The Story That Shocked Canadians
When Ashley Galea’s parents passed away within the same year, she never expected that the hardest part of her grief would come from the Canada Revenue Agency.
After losing both her mother and father in 2023, the Burlington family received a staggering $669,126 tax bill — wiping out nearly all the money her parents had saved for retirement.
CTV News reported that Galea’s parents, Jackie and Michael, were a hardworking middle-class couple who spent decades saving diligently in their Registered Retirement Savings Plans (RRSPs) and eventually bought a cottage that became their dream home.
But because both spouses died in the same calendar year, their combined RRSPs — worth about $715,000 — were taxed as income on the father’s final return. The entire balance was treated as if it had been withdrawn in one year, triggering a top-tier 50% tax rate.
To make matters worse, the CRA also assessed capital gains tax on their cottage for the years before it became their principal residence, from 1998 to 2019.
In total, the family owed nearly $670,000. To keep their cottage, Ashley and her brother had to use most of their parents’ savings to pay the CRA.
“This is what happens if you die young with a large RRSP,” Galea said. “People need to know there are better vessels for wealth transfer.”
What Actually Happened — and Why It’s So Common
This heartbreaking situation is more common than people realize.
RRSPs are tax-deferred, not tax-free. Every dollar contributed grows without tax until it’s withdrawn — but at death, that deferral ends. Unless the RRSP can be rolled over to a surviving spouse, the entire balance becomes taxable income in the year of death.
In most provinces, that can push the deceased’s estate into the highest marginal tax bracket, meaning roughly half of the RRSP value goes to taxes.
If both spouses pass in the same year, the “spousal rollover” — which normally delays taxation until the second spouse’s death — is lost. Add in capital gains on real estate and there’s a perfect storm for a massive tax bill.
What Could Have Been Done Differently
While the Galea family’s tragedy is unique, it highlights key planning gaps that families can still address:
1. Plan for the “RRSP Meltdown” Before Retirement
Start drawing down RRSPs strategically in your 50s and 60s — even if you don’t need the income — to reduce future tax exposure. Move funds gradually into Tax-Free Savings Accounts (TFSAs) or non-registered investments.
2. Use Life Insurance to Cover Final Taxes
A permanent life insurance policy can create a tax-free payout that covers the estate’s final tax bill, allowing assets to pass to heirs intact. This is one of the most efficient tools for estate equalization and wealth transfer.
3. Designate Proper Beneficiaries
Ensure RRSPs, RRIFs, and TFSAs name the right beneficiaries (spouse or estate when appropriate). An improper designation can trigger unnecessary tax and probate fees.
4. Consider an Estate Freeze or Trust Structure
For those with significant assets (cottages, corporations, investments), strategies like an estate freeze or a joint partner trust can lock in capital gains and minimize tax at death.
5. Work With a Certified Financial Planner
Tax and estate planning are complex. Having a planner who can coordinate your financial, tax, and legal strategies is crucial — especially as you approach retirement.
The Takeaway: Don’t Let CRA Be Your Biggest Beneficiary
Ashley Galea’s story is a powerful reminder that building wealth is only half the battle — keeping it requires strategy.
Dying with a large RRSP may sound like a success story, but without planning, it can turn into a massive tax trap. By taking proactive steps today — melting down RRSPs, maximizing TFSAs, and leveraging insurance and estate tools — you can ensure your legacy goes to your family, not the government.
Need Help Protecting Your Family’s Legacy? 📘 Read my book The Art of Retirement to learn how to turn your retirement assets into income that lasts — without leaving CRA a windfall.
