Families have been passing down property, particularly cottages, to their children or grandchildren for generations.
This process is part of the fabric of Canadian society and is why so many cottagers have grown up being friends with their neighbours – after all, their parents and grandparents and even great-grandparents were friends.
With the recently passed legislation that has increased the capital gains inclusion rate, that generational history could take a hit. Taxes on the gift of a property – which includes a cottage – have increased by 33 per cent, and that could mean a new tax of $1 million or more for some families.
However, as Safebridge Private Wealth founder Chris Karram notes, good tax planning as part of an overall quality wealth management portfolio can help preserve those familial assets.
The new capital gains tax came into effect on June 25, 2024. The main changes impacting generational wealth include increased taxes on profits made through the sales of secondary properties and investments.
“You can’t bypass this tax, but there are strategies to mitigate its impact,” says Chris. “It’s more important than ever to have a tailored financial plan to help you build, protect, and grow your wealth.”
“Our experienced team of professionals find custom solutions for our clients, crafting balanced portfolios using a variety of assets. We implement tax-efficient wealth-building strategies to minimize our clients’ tax liabilities.”
Powerful tool
One of the most powerful tools in the tax-planning kit is a life insurance umbrella. This under-used stategy provides both great coverage and an opportunity to build and protect tax-free wealth. There are very few tax-free assets available in Canada, and for many people life insurance is the most valuable.
“A professionally managed, tax-exempt, cash value life insurance policy can act as a top-level tax-free savings account that doesn’t have maximum contribution limits,” explains Chris.
You can use personal or corporate funds to purchase your life insurance. This is especially helpful for entrepreneurs and executives.
A well-structured life insurance umbrella is also key for estate planning. Funds invested in a life insurance policy allow families to take money out of their family corporation, holding company, or business completely tax free and put it in the hands of their children.
“Using a customized plan and structure within a life insurance umbrella, we can help you keep more of your own wealth. This helps you grow and access your money tax-free without slowing down the compounding growth and future impact of those funds.”
TEXT CHRIS OCCHIUZZI
PHOTOS ANDREW FEARMAN
