about how this works on pp. 108-109.

If you wish, you can order a copy at a special price for 50plus.com users. – G.P.