Please join us for an informative and informal session to talk about practical ways in which you can ease your stress in caring for your aging parents. We’ll answer such questions as:

• How far should I go to save 1.4% in probate fees?
• Joint ownership of assets: what are the myths, costs, benefits, and disadvantages?
• Is there a way I can reduce the chances of fraud and vulnerabilities for my aging parents?

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You may have arranged your finances such that the last cheque you ever write bounces, but if you expect to have funds left over in your Registered Retirement Savings Plan (RRSP) and Registered Retirement Income Fund (RRIF), they can become a welcome source of funds for your chosen charities as part of your estate plan.

There are two ways you make a charitable gift of your registered retirement funds, both of which are equally as tax effective, but each achieves different planning objectives:

(1) Through your Will and estate plan

This is the traditional method, which names your estate as the beneficiary on the registered account documentation. Naming your estate ensures that all your assets are in a single account and get distributed according to your wishes outlined in your Will. A disadvantage of this method is that it inflates the value of your estate, which may increase executor and probate fees. Another downside is that this form of a donation (a bequest) takes longer to be distributed to your chosen charities than a direct donation.

(2) Direct designation as a gift

The second way names the charities as the beneficiary on the account documentation. This method allows the donation to bypass your estate and therefore avoids probate. It also separates family beneficiaries from charitable beneficiaries, which can help preserve privacy. Please note that some financial institutions do not permit multiple beneficiary designations, so you may need to modify your Will.

Did you know that donating your registered funds to a charity generates a tax credit at least equal to the tax owing on the funds at the time of death?

Donations can be claimed against 100% of net income in the year of death. And if the donation is too large to claim in the year of death, it is possible to carry back donations to claim against 100% of net income in the preceding year. This 100% contribution limit can eliminate all tax in the final two years if the gift is large relative to income.

Practical Tips:

• The full value of registered funds is taxable on the deceased's final income tax return. While registered funds can be rolled over tax-free to a surviving spouse/partner, tax deferral ends with the death of the second spouse. It typically makes sense to take advantage of the tax-free spousal rollover option to continue to defer tax payment.
  
  
• After an RRSP becomes a RRIF at age 71, there are mandatory withdrawals according to an age-based formula, so the account value typically begins to decline. If you have a specific amount that you'd like to donate to a charity, consider making a gift through your Will: a bequest. Conversely, if you wish to offset the taxes owing on the registered funds, a direct designation is a simple way to ensure the tax liability and credit match.
  
  
• Some donors want to include charities in their estate for privacy purposes. A direct designation gift of registered funds is a good way to preserve privacy, as the charities only receive a cheque from the plan beneficiary. Otherwise, the charity may receive detailed family and financial information as part of the estate administration process.

This article is for information purposes only. It is recommended that individuals consult with their own tax advisor before acting on any information contained in this article.

Are you doing everything you can to minimize your family's taxes? You know that Canadian taxes are progressive: tax rates increase as you earn more income and move into higher tax brackets. But do you know that a higher income earner can transfer some income to a lower income earner to be taxed at a lower rate? This is known as income splitting and there are a few ways you can take advantage of the options – but watch out for the attribution rules.

First of all, every individual and family tax situation is different, so work with a tax advisor to tailor a plan to your specific needs. But to get you thinking, here are few ideas on how family members can work together to save on their taxes.

1. Take advantage of the prescribed rate: The Canada Revenue Agency (CRA) states a prescribed rate at which one spouse can lend money to another spouse.

Here's how you can benefit: if one spouse has a lower income, that spouse is probably taxed at a lower rate. If so, it may be advantageous for the higher income spouse to transfer money to the lower income spouse, who in turn invests it. The lower income spouse can then earn investment income that will be taxed at a lower rate.

Attribution rules dictate that the higher income earner must officially loan the money to the lower income spouse – otherwise the investment earnings are taxed in the hands of the higher income earner and the strategy is thwarted!

The loan must be at an interest rate no lower than the CRA prescribed rate. There are a few more details that you'll need to be aware of so speak with your tax advisor if you think this strategy could help you.

2. Tax Free Savings Accounts: As with an RRSP, it is possible to contribute to a TFSA for your spouse. It is even possible for parents to contribute to a TFSA for their adult children over the age of 18.

Unlike an RRSP, attribution rules do not apply to TFSAs. This means that you can give your lower-income spouse $5000/year for their TFSA rather than lend them the money for investments outside the TFSA.

Note that while you receive the benefits of tax-free capital gains in your TFSA, you are not able to claim capital losses.

3. Transfer losses between spouses: one spouse may accrue capital losses while the other has realized capital gains during the previous three years. There is a way to apply the losses incurred by one spouse against the gains of the other. It is particularly important to consult a tax advisor before implementing a plan to transfer losses between spouses.

4. Gifts to family members: a taxpayer who owns assets with an unrealized loss (i.e. you own shares that have dropped in value, but you haven't sold them for a loss yet) may realize capital losses by giving them to adult children. This can be done directly, or through a trust. The adult child is deemed to have received the gift at fair market value, but the taxpayer keeps the capital loss to offset capital gains.

Furthermore, if the asset given to the child entails an income component, the child will likely be taxed on that income at a lower tax rate.

Transfers of this type to adult children do not fall into the category of superficial losses (these are losses that the taxpayer is not allowed to claim against capital gains) whereas transfers to a spouse might.

While some people are comfortable managing their own investments, many are not. They find the idea of creating a plan for allocating their assets bewildering, choosing a mutual fund intimidating, and designing an investment portfolio to be one more thing for which they have neither the time nor the expertise.

Perhaps you want to start a university fund for your child. Maybe you are concerned that you're not doing enough to save for retirement. Or maybe you simply feel the need to get your financial house in order.

My goal here is to provide some basic information you can use to find an advisor that most likely has the expertise and interests to match your needs – one who offers the services you want on terms you understand and accept.

'Investment Advisor' describes a broad range of people who are in the business of giving advice about securities (including stocks, bonds, mutual funds and annuities). Institutions may use a variety of titles for Investment Advisors such as Investment Counsel, Wealth Advisor, or Portfolio Manager, each of which has a distinct meaning.

Investment Advisors provide ongoing management of investments based on your objectives. Sometimes, you have the option to give your Investment Advisor authority to make investment decisions without having to get prior approval from you for each transaction – this is called discretionary authority.

'Broker' is the term that describes people who are in the business of buying and selling securities (stocks, bonds, mutual funds) on your behalf. Individual salespeople employed by brokerage firms are often called stockbrokers, but may also have titles such as Financial Consultant, Financial Advisor, or Investment Consultant.

'Financial Planner' generally refers to people who develop and sometimes implement comprehensive financial plans based on your long-term goals. A comprehensive financial plan typically covers such topics as estate planning, tax planning, insurance needs and debt management in addition to investment-oriented areas like retirement and education planning.

Your search should begin with a simple-sounding question: what services are you looking for? Do you want assistance with buying and selling securities? Would you like ongoing management of your investments? Do you need a financial plan?

I would be pleased to speak frankly with you about your needs and help you figure out which services are best for you.