Selling half of your non-registered investments today and repurchasing different investments, or waiting 30 days to repurchase the same investments, means paying an extra $252,000 in tax — shrinking your investments by $252,000. Modelling this, I can see a relatively small advantage by selling today if the inclusion rate rises to 75 per cent and stays there, you live another 30 years, and I don’t consider changing inflation rates.
But what if you sell and the inclusion rate doesn’t change? That’s an “oops.” The only reason you should do this is if you need the money in the next year or two. Remember, tax-efficient investing means you want to avoid tax, defer tax and earn tax-preferred income such as capital gains and dividends.
Rather than focusing on the inclusion rate, what are your thoughts on developing a family plan? It would mean changing your mindset from accumulating more for you and your wife to accumulating more for your whole family. It’s a different mindset and not everyone wants to, or can, make the mental shift.
Think of the opportunities, though. You’ll be working with five people in different tax brackets, with different investment opportunities. Your children may still have RRSP and TFSA contribution room, and there may be government money in the form of registered education savings plan grants.Article content
The time to sell some non-registered money and repurchase the same investments right away in your children’s names is when the next market crash comes. The future growth, income and tax liabilities will be in their names, not yours. Maybe the biggest benefits to family planning are preparing your children to receive a large inheritance without squandering it and seeing both them and your grandchildren flourish.