Tax Minimization 101

Posted 06 Jun 2014 by Rick Irwin, CFP, CLU

Tax minimization is more than just simply maximizing the amount of money you keep in your pocket at income tax time; its a long-term engagement and an important component of the overall financial planning process. In addition to preparing personal income tax returns for our clients, we incorporate effective tax minimization strategies into the overall planning process whenever possible.

It can include:

  • Choosing tax-efficient investments, both in the accumulation stage and as you begin to draw income from your assets
  • Taking advantage of capital losses
  • Income splitting though Spousal RSPs and pension income splitting
  • Utilizing asset location as well as asset allocation to lower overall taxes paid on investment gains
  • Exploring the advantages of incorporation
  • Estate planning issues such as an estate freeze and/or setting up a family trust
  • Transitioning a family cottage
  • Determining whether an up-front tax deduction or the long-term benefits of Tax-Free Savings Accounts makes the most sense in your situation
  • Maximizing charitable giving strategies

At a minimum an advisor should be aware of the consequences of taxation on investment and financial planning decisions. Ideally they would incorporate tax minimization strategies into the financial planning process on an on-going basis: doing so requires a high level of understanding of tax issues as well as bringing in qualified professionals occasionally as required.