Become Familiar with Wealth Transfer Strategies

To retire comfortably, you need to save and invest regularly using an effective savings and investment strategy. Maximizing RRSPs or other retirement accounts will likely be essential to realizing your retirement goals. Once you retire, you’ll need to “switch gears” somewhat and begin considering wealth transfer strategies.

An effective wealth transfer strategy can help you accomplish a variety of goals, such as distributing your assets the way you choose, avoiding probate fees and reducing estate taxes. You can explore a variety of wealth transfer tools, including the following:

  • Gifting — Gifting your assets to your adult children can help minimize the size of your estate, reducing the tax burden at death. This could also potentially lower probate, executor and legal fees. Be careful when gifting property (including cash and securities) to a spouse or minor child, as income attribution rules may apply, causing income earned on the gifted property to be taxed in your hands. 

    If you donate securities with a capital gain to a registered Canadian charity then there is no tax payable on the capital gain, and you get full credit for the donation, up to the standard charitable deduction limit.

  • Will — A will is simply a plan for distributing your assets to family members and other beneficiaries. If you were to die intestate (without a will), provincial laws would determine how your assets should be distributed — and there’s no guarantee that the end result would be what you would have chosen. 
  • Beneficiary designations — Many of your financial assets — including life insurance policies, RRSPs and TFSAs — allow you to name a beneficiary. Upon your death, your beneficiary will automatically receive these assets, avoiding the sometimes time-consuming, expensive (and public) process of probate. It is essential that you periodically review these designations to make sure they reflect your current wishes and that they do not conflict with the terms of your will. 
  • Trusts — Different trusts can help you accomplish a variety of wealth transfer and estate planning goals. For example, an inter vivos trust can help you leave assets to your heirs without going through probate. You can also structure the trust to stagger payments over a number of years, rather than all at once, or include other restrictions or incentives. A testamentary trust, created in your will, can allow your heirs to effectively income split with the trust, potentially decreasing overall taxation.

As you can see, trusts are versatile instruments — but they are also complex. Consequently, you’ll need to consult with your tax and legal advisors regarding your particular situation.

  • Permanent Life Insurance — When building an estate for your heirs, you have typically considered both registered and unregistered investment accounts as your principal sources of accumulating wealth. Permanent life insurance can be used to effectively accumulate wealth and pass it along to children or grandchildren, typically in a very tax-efficient manner.

All the wealth transfer techniques we’ve looked at will require some careful thought and preparation on your part — so don’t wait too long before getting started. Time has a way of sneaking up on all of us — but it’s especially sneaky when we’re unprepared.

This article was written by Edward Jones on behalf of your Edward Jones financial advisor. Edward Jones, its employees and financial advisors do not provide tax or legal advice. You should consult with a qualified tax or legal specialist for professional advice on your specific situation.

Insurance and annuities are offered by Edward Jones Insurance Agency (except in Quebec). In Quebec, insurance and annuities are offered by Edward Jones Insurance Agency (Quebec) Inc.

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