Advanced Tax Planning: Moving Beyond Compliance to Strategic Wealth Management

Seek out Strategic Tax Planning Once a Year

Preparing your tax return every April is not tax planning.  It is a data entry exercise. By the time you file your tax return it is too late to reduce your taxes for the previous calendar year.  You need to implement tax reduction strategies during the current year to have an impact on your taxes for that year.  Meet with a qualified tax expert each year during the summer to talk income tax reduction in your finances – career income, estate plan, inter-generational tax reduction, tax smart investing, corporation tax planning and windup, retirement tax planning, income splitting and more.

Tax Smart Investing

Design your investment portfolio to maximize after-tax investment returns.  Pay attention to the type of investment return you earn, not just how much you earn.  Annual trading of securities, what account you place certain products in, fee types and what products you or your spouse or children own affects tax smart investing.

Tax Wise Estate Design

Get a CPA to calculate your potential income taxes on death and work backwards to see what you can do today to reduce future income tax.  Give the kids early inheritances. Put the cottage in heirs’ names today. Grind down RRSPs in your 50s and 60s not your 70s and 80s to avoid huge taxes on death.  Carefully explore joint investment accounts to avoid Ontario probate costs.

Potentially Bad Products to Hold for Income Tax Cost

Many mutual funds and pooled funds may not be the most tax-efficient choice for taxable investors. Consider ETFs and individual securities for better tax management of your portfolio returns. For full service advisor relationships, consider paying your fees using investment counsel fees to help maximize potential fee tax write offs.  Control annual trading frequency with stocks to limit tax costs. Choose Canadian dividends over U.S. dividends to pay lower income tax. Be very careful how you invest in corporations to cut corporate income taxes.

Tax Smart Retirement Income Design 

Limit RRSP withdrawals in retirement to smaller amounts monthly alongside CPP and OAS.  Do not retire without a maxed-out TFSA to use for larger annual purchases. Take CPP between 64 and 67.  Plan withdrawals from investments a year in advance when retired.  RRIF at age 65, not 72 to shrink death tax in your estate.  Know when your RRSP is getting too large and stop contributing annually.

Explore Lesser Known Tax Breaks

• Investigate the full range of medical expense tax breaks.
• Dnte appreciated equities to charities instead of cash to pay less income tax.
• Make sure you maximize the pension tax credit.

DISCLAIMER 

Upper Canada Capital is a trade name used to carry on business related to life insurance and stocks, bonds and mutual funds products. Investment dealer dealing representatives (“Investment advisors”) registered with Manulife Wealth Inc. offer stocks, bonds and mutual funds. Insurance products and services are offered through Upper Canada Capital Inc. Banking products and services are offered by referral arrangements through our related company Manulife Bank of Canada. Additional disclosure information will be provided upon referral. Please confirm with your advisor which company you are dealing with for each of your products and services.

This publication contains opinions of the writer and may not reflect opinions of Manulife Wealth Inc. and/or Manulife Wealth Insurance Services Inc. (collectively, “Manulife Wealth”). The information contained herein was obtained from sources believed to be reliable. No representation, or warranty, express or implied, is made by the writer, Manulife Wealth or any other person as to its accuracy, completeness or correctness. This publication is not an offer to sell or a solicitation of an offer to buy any of the securities. The securities discussed in this publication may not be eligible for sale in some jurisdictions. If you are not a Canadian resident, this report should not have been delivered to you. This publication is not meant to provide legal, financial, tax or investment advice. As each situation is different, you should consult your own professional advisors for advice based on your specific circumstances.