The Benefits Of Having A TFSA


In 2009, Canada introduced a unique way for Canadians to invest and save money – tax free!

Known as a TFSA, the Tax Free Savings Account is a flexible and simple way to grow a savings account.

What can you save for? Basically, anything you can think of:

What is a TFSA?

A TFSA is a tax free savings account available to Canadians who are 18 years of age or older.

As its name suggests, TFSAs are completely tax free. This means that savings are placed into an eligible investment and grow tax free. All interests, dividends and capital gains are tax free. Even withdrawing from a TFSA is considered non-taxable income.

TFSAs can be used for anything – tuition, down payments, retirement income, emergency funds. They are suitable for both long term and short term savings goals.

The Benefits of a TFSA

1. Draw Income During Retirement

Most retirement incomes are taxable, meaning that you have to pay taxes on any amount you withdraw. Withdraws from a tax free savings account, on the other hand, are not considered income and are not taxed.

If you can establish a healthy TFSA, you can draw on that account for your retirement income before having to touch your taxable RRSPs.

2. Flexibility of Savings

A TFSA gives you the flexibility to save for short term goals such as a vacation, long term goals such as retirement or to have an emergency fund.

You can use a TFSA in so many different ways in so many different stages of your life. Here are some ideas as to how a TFSA can be used:

  • Savings for Education. You may already have a registered education savings plan (RESP) set up for your child – and you probably have already accessed the maximum government grants. If that is the case, you can use a TFSA to save more for your children’s education.
  • Rainy Day Savings. In this uncertain world, you never know when you may need money for good times or bad times. You can use a TFSA in case you lose your job, incur uncovered health care costs or if your home or car require unplanned repairs.
  • Care for Elderly Parents. If you’re responsible for caring for aging parents, a TFSA can help with the cost of healthcare at home or in a long-term care facility.

With a TFSA, you can invest or save – the choice is yours!

3. Reduce Tax on Investments

You can use a tax free savings account to shelter investments that would usually be taxed at a higher rate.

Tax shelters are legal investment vehicles that aim to reduce or eliminate your tax liability. Some are risky and should be avoided, but TFSAs are a safe way to shelter your investments and reduce your bill.

4. No Income Required

In order to open a TFSA, you do not require any proof of income.

As soon as a Canadian turns 18, they only need to prove they are a resident of Canada and provide a social insurance number to begin a tax free savings account.

Once an individual turns 18, they start accumulating contribution room on a TFSA, regardless of employment status.

The contribution room is the maximum amount you can contribute to a TFSA per year. If you do not take advantage of the contribution room, the remainder carried forward to the next year.

5. Does Not Affect Government Benefits

Because withdrawals from a tax free savings account are not considered to be taxable income, taking money from a TFSA does not affect government benefits such as the child tax benefit or retirement supplements like the Guaranteed Income Supplement (GIS).

Ready to Start Saving – Tax Free?

Our expert accountants at Liu & Associates are ready to answer any questions you may have about opening a Tax Free Savings Account! Contact us today for more information.

Are There Any Tax Implications for an Inheritance in Canada?


In some countries, inheritance taxes are imposed upon an amount inherited by a person from someone who has died. That person is responsible for paying tax on whatever they receive. Fortunately for us in Canada, inheritance taxes do not exist when it comes to receiving an inheritance from a loved one.

Instead, the estate of the deceased pays the taxes before any money or value is transferred to the beneficiary. This means that, in the end, the beneficiary should not have to worry about taxes.

While this may reduce the initial value of the estate, it certainly provides peace of mind to beneficiaries and loved ones who would otherwise shoulder the burden of any owing taxes, interests or penalties.

Who Inherits the Estate?

Who inherits the estates all depends on whether or not the deceased left a valid will. An estate is considered to be everything that a person owns when they die, including their property and their debts. A will is a legal document that describes who will inherit the estate after the owner of the will passes away.

With a will, the estate is distributed as per the directions of the will after taxes and expenses are paid and settled. If, however, the deceased did not have a valid will, then government-imposed rules are applied:

  • If there is a surviving spouse but no surviving descendants, then the spouse receives the estate.
  • If there are surviving descendants, and no surviving spouse, then the descendants receive the estate.
  • If there are both surviving descendants and a spouse, the spouse receives the household furnishing and the spousal preferential share (a specified amount from the estate before other distributions are made). The spouse then receives half the remainder of the estate, with the other half split between descendants.
  • If there are no descendants or spouse, the estate goes to other relatives based on a government-imposed distribution schedule.

Filing the Deceased’s Final Tax Return

After a person passes away, their tax return is filed and any owing taxes are paid by the estate. This is done by the deceased’s legal representative, which is usually an executor or estate administrator. This individual also notifies the CRA (Canada Revenue Agency) and Service Canada of the date of death and forwards any necessary documents.

The final tax return and owing taxes are due on April 30th if the deceased passed away between January 1st and October 31st. Otherwise, they are due six months after the date of death.

Any owing income tax is paid by the estate first.

Clearance Certificate

After the deceased’s taxes are filed and settled, a Clearance Certificate needs to be requested from the CRA to confirm that all taxes have been paid. A Clearance Certificate confirms that the estate has paid any taxes, interest and penalties owed.

A Clearance Certificate is necessary because it allows the legal representative to distribute the inheritance to any receivers without the risk of being personally responsible for any amounts owing.

Distribution of Inheritance

After the Clearance Certificate is obtained, the executor distributes what remains of the estate in accordance to the will. The entire process from death to receiving inheritance can be a lengthy process, as wills have to be verified, items appraised and taxes filed.

Ultimately, the beneficiary will never have to worry about paying taxes on any amounts received.


Need help? Contact Liu & Associates today!

How To Manage An Inheritance

an-accountant-helping-a-client-manage-their-trust-while-sitting-outside-of-a-shopComing into a lump sum of money suddenly, be it big or small, can be jarring to say the least. A sizable inheritance can represent a life-changing opportunity, if managed properly. Follow these five tips to make sure you’re managing your money smart and effectively to keep you financially stable for years to come.

1. Take A Step Back

Because an inheritance usually comes with a loss, it’s important for you take time to deal with your grief. You don’t want to be making any major financial decision when you’re in an emotional haze.

The second thing you need to do is take a reality check. Before you go quitting your job or booking a flight to Europe, you need to think realistically about what your inheritance is going to do for your life. $90,000 might seem like a lot at the time, but that’s not enough to sustain you and your family for 25+ years. You need to consider whether your new found fortune is going to rewrite your financial goals, or simply just help you reach some of your existing goals a bit sooner.

2. Pay off Debts

Using your inheritance to pay down or pay off any current debts can help you to reduce your expenses and save you money that would go towards interest down the line. When choosing which debts to pay off first, always pick the loans with higher interest rates first, like credit cards, personal loans, or car loans, before paying off a lower interest rate loan like your mortgage.

3. Prioritize Your Goals

Identifying your financial goals will help you determine the next steps you take with your money. Cleaning up any debt should always be a top priority, followed by creating a retirement nest egg. After that the sky’s the limit; others goals may include:

Determining what your financial goals are will help guide you in the types of investments you make, or the types of accounts you open.

4. Splurge Thoughtfully

It’s okay, and even encouraged, to have a little fun with your new money! Depending on the size of the inheritance, your “splurge” will look very different. It could be anything from some new shoes to a new house! Remember: reason and moderation are what it’s all about. Just because you can buy 10 swimming pools doesn’t necessarily mean that you should!

5. Hire Some Help

Depending on the type of inheritance you received (ex. Investments, life insurance, etc.) there may be some hidden taxes you are unaware of. A financial advisor or accountant can help you create a financial plan and deal with any tax implications that might come your way. They will help you understand your inheritance, and can assist you in managing it moving forward.

For help managing your inheritance, trust the team at Liu & Associates. Call today to book an appointment.


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Family Trusts 101

One of the most common misconceptions people have about family trusts is that they’re only for incredibly well-off families. That couldn’t be further from the truth. Keep reading for our introduction to family trusts and how they can be beneficial to you!

What is a family trust?

A trust fund or family trust is a legal agreement two parties in regards to assets to be passed on. A trust can contain money, stocks, real estate, and/or other assets.

There are three parties involved in establishing a trust fund:

  1. The settlor or trustor – this is the person or entity who establishes the trust fund with the initial contribution. This can be a company, family member, or even a family friend.
  2. The trustee(s) – the person, people, or entity responsible for the management and administration of the trust fund. Typically this is a financial institution or legal entity, though in some cases it may be a family member.
  3. The beneficiary/beneficiaries – The person or people that will receive the benefits of the trust, usually children and/or grandchildren of the person who established the trust.

While the specific roles of each party will vary between different types of trust funds, they are required in every situation. There is a huge variety in the types of trusts available, including living trusts that become effective right away, revocable trusts that allow you to keep control and ownership of your assets, and irrevocable trusts which allows you to transfer ownership and control of assets over to the trustees.

What are the benefits?

There are a number of different benefits for setting up a family fund for both the settlors and the beneficiaries. For certain types of trusts, once an asset is placed in the trust it no longer belongs to the settlor. This means that the settlor would not be required to pay income tax on money made off of those particular assets. For beneficiaries, there is a similar benefit. Since assets within the trust do not belong to them, beneficiaries would still be eligible for things such as student aid.

One of the greatest benefits may be a sense of security for the beneficiaries. As opposed to handing out a single payment that could be wasted and spent irresponsibly, a trust can be set up with certain stipulation for beneficiaries. For example, you can dictate that the beneficiaries may receive a monthly or yearly payment as long as certain conditions are met. Furthermore, you can make specific guidelines on how the money can be spent (education, investments, etc.). A family trust is a great way to ensure that your children and grandchildren receive the maximum benefit from what you’ve passed on to them.

Is it right for me?

As mentioned earlier, trust funds are not exclusively for those who are well-off. Anyone who has assets that they would like to protect for future generations would benefit from at least exploring the option of a family trust. There are limitless options for family trusts, allowing you to choose something that best meets the needs and wants of you and your family. Don’t be afraid to explore your options!

For more great advice on family trusts and estate planning, contact the team at Liu & Associates today!

RESPs: What you should know

what you should know about RESPsIt’s no secret that the cost of a university education continues to increase every year. Planning for your child’s education now allows you to save as much as possible to give them a step up when it comes to post-secondary costs.

What is an RESP?

RESP stands for Registered Education Savings Plan. These are plans that allow parents to put aside money for their child’s education. RESPs aren’t limited to just a child’s parents. Any adult is able to open up and contribute to an RESP on behalf of a child.

The first iteration of an RESP dates back to 1974. The program was overhauled in 1998, with the Canadian government now contributing to RESPs as well through the Canadian Education Savings Grant (CESG). Some provincial governments also contribute to RESPs through various savings grants.

You can open up and RESP through most financial institutions and some scholarship dealers as well.

Are there any restrictions?

As mentioned above, anyone is able to open and contribute to an RESP. However, there is a lifetime contribution limit of $50,000. While there is no annual contribution limit, CESG can only be received on the first $2,500 contributions per year.

These are some of the general restrictions that apply to all RESP accounts. Individual RESP providers may have different requirements, so be sure to do your research when choosing a provider.

When should you start saving?

As with any type of financial planning, the sooner you start saving the better! Contributing to an RESP early on will ultimately lead to your child having more money saved up for their education. You can contribute to an RESP for up to 31 years after it’s been opened, providing plenty of time to accumulate savings.

There’s no time like the present to start thinking about saving for your child’s education. Liu and Associates offers personal financial planning services to help you reach your goals in a timely and efficient manner. Make an appointment with one of our accountants today!

What age should you start saving for retirement?

at what age should you start saving for retirementRoughly half of all Canadians have some form of savings that they plan to use in retirement, not including any pension or social security that may (or may not) be available to them. While this may seem like a lot, it is not nearly enough! Many people procrastinate the process of putting away paychecks– even if you have a sizable savings account, your money could be earning you more than the modest interest offered by most banks. Keep reading for a few retirement savings tips from Liu & Associates!




Throughout all professions and ways to make a living, you will always make less at the start than later in your career. This fact of life leads people to put off savings until their annual income grows beyond their needs. While you can afford to make larger contributions when you make more money, investing small amounts earlier on can actually be more beneficial. Therefore it is always better to start saving for retirement at as young an age as possible!


Now that you know you should have been investing yesterday– whether you have saved anything or not, you should make a detailed plan for your priorities. Is there a specific item or activity that you are saving for? Do you hope to start a business? Dreaming of retiring in luxury? There are many different paths leading to each of these anything else you can imagine. The only way you will achieve this goal is by following your financial roadmap!


From a Tax Free Savings Account (TFSA) to a Retirement Savings Plan (RSP), there are no shortage of good options for saving your money at any age. Beyond these low-interest, non-volatile investments, there are also innumerable services that claim much higher returns– albeit, for a considerably higher risk (including losing your savings entirely). Look for modest interest rates or programs that support your personal values, but always beware putting all of your eggs in one basket. “Diversify your portfolio” by splitting up your investments between two or three different accounts that each offer different advantages.

The above tips are only a brief survey of the many ways you can make the most of your retirement. Whether you are just starting out or you are already an established professional, contact or visit Liu & Associates today for a full rundown of all retirement investments available to you.

IN SICKNESS AND IN WEALTH: How Marriage Affects Your Taxes

how marriage affects your taxes


Being married, or having a common-law partner, impacts your tax situation in a number of ways. The good news is that many are beneficial to you and your spouse. Married and common-law couples may be eligible for a number of additional tax benefits that can help them save money on their next return. Join Liu & Associates as we highlight a few of the ways being married can help you out come tax time.


Spousal Tax Credit

If your partner has a lower income, you may be eligible for a non-refundable tax credit which can help to reduce the amount of income tax you’ll pay. To qualify, your partner must have a net income of less than $11,474.

Combine Charitable Donations

You get a non-refundable tax credit when you donate to registered charities. By having one spouse claim all of the donations for the year, you and your partner can get a larger tax credit. Note: there are some donations you cannot claim. Learn more about what donations are eligible to claim here.

Spousal RRSP Contributions

If one partner has a much larger amount of money in an RRSP, it means they will have to pay more tax when they decide to withdraw it. By divvying up RRSP contributions, you can help balance your incomes when you retire, which means that both you and your partner will get taxed at a lower rate.

Combine Medical Expenses

You are able to claim medical expenses for your spouse or common-law partner. When filing your taxes, consider having the person with the lower income claim all of the medical expenses for the couple. Why? The tax credit for medical expenses is based on a percentage of your income, which means you’ll probably get a bigger tax credit!

Common Medical Expenses

The Government of Canada has an excellent list of what medical expenses can be claimed, and whether or not you need any supporting documents in order to claim them. Check out the full list here.

Taxes Are Hard – Liu & Associates Can Help!

Our expert accountants will help you get the most out of your tax return. Give us a call to book an appointment today!

RRSPs vs TFSAs for Retirement Savings

Three pink piggy banksIt’s never too early to save for retirement. And it used to be very simple – open a Registered Retirement Savings Plan and saved as much as you can. Maybe if you’re a lucky high-earner with no debt or other liabilities, you are able to contribute to your retirement with investments beyond an RRSP. But, for the average earner, RRSPs are the way to go. Then in 2009 Tax Free Savings Accounts come along and now low and mid-level earners have options. Read on to find out the pros and cons of using RRSPs and TFSAs to save for your retirement.



We’ll start with the old classic. Basically, a saver will make contributions – which are deducted from their taxable income – to their RRSP and the money will appreciate tax-free while it sits there and waits for you to retire. Taxes on your investment are paid when you make a withdrawal from your savings. This can have several advantages:

  • Depending on your current income and the income you have upon retirement, you could defer paying higher taxes on your contributions in favor of paying a taxes on your withdrawals at a lower rate when you retire. However, this presupposes your income at retirement will be less than it is now.
  • Tax-upon-withdrawal often incentivized people to leave their RRSP investments alone until they need them in retirement.



The new kid on the block – TFSAs – are the opposite of an RRSP. Contributions are not deducted from your taxable income – meaning no tax refund. However, once you’ve paid the upfront income tax on your contributions, your money grows and can be withdrawn at any time, tax-free. This can provide some flexibility:

  • This money is available to you at any time, which can be great in an emergency, but also may backfire as making withdrawals for short term needs or immediate needs detracts from retirement savings goals.
  • Paying the income taxes now on your TFSA contributions also make sense in you plan to be in a higher tax bracket when you retire and begin to make withdrawals.


This is a simplified explanation of the main differences between using TFSAs or RRSPs – there are lots of other angles to consider your how your investments may affect Old Age Security clawbacks or your Canada Child Tax Benefit. The tax accounting experts at Liu & Associates will guide you through your retirement and tax planning options.

Christmas Celebrations at Liu & Associates Edmonton

Liu & Associates LLP is Public Accounting firm of CAs, CMAs and CGAs, we strive to do their best for our profession, clients and community.  At Christmas time, the warmth and welcome of our office is thanks to our staff and partners who have the biggest of hearts. This Christmas, the staff’s kindness and sense of social duty donated funds for the purchase of ……..  for the 2014 Christimas Save the Children campaign.  The firm matched the staff’s contributions and in this way doubled what they had hope to achieve.  The passion for our community (global and local) is not just a Christmas time, throughout the year, the staff and partners of Liu & Associates LLP has donated to many charities close to their hearts.  These donations are both monthly and yearly in nature and some of the charities we supported are:

Trust Funds & Your Child’s Education


With all of the financial strains weighing on a family these days, saving for our children’s education can seem almost too much to bear.

Tuition rates are increasing and show little signs of slowing; so while current post-secondary graduates leave school saddled with tens of thousands in debt, children born today could face debt totals in the hundreds of thousands after graduation. Faced with this future, many families make the most of government-supported RESPs and maximize their contributions. Many also engage their children in saving early on to prepare them for the realities of pursuing their dreams.

There are still some other ways to put away money for your child and ensure that is used for its intended purpose, one of these ways is a legal trust.


Once an RESP contribution is maxed out, one of the best strategies for education savings is to create a trust in the name of your child or children. Rather than take taxable earnings out of your business or investments, contribute to a trust over time and have that transition to your child when they are ready to begin their post-secondary education.

Interest earned in a trust can be taxable, but your child’s income when they use the trust is likely to be minimal if any, so the money will be taxed in the lowest bracket. Trusts can also be established with written agreements and conditions to ensure the money is put to its intended purpose.

All of these factors make trusts a secure investment in your child’s future.


Planning for a child’s higher education can be intimidating, but the most effective way to handle those fears is to be prepared. While RESPs offer great incentives like government grants and tax-free savings, contributions are capped annually. Trusts can be used as an excellent supplement for education savings; they could mean the difference between a Bachelor’s degree and a Doctorate. Here at Liu & Associates we can help make the most of your current contributions and we can offer advice on what step to take next.

Trusts are just one of the many strategies we have to help you shoulder the burden of your children’s education. Contact Liu & Associates today.