FEATURE FINANCE TAX TALK Smart ways to secure your financial future. T BY MIKE MAGREEHAN axes are inevitable. The amount of tax you pay is often your highest lifetime expense. With inadequate planning, Canada Revenue Agency can become the largest beneficiary of your hard-earned dollars. In my years of experience working with wealthy families, including chiropractors, naturopathic doctors and business owners, there is a cardi-nal error that has proven costly on the long-term success of an otherwise well-crafted investment plan: thinking in pre-tax instead of after-tax returns. Many affluent investors fail to integrate their investment and tax-planning strategies in a manner that optimizes af-ter-tax returns. This error is committed with great frequency when there are solutions that can be easily implemented. The good news is that there are strategies to alleviate tax and ways to structure your investments in a way that offers compelling advantages. Successful business owners and high-income earners can accumulate substantial wealth over their working lives. Returns from non-registered investments are often taxed at your highest marginal rate. Additionally, returns on invest-ments inside your corporate Holding Company are dimin-ished by annual taxation as well. Ensure financial security through effective tax planning and investment strategies. CORPORATE CLASS FUNDS One powerful advantage of a registered plan, such as a registered retirement savings plan (RRSP), tax-free savings account (TFSA), insured retirement program (IRP) or pension, is the tax-deferred compounding of income that occurs inside these plans over time. These accounts are limited by strict annual contribution limits and the penalties for over-contributing are severe. As a result, many affluent families accumulate a sizeable non-registered nest egg, MIKE MAGREEHAN is an investment and insurance advisor with Canaccord Genuity Wealth Management in Waterloo, Ont. Mike welcomes your comments and questions at 1.800.495.8071 or [email protected]. Visit www.LMwealth.com. 38 Canadian Chiropractor September 2014 which is subject to annual taxation. For these assets, inves-tors should consider corporate class funds for their many tax advantages, which can be substantial over your invest-ment lifetime. To set the stage, there are two broad fund categories. Traditional mutual funds are structured as trusts, and there-fore each year you must declare any capital gains/losses and investment income received. This income is taxed at your highest marginal tax rate. Additionally, if you switch from one fund to another, as investors often do in order to rebal-ance portfolios, you will trigger a taxable disposition that must be declared on your tax return that year. The other fund category is corporate class funds, where funds are structured under a corporate umbrella. This sim-ple distinction is what makes corporate class funds so attractive. Corporate class funds have been growing in both practi-cality and popularity. They look and feel a lot like regular mutual funds, but provide investors certain tax benefits which traditional funds do not offer. Under the corporate class umbrella, investments can grow tax-free and be rebalanced among other class funds offered by the same fund company without triggering a capital gain or loss. Tax is ultimately realized once you redeem funds from the umbrella, but is treated as a capital gain (only half www.canadianchiropractor.ca Photo: Fotolia
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