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By Julie Cazzin with Allan Norman
If we’re entering a prolonged inflationary period, you may be best to preserve and grow your capital as much as you can
By Julie Cazzin with Allan Norman
Q: I am 65 years old and my wife and I have pensions that total $95,000 per year plus a non-registered portfolio of $5 million that annually generates $95,000 in dividends. There is $2.3 million in unrealized capital gains in this non-registered account. We also have $2.5 million in registered retirement savings plans (RRSPs) and $240,000 in tax-free savings accounts (TFSAs). I am concerned the capital gains inclusion rate is going to go up from 50 per cent to 75 per cent, so I am thinking of crystalizing the capital gains on half of my investments this year by selling some equities. What do you think? I’d also like your opinion on the best drawdown strategy. Our current pension plus dividend income is enough for us, and we occasionally gift some money to our three kids. — Bob in Ontario
FP Answers: Bob, it’s possible the capital gains inclusion rate will increase, but that’s been a source of speculation for years. Don’t get too focused on one thing and make a change that could later be seen as a mistake. Increasing taxes seems to be a viable option for governments given their debt loads, but what if instead they allow inflation to rise as they have in the past?
Think about the mortgage you took out 30 years ago. I bet it seemed like a lot of debt at the time. I’m guessing if you took on the same level of debt today, it wouldn’t seem so big. This is an example of using inflation to shrink debt. If we’re entering a prolonged inflationary period, you may be best to preserve and grow your capital as much as you can.
Selling half of your non-registered investments today and repurchasing different investments, or waiting 30 days to repurchase the same investments, means paying an extra $252,000 in tax — shrinking your investments by $252,000. Modelling this, I can see a relatively small advantage by selling today if the inclusion rate rises to 75 per cent and stays there, you live another 30 years, and I don’t consider changing inflation rates.
But what if you sell and the inclusion rate doesn’t change? That’s an “oops.” The only reason you should do this is if you need the money in the next year or two. Remember, tax-efficient investing means you want to avoid tax, defer tax and earn tax-preferred income such as capital gains and dividends.
Rather than focusing on the inclusion rate, what are your thoughts on developing a family plan? It would mean changing your mindset from accumulating more for you and your wife to accumulating more for your whole family. It’s a different mindset and not everyone wants to, or can, make the mental shift.
Think of the opportunities, though. You’ll be working with five people in different tax brackets, with different investment opportunities. Your children may still have RRSP and TFSA contribution room, and there may be government money in the form of registered education savings plan (RESP) grants.
The time to sell some non-registered money and repurchase the same investments right away in your children’s names is when the next market crash comes. The future growth, income and tax liabilities will be in their names, not yours. Maybe the biggest benefits to family planning are preparing your children to receive a large inheritance without squandering it and seeing both them and your grandchildren flourish.
With your pension and dividend income already supporting your lifestyle, what else do you want to do with your money? When do you want to do it? Do you want to enhance your lifestyle, help your children or give to charity? Anything else?
Even if you start gifting money, you’re still likely to have some tax challenges with the income from your registered retirement income fund (RRIF) that you don’t need. Your best withdrawal strategy may be to let your RRIF investments grow tax sheltered and keep drawing down on your non-registered accounts. Yes, your estate will have a big tax bill, and your kids will wonder why you ever invested in RRSPs, but I think this will give you the largest after-tax estate.
Maybe it’s also worth looking at life insurance to offset the tax. Or look at trusts. A joint-partner trust will help take care of the $250,000 in probate I am projecting. If you are interested in this option, it may be time to involve your lawyer and accountant to help you with the details.
Bob, it may make sense to start thinking in terms of family planning and consider working with a lawyer, accountant and financial planner, all in sync with what you want to achieve. Approaching your tax plan this way will likely be your best financial strategy.
Allan Norman, M.Sc., CFP, CIM, RWM, is both a fee-only certified financial planner with Atlantis Financial Inc. and a fully licensed investment adviser with Aligned Capital Partners Inc. He can be reached at www.atlantisfinancial.ca or alnorman@atlantisfinancial.ca. This commentary is provided as a general source of information and is intended for Canadian residents only
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TORONTO – Canada’s main stock index was up more than 250 points in late-morning trading, led by strength in the base metal and technology sectors, while U.S. stock markets also charged higher.
The S&P/TSX composite index was up 254.62 points at 23,847.22.
In New York, the Dow Jones industrial average was up 432.77 points at 41,935.87. The S&P 500 index was up 96.38 points at 5,714.64, while the Nasdaq composite was up 486.12 points at 18,059.42.
The Canadian dollar traded for 73.68 cents US compared with 73.58 cents US on Thursday.
The November crude oil contract was up 89 cents at US$70.77 per barrel and the October natural gas contract was down a penny at US2.27 per mmBTU.
The December gold contract was up US$9.40 at US$2,608.00 an ounce and the December copper contract was up four cents at US$4.33 a pound.
This report by The Canadian Press was first published Sept. 19, 2024.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD)
The Canadian Press. All rights reserved.
Losing a loved one is never easy, and the legal steps that follow can add even more stress to an already difficult time.
For years, families in Vancouver (and Canada in general) have struggled with a complex probate process—filled with paperwork and legal challenges.
Thankfully, recent changes to Canada’s probate laws aim to make this process simpler and easier to navigate.
Let’s unearth how these updates can simplify the process for you and your family.
Probate might sound complicated, but it’s simply the legal process of settling someone’s estate after death.
Here’s how it works.
Probate ensures everything is done by the book, giving you peace of mind during a difficult time.
Several updates to probate law in the country are making the process smoother for you and your family.
Here’s a closer look at the fundamental changes that are making a real difference.
Now permanent in many provinces, including British Columbia, wills can be signed and witnessed remotely through video calls.
Such a change makes estate planning more accessible, especially for those in remote areas or with limited mobility.
Smaller estates, like those under 25,000 CAD in BC, now have a faster, simplified probate process.
Fewer forms and legal steps mean less hassle for families handling modest estates.
Courts can now approve wills with minor errors if they reflect the person’s true intentions.
This update prevents unnecessary legal challenges and ensures the deceased’s wishes are respected.
These changes help make probate less stressful and more efficient for you and other families across Canada.
Working with a probate lawyer in Vancouver can significantly simplify the probate process, especially given the city’s complex legal landscape.
Here’s how they can help.
Probate lawyers ensure all legal steps are followed, preventing costly mistakes and ensuring the estate is managed properly.
They manage all the paperwork and court deadlines, taking the burden off of you during this difficult time.
If conflicts arise, probate lawyers resolve them, avoiding legal battles.
With a probate lawyer’s expertise, you can trust that the estate is being handled efficiently and according to the law.
With a skilled probate lawyer, you can ensure the entire process is smooth and stress-free.
The updates to probate law make a big difference for Canadian families. Here’s why.
With these changes, probate becomes smoother and more manageable for you and your family.
Even with the recent changes, being prepared makes probate smoother. Here are a few steps to help you prepare.
These simple steps make the probate process easier for everyone involved.
Recent updates in probate law are simplifying the process for families, from virtual witnessing to easier estate rules. These reforms are designed to ease the burden, helping you focus on what matters—grieving and respecting your dead loved ones’ final wishes.
Despite these changes, it’s best to consult a probate lawyer to ensure you can manage everything properly. Remember, they’re here to help you during this difficult time.
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD)
The Canadian Press. All rights reserved.
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