Insights

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When I was 14, my father was diagnosed with cancer. The doctors gave him six months to live and six months later almost to the day he passed away. My mother was my father's power of attorney and she was spending 7:00 in the morning until 11 o'clock at night every day, Monday to Sunday at the hospital with him. So then fell to my siblings to do that. I remember distinctly my siblings coming over and going through the bills and writing checks. This isn't about whether or not you're capable, this isn't about whether or not you have some sort of expertise as a financial professional or anything like that, it comes down to how you're going to use probably one of the most scarce resources, all of us have individually as individuals have. And that's our time. And if I had to be my mother's power of attorney, I would rather spend the time, that time with her. And I think that's the freedom that you get with the service.

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We're dealing with baby boomers that upto the stage of retirement, that are caught in the sandwich generation. Still dealing with the care of their parents, also still dealing with their children. And the concern they have is just the time management for the most part.

The sandwich generation is real. It is absolutely real. We want to be able to step in when that need arises and be available for families, to help them through what is probably the most difficult situation they're ever going to have to deal with.

Being appointed as an attorney is a huge responsibility. Because you need to make financial decisions, and look after the financial assets of that individual throughout their lifetime.

One of the things that a lot of people don't realize is that they are taking responsibility. And they have to do it properly. They have to do it efficiently.

But we're here to help, I am going to be your contact. And so we are going to work together as a team. You choose what you'd like us to do and will do it and maybe there's certain things you want to take care of yourself certain aspects of the administration, maybe you want to look after the taxation, but you don't want to have to deal with the audit administration. The payment of bills, dealing with pension department, going to the various financial institutions to have the assets collected and transferred. The benefits in appointing us is that you have qualified professionals with the expertise, we have the resources to provide the accounting, to provide the investment management, to do the tax returns.

For the individuals who entrust us with the responsibility of acting on their behalf, it's giving them time to then go and invest with that family member or that friend. And to create those memories that 20 years later, you're going to look back on and say I'm really, really glad I did that.

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Do you own all the shares of your business?

If so, you may be limiting yourself from numerous tax and business transition opportunities.

An estate freeze of your shares can help minimize taxes and provide you with more flexibility.

There are a few tax benefits of an estate freeze.

Current capital gain on your shares is frozen. Any future growth is then transferred to the next generation, limiting your taxes at death.

As well, lifetime capital gains exemption can be multiplied with family members upon a sale.

You may also be able to pay dividends to lower-income adult family members subject to “Tax on Split Income” rules.

For example, if your business is worth $5MM, an estate freeze would lock in that value in your name.

Any future growth above $5MM would then accrue to the next generation.

For tax reasons, an estate freeze should be set up at least two years in advance of a potential sale — so early planning is key.

If you're retired, you know firsthand how difficult it can be to get a satisfying retirement income.

Traditional retirement Investments Like GICs and bonds continue to pay very low interest after taxes and inflation there can be very little left over.

What's more people are living longer so they need their retirement savings to last longer too.

So what can you do to maximize your after tax retirement income without taking on too much risk?

Here are a few ideas.

First, get the most out of your interest paying investments with a GIC or bond ladder.

For example, with a 5-year Bond ladder you invest equal amounts in a 1, 2, 3, 4 and 5 year bond.

Now as each bond matures you reinvest in a new five-year bond. At the end of five years you hold only five year bonds.

The advantage?

Longer-term bonds historically pay higher interest than shorter term bonds.

Second, look at other investments that pay higher income.

Some options include corporate bonds, insurance company guaranteed investments, and dividend paying stocks.

They all have higher risk than traditional GICs and government bonds, to varying degrees, but you can reduce the risk through diversification.

The key is to find the right balance between higher income and lower risk based on your individual situation.

Third, consider how different investments are taxed in your regular non-registered accounts.

For example, dividends from Canadian corporations enjoy tax advantages while interest from GICs and bonds are fully taxable.

Sticking with the tax theme, also consider income splitting with your spouse to enhance your combined after-tax income.

With this strategy you transfer income from the higher-income spouse to the lower-income spouse so your combined tax rate is lower.

You can split up to 50% of your eligible pension income like RIF income with your spouse.

You can also split income with a spousal RSP or a spousal loan strategy.

These are just a few ideas for enhancing your retirement income.

If you would like more ideas specific to your situation, I invite you to contact an RBC Wealth Management advisor.

These days it can seem like there's a tax on everything and with Canada's progressive tax system the more income you earn the higher your tax rate.

If you face a high tax burden, you'll be interested in how you can reduce it or at least manage it.

One way is with insurance.

Most people think of insurance for their home, their Auto and life.

But did you know that life insurance can help cover the taxes due when your estate is settled?

What's more there are Insurance based investment strategies that can provide tax free income during your retirement and tax-free benefits to the beneficiaries of your Estate.

Another way is with family income splitting.

Family income splitting involves transferring investment income that would otherwise be taxed at your higher tax rate to family members who are taxed at lower rates.

Here are two additional ways to split income with your family.

One, a family trust which enables you to provide funds for your children or grandchildren’s needs while reducing taxes.

Two, a spousal loan strategy which enables your lower income spouse to earn investment income at their lower tax rate.

Here's some other ways to reduce tax.

If you have an RRSP contribute as much as you can to maximize the tax deferred growth over time.

Also take advantage of the tax free savings account if you haven't done so already to earn tax-free investment income.

Next look at your non-registered savings and how the different types of investments are taxed.

Capital gains and dividends from Canadian corporations received preferential tax treatment while interest income from GICs or bonds is fully taxable at your marginal rate.

Here's a tip - put more of your interest-bearing investments in your registered accounts like your RRSP where they are sheltered from taxes, then put more of your taxed advantage dividend-paying investments into your non registered accounts.

And here's one more tip.

Always make sure you speak with a qualified professional tax advisor to get the right tax advice for you.