A recent article in the press reminded me of a trend in estate planning which appears to be taking more favor in recent times. It is not very complicated, can lead to considerable tax savings and other benefits while you are with the living. I am referring to the gifting of cash or assets during your lifetime.
Many people who consult me and other members of my practice are often surprised to learn that there is no gift tax in Canada. So cash given to your heirs, say children or grandchildren while you are alive is not generally subject to tax to either party.
After some careful evaluation of their potential estate, several of my clients have found themselves in the enviable position of having cash and assets they will not need in their lifetime. I understand by the way this has been recently termed as “never money”. If they hung on to these assets, it is likely costing them higher taxes annually, and these “never money” assets will likely cost the estate more fees (probate being a big one) and taxes, when they pass.
So many have decided to give these assets away to their heirs while they are alive. The heirs have used the funds in a manner that will likely cost less tax: For example pay down some personal debt, apply it as a deposit on a house, or turn around and invest in non-registered or registered investments.
The other benefit is these clients get to watch their heirs enjoy the gift and/or have some say on they will use it. At least they got to monitor what their heirs were doing with it. I have a client who decided to do this sometime ago, with advice from professionals and told me recently with tongue in cheek that she finds herself getting invited to family dinners on a more regular basis that in the past.
Gifting in this fashion has several benefits but must be done so in a careful manner. I would strongly urge you to see professional advice before doing so but I think you will find it is some to some of the easiest estate planning you can do, if you can do it.
Happy Canada Day and happy reading.