| Income taxes are among the biggest expenses | | | | - No probate fees: since it is a liquid asset, it's one |
| you have to pay during your life. Canadian citizens | | | | of the best ways to pass on wealth to the next |
| may very well pay as much as almost half of | | | | generation in your family. In the event of your |
| their annual income back to the government | | | | death, they don't have to pay any additional |
| every year. Luckily, there are many tools you can | | | | probate fees and there's no tax liability. In |
| use for managing your finances in a way that | | | | provinces like Ontario, these can total up to very |
| you'll end up with significant savings and cut your | | | | large amounts - you'll be able to prevent these |
| taxes dramatically. | | | | unnecessary expenses. |
| A large part of tax savings strategies deal with | | | | - You don't pay any taxes on the proceeds. |
| spreading your earnings through your inner family | | | | Depending on your insurance package, your |
| network and thus getting the benefits of lower | | | | savings grow sheltered from taxes and you can |
| tax brackets. In this group of tools you'll find | | | | also use accumulation funds to offset your future |
| some very interesting possibilities such as: | | | | premiums with pre-tax dollars rather than after |
| - Family Loans & Accounts Structuring | | | | tax dollars. |
| - Own & Spousal RRSP Contributions | | | | - Cash values inside policies can be accessed at |
| - Claiming Home Office & Deducting Home | | | | any time within certain limits through a policy loan |
| Expenses | | | | or partial surrender. Often, these financial tools |
| - RESP Contributions | | | | can create the equivalent of a tax-free income |
| - Medical Contributions | | | | stream. However, be sure to understand that |
| - Employing family members | | | | straight cash withdrawals are subject to taxation. |
| - Donations to Charity | | | | Consult your advisers first in any case. |
| From 2009, there's also a new tool in effect called | | | | - Donations and charitable giving in the form of life |
| Tax-Free Savings Account (TFSA). It is similar to | | | | insurance policies are tax-deductible. These are |
| an RRSP account, but with some significant | | | | little known options which can involve transfer of |
| differences. For example, withdrawals are | | | | ownership to the charity, naming the organization |
| non-taxable and they don't affect other | | | | as the policy beneficiary or replacing the donated |
| government benefits. On the other side, deposits | | | | assets with a new insurance policy that will not |
| are non-deductible either. There's a maximum cap | | | | affect the inheritance you wish to leave. These |
| of $5000 for the savings every year, which | | | | options all allow you to give future gifts of |
| translates to significant savings over the span of | | | | significant amounts at modest costs in the |
| multiple years. | | | | present. |
| Life insurance products also offer significant | | | | These tools are well known by most people |
| advantages and can be useful tools for lowering | | | | speculating on tax cuts and often get advised |
| your taxes and paving the way for maximizing | | | | first. When using them, you'll need to know the |
| wealth. | | | | projected amount of income taxes you'd pay |
| There are a number of benefits of using it over | | | | before to see which options are the most |
| other forms of investments, for example | | | | effective in your individual case. For this, you can |
| traditional RRSP accounts and other assets such | | | | use online tools like Canadian income tax calculator. |
| as stocks. | | | | As closure, it is important to understand that |
| - No risks involved: the minimum-guarantee | | | | taxes are a complicated matter and they deserve |
| percentage will keep the policy profitable under all | | | | professional attention. Be sure to consult your |
| circumstances. Life insurance therefore makes | | | | options with independent advisers first and make |
| sense as one of your primary long-term | | | | only informed decisions. |
| investment tools. | | | | |