Traditionally, money and assets to be willed to children or charity upon the death of their parents. However, this isn’t always the best strategy – if it’s feasible, it often makes better tax sense to gift or donate your assets in your lifetime. Read on to find out how you can make the most of passing on your wealth.
Maximize Your Impact
If you are in a position where you’ve amassed enough wealth that you couldn’t spend it all in your lifetime, you can benefit both yourself and your children by gifting it to them now rather than later. It’s likely that you’re paying more taxes than necessary on cash you’ll never use, while your children are currently servicing debts like mortgages, or are in a lower tax bracket.
By giving inheritances sooner rather than later, you reduce your taxes and watch your heirs benefit. Finally, there is no “gift tax” in Canada, meaning that you’re able to give large sums of cash (not investments or property) tax free.
See the Good
Leaving a sum of money to a favorite charity in your will may seem like a good idea – however making that donation during your lifetime a can be better tax strategy. Not only will your non-profit benefit from your generous gift, you can reap additional tax benefits. Whereas donating in your will would results in tax credits applicable to only 2 tax years (current and previous), donating in your lifetime incurs a tax credit that can be carried forward up to 5 years, adding flexibility to your tax planning.
Giving away or donating your wealth in your lifetime may seem daunting – especially during a long retirement when the need for resources may be higher. However, working with experienced accountants like Liu & Associates to create a realistic retirement and tax plan can enable you to make the most efficient use of your assets.