360 Private Wealth Management’s Natural Wealth® Process: Tax and Estate – The Next Ninety

In the first quarter of the year in the Natural Wealth® Process we focused on household Wealth, both the measurement (amount) and the structure (type). Given that we receive so many statements from various organizations on account balances in the first couple months of a calendar year it is a natural time to add up our combined household wealth assets and assess the overall structure.

In the second calendar quarter we will focus on Tax and Estate matters. The annual income tax filing deadline in Canada is April 30th each year (June 15th if you own an unincorporated business). In the US, for our US domiciled clients, the annual filing deadline is April 15th. Many households will have “freshly” filed tax returns and income tax Notice of Assessments at their disposal to reference for key information, which makes this time of year a natural time to review our current income tax situation and look for ways to reduce the tax we pay.

Our estates are significantly affected by the impact of taxation on liquidation and disbursement. Your household estate can loosely be defined as your net wealth (refer back to our discussions in January, February, and March) plus any life insurance policies that you may be carrying on lives in the household. Many assets in our estate have ongoing income tax and consumption tax considerations (think about the GST and sales tax expense on the purchase of possessions). Others, such as Registered Retirement Savings and Income Plans will have significant tax implications on the death of the holder. Still other assets, like a cottage or sun belt property, can have income tax implications on the death of an owner. It is often said that the only certainties in life are “death and taxes”. From where I sit, no truer words have ever been said.

Given the impact of various forms of tax in our lives at our death, it is wise to have a tax awareness in our ongoing financial life planning activities. Another financial life planning maxim is “its not what you make, its what you keep”. Tax paid is a significant factor in reducing the amount we get to keep. Spending (cash flow management) is another but that is a planning topic we will cover in the next calendar quarter).

Given that tax planning and estate planning, while closely related, can be distinct activities, we will divide the two subjects up for discussion purposes each month. First, we will discuss the tax implications of each type of Wealth we have; Person, Portfolio, and Possession; individually each month. We will follow-up each blog with a discussion of the estate planning implications associated with each type of wealth. The blog discussions will have a worksheet or self-assessment checklist attached that you can use in your own assessment of your household tax planning. Through the quarter’s blog discussions and activities, if you have questions or would like input or advice on methods to improve your overall tax and estate planning, please call or email us. And again, any feedback on our blog communications and activities, is always appreciated. Thank you to everyone who has already provided input to date.

Next week we will begin with a discussion of Person Tax. Keep your 2017 income tax returns and any T4’s used to complete the returns handy, along with your 2017 income tax Notice of Assessment (NOA) and Registered Retirement Savings Plan Contribution Limit Statement (if applicable). If you are only filing your income tax for 2017 in April, you can wait to complete the Person Tax Worksheet until you have the required info.

One more thing . . . given the importance in Tax and Estate planning for the overall financial life planning process please consider sending us a copy of your filed income tax returns each year along with a copy of the Notice of Assessment you receive after the return is filed. This is very valuable information for us as we work with you and your family in building the very best financial life plan we can for you. Thank you again, to everyone who already does this each year.

David J. Luke, CFP, RFP, CLU, CH.F.C., CIM | Financial Advisor

360 Private Wealth Management | Manulife Wealth Inc. 

Unit 1 – 25 Scurfield Boulevard, Winnipeg, MB R3Y 1G4 

Main Office 204.925.5868 | Direct 204.925.2073| Fax 204.925.2263 | Toll Free 844.688.3656