What is the difference between a registered account and an unregistered account?

Posted in RESP, RRSP, RRIF, TFSA, Family Trusts, Endowments, Investments, IPP, Holding Company, Estate Planning

There are a number of differences between registered and unregistered investment accounts, but the main differences mostly revolved around tax.

The reason that the government has required that some investment accounts be registered is to make sure those accounts qualify for the various tax incentives being offered to investors. For instance, RRSP accounts and RRIF accounts have tax implications when you are putting money into them (RRSP’s) or taking money out of them RRSP’s, RRIF’s) The government requires that these accounts be registered so that they can monitor the inflows and outflows from them and apply tax accordingly.

TFSA’s are also a form of registered account, again to monitor the tax implications of investing in them. In the case of the TFSA however, the registration of the accounts allows for the investment returns inside these accounts to be tax exempt.

There are a number of other types of registered accounts – LIF’s (Life Income Funds) LIRA’s (Locked In RSP Account), etc. – but all of the registered accounts have one thing in common, a special tax status for investments held inside of them.

Unregistered Investment accounts do not usually have any special tax status. Savings and chequing accounts are two simple examples, but investment accounts can also be unregistered.

A holding company and an investment portfolio in either a cash account or margin account are examples of investment accounts that do not require registration.

If you would like more information about which style of investment account is right for your particular situation, please give us a call.