Are You Prioritizing Tax-Efficiency In Your Financial Plan?

By Kaylin Fitzsimons

Here Are Three Tax Strategies for High-Net-Worth Professionals

Introduction

Most high-net-worth (HNW) professionals in Canada face a unique set of challenges in maintaining and growing their wealth. These challenges often require a robust and comprehensive financial strategy that incorporates tax-efficient measures for you and your companies. Tax-efficient wealth management focuses on optimizing the way investments are utilized, financial plans are implemented, and insurance solutions are enhanced to minimize tax liability. In this article, we will discuss why tax-efficient wealth management is a necessity for HNW professionals and how you can strategize to assist your company’s growth. We broke it down into these three main categories, insurance solutions, investment management, and financial planning.

1. Insurance Solutions

Insurance policies can be structured to provide significant tax advantages. In Canada, one of the most common insurance-based tax strategies involves the use of permanent life insurance, critical illness and disability insurance. For example, the cash value growth inside a permanent life insurance policy is not subject to income tax, providing a tax-efficient wealth accumulation opportunity. Additionally, upon the death of the policyholder, the policy's death benefit is paid out tax-free to the beneficiaries.

Corporate-owned critical illness and disability insurance, is structured for protection on the business owner which is the utmost importance and can also provide return of premium to the business owner.

Insurance solutions allow HNW professionals to pass on a larger portion of their wealth to their heirs and avoid losing a significant portion of their wealth to taxes.

2. Investment Management

The method in which HNW individuals manage their investments can have a significant impact on their tax obligations. For example, investing in both public and high-quality private investments provide planning opportunities to lower the tax on the cash you need to fund your personal lifestyle today. Our motto “spend your investment income, save your business income” can be structured to significantly reduce the personal tax you pay to fund and grow your lifestyle in a tax friendly manner. For most business owners, your business is your best investment and best tax shelter. The key is to strategically hold your passive investments and insurance protection in your corporate structure.

3. Financial Planning

Effective financial planning plays a pivotal role in tax-efficient wealth management. This involves making strategic decisions about the passive investments you make today, to set yourself up for a less taxing retirement. In terms of retirement income, it's crucial for HNW individuals to invest in a variety of tax-preferred investments to minimize taxes on income each year. Being strategic of manufacturing and harvesting capital gains annually, before and after your retirement and splitting income with family members, can also significantly reduce an individual's tax burden. Moreover, estate planning with tax-smart strategies such as proactive estate freezes and tactical share redemptions, can help in reducing the future tax liability of one's heirs.

Conclusion

Canadian tax laws are continuously evolving, making it critical for you to stay updated and adjust your strategies accordingly. This changing landscape offers new opportunities for tax-efficient wealth management, but also presents potential pitfalls for those not familiar with the rules. By enlisting the help of your trusted advisors at Lifecycle Wealth, you can ensure that you’re following the current laws and taking advantage of all available tax-efficient strategies.

As we have outlined, tax-efficient strategies through insurance solutions, investment management, and proactive financial planning, is of paramount importance for Professionals. This will ensure that you are not missing out on opportunities to pay less tax and create more wealth. Our mission at Lifecycle Wealth and Mandeville Private Client Inc. is to maximize the benefits of your wealth for yourself, your companies, and future generations.

About Kaylin

Kaylin Fitzsimons is an Insurance Advisor at Lifecycle Wealth, providing tax-efficient insurance solutions to high-net-worth professionals and business owners in Ontario, Canada. She is also an investment advisor at Mandeville Private Client Inc., which allows her to offer a wide range of investment options to her clients, including private and alternative fund solutions. Kaylin is focused on using insurance to add value to her clients’ lives and designing investment portfolios that allow her clients to minimize taxes. Kaylin is dedicated to helping her clients save money, make the most of their hard work, and experience confidence that their businesses and families are protected through tailored strategies.

Kaylin graduated from Western University with a Bachelor of Management and Organizational Studies. In her free time, she enjoys cooking or visiting her favourite restaurants, traveling, spending time with her son, and learning about different cultures. To learn more about Kaylin, connect with her on LinkedIn.

This publication contains the opinion of the writer. The information contained herein was obtained from sources believed to be reliable, but no representation or warranty, express or implied, is made by the writer, Mandeville or any other person as to its accuracy, completeness or correctness. This publication is not an offer to sell or a solicitation of an offer to buy any securities. The information in this publication is intended for informational purposes only and is not intended to constitute investment, financial, legal, tax or accounting advice. Many factors unknown to us may affect the applicability of any statement or comment made in this publication to your particular circumstances. Hence, you should not rely on the information in this publication for investment, financial, legal tax or accounting advice. You should consult your financial advisor or other professionals before acting on any information in this communication.