Tax, Retirement
and Estate Planning

About TREP

CI's TREP Team is a trusted partner assisting with unique tax, retirement and estate planning concerns. For more information, speak to your CI sales team.

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TREP Talks

TREP is proud to host a three-part national webinar series. These webinars cover a range of topics for advisors from tax and retirement planning to estate planning. These webinars aim to demonstrate CI’s commitment to being trusted partners in wealth through timely and relevant tax, retirement and estate planning discussions. Explore below to find TREP Talk resources including webinar replays, summaries, and valuable articles.

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Podcasts

TREP is pleased to host a monthly series of investor-friendly podcasts. These podcasts discuss a range of topics of interest in tax, retirement and estate planning These podcasts aim to demonstrate CI’s commitment to being trusted partners in wealth through timely and relevant tax, retirement and estate planning discussions. Explore below to find TREP podcasts resources including replays, summaries, and valuable articles.

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In the News

Recognized as industry experts, the TREP team has written for, and been quoted in, various media publications. The following links show some of their work in this area.

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Frequently Asked Questions

Business Owner

What should a business owner consider when thinking of incorporating their business?
Like any important business decision, the choice to incorporate and operate a business through a corporation should include an examination of several important factors. A trusted tax and legal professional should also be involved. Limited liability and tax deferral are some of the advantages that must be weighed against disadvantages including set-up and ongoing costs. For a more detailed discussion, refer to this TREP article, Business Operations: Corporation vs. Sole Proprietorship.

Cross-border

What is a Passive Foreign Investment Corporation (“PFIC”)?
The Internal Revenue Service (“IRS”) generally considers all Canadian mutual funds (trusts and corporations) and ETF’s to be a PFIC for a US citizen (or other US person liable for taxes in the US). This could potentially create adverse tax consequences. An annual election can be made by the investor when filing their US tax return in order to minimize these. There is also additional information to be reported by the investor on their US tax return. For additional information please see this TREP article, Passive Foreign Investment Company.

Estate Planning

How can probate fees be avoided?
Probate fees are calculated on the value of the estate assets passing through the Will of the deceased. Where assets pass outside of an estate their value is not included in the value of the estate and therefore do not attract probate. Some common strategies to avoid probate include:

Placing Assets in Joint Name

Whether the estate can avoid probate fees will depend on the transferor’s intention when placing the assets in joint name. While probate fees can sometimes be significant, there are many other issues to consider before placing assets in joint name. These TREP articles, Joint Accounts and Joint Accounts in Quebec discuss the various considerations for joint accounts.

There is a common misconception that probate can be avoided where “Joint account (resulting trust)” is the intention. Although the executors of the estate might be granted access by the financial institution to the non-registered accounts without a probated will, they are still required to include these assets on the Estate Information Return (EIR) and would be subject to probate fees on filing the EIR. Note that Ontario is currently the only province that requires an EIR be filed and is discussed in more detail in this TREP article, Probate Rules for Ontario – the Estate Information Return.

Beneficiary Designations

Registered accounts (i.e. RRSP, RRIF, TFSA, etc.), segregated funds and life insurance policies allow the holder to name a beneficiary, either within the policy or through a separate designation. Provided the designated beneficiary is not the estate, the proceeds of these products are paid to the beneficiaries outside of the estate and are therefore not subject to probate fees. In certain circumstances, Canadian courts have set aside the designation and ordered the proceeds to be paid to someone other than the designated beneficiaries. Refer to this TREP article, Registered Products for more details.

Alter-Ego and Joint Partner Trusts

These trusts allow a settlor of an inter-vivos trust to transfer capital assets into the trust on a tax-deferred basis. On death, probate fees can be avoided since the assets held in such trusts are now owned by the deceased and they transfer in accordance with the terms of the trust and not the deceased’s Will. As with joint accounts, there are many other issues to consider as discussed in these TREP articles, Alter Ego and Joint Partner Trusts – Advantages and Alter Ego and Joint Partner Trusts – Disadvantages.

Multiple Wills (British Columbia and Ontario only)

Even if only one asset requires probate (such as investments held by a financial institution), all assets that transfer through the Will are subject to probate fees. A solution unique to Ontario and British Columbia is the use of a secondary Will to transfer some estate assets. This TREP article, Multiple Wills as a Planning Tool, discusses this strategy in more detail.

Life and Legacy Planning

Can a Power of Attorney (“POA”) make a gift on behalf of the grantor?
An attorney is a fiduciary for the person who granted the POA and fundamentally must act in the person’s best interest. A gift is not an expenditure that is in the grantor’s best interest as it depletes his or her property. However, it is imperative the POA read the entire POA document and review the legislation in the province where the grantor resides. Most provinces provide that in limited circumstances an attorney may make a gift or a loan to the grantor’s friends and relatives and a gift to a charity. Usually, the legislation only permits gifts when the grantor’s remaining assets will be sufficient to satisfy their basic needs and when there is evidence, they would have made the gift had they been competent. For a more detailed discussion, refer to this TREP article, Consider the Limits on a Power of Attorney in Making Changes to Client Accounts.
Can a Power of Attorney (“POA”) make or change a beneficiary designation?
An attorney is a fiduciary for the person who granted the power of attorney and fundamentally must act in the person’s best interest. It is imperative that the POA read the entire POA document as it will often set out limitations. They can generally do anything except “make a Will” which has been interpreted to include a “testamentary disposition.”

The general consensus in Canada is that a beneficiary designation on life insurance policies, segregated funds, pensions, RRSPs, RRIFs and TFSAs is a testamentary disposition and thus cannot be completed by a POA in any circumstances. For a more detailed discussion, refer to this TREP article, Consider the Limits on a Power of Attorney in Making Changes to Client Accounts.
What happens when a Power of Attorney (“POA”) refuses to act, is incapable of acting or has predeceased the grantor?
In a Will situation the executor of a named executor inherits the office of executor unless a substitute executor is named, or more than one executor is in place. However, there is no such saving provision for a POA. In other words, unless the POA names a substitute, or provides a power to the attorney to resign and replace him or herself, there is no one to assist. This leaves three alternatives:

  1. If the grantor is competent they should enter a new POA naming an alternative attorney;
  2. If the grantor is not competent the attorney may wish to approach a trust company and retain their services to act as their agent. The attorney would still be the principle, but the trust company would complete the work. Unfortunately, this will only work so long as the attorney has capacity. Should the POA loose capacity the trust company will no longer have a principle and will be unable to act further;
  3. In the event the grantor and their POA are both unable to act, another family member will have to bring an application to court to be appointed guardian of the individual. These applications are time consuming and incur some cost. However, should there be no ability to complete forward planning this would be the alternative open to the family.

Retirement

What strategies are available to reduce or avoid the OAS “clawback”?
Individuals who are receiving Old Age Security (“OAS”) might be aware that the amount of income they earn can impact their OAS pension. However, they might not understand how different types of income impact their pension amount. For example, receiving Canadian dividends will result in higher net income, and smaller OAS pension, than other types of income because of the dividend “gross-up”. See this TREP article, Retirement Planning – Tackling the OAS Clawback for further details.

Tax-efficient Investing

Does income attribution apply where gifted property is contributed to a TFSA?
Normally, where an individual gifts property to a spouse or common-law partner, income attribution rules apply on future income and capital gains earned from the gifted property. However, where the gift is contributed to the spouse’s TFSA, attribution rules will not apply while it is held in the TFSA and did not create or increase a TFSA overcontribution. See this TREP article, Understanding TFSA Attribution Rules, for further details.
Does income attribution apply where property is gifted through a spousal RRSP?
Normally, where an individual gifts property to a spouse or common-law partner, income attribution rules apply on future income and capital gains earned from the gifted property. However, a common income-splitting strategy involves a higher-income spouse contributing to a spousal RRSP in order to benefit from the current year tax deduction. In the case of a spousal RRSP, income attribution will only apply where the annuitant of a spousal RRSP withdraws an amount from the plan where contributions were made in the year of withdrawal of the previous two calendar years. See this TREP article, Understanding RRSP Attribution Rules, for further details.
What is income attribution and when does it apply?
Where an individual (“the transferor”) gifts property to a spouse or common-law partner, future income and capital gains earned from that property are taxable to the transferor, unless fair market value consideration is received. Income attribution can also apply where property is gifted to a child, niece or nephew if they are under the age of 18; however, capital gains earned by the minor are not taxable to the transferor, only income earned.

Important Disclaimers

This communication is published by CI Global Asset Management Inc. (“CI”). Any commentaries and information contained in this communication are provided as a general source of information and should not be considered personal investment advice. Facts and data provided by CI and other sources are believed to be reliable as at the date of publication.

Certain statements contained in this communication are based in whole or in part on information provided by third parties and CI has taken reasonable steps to ensure their accuracy. Market conditions may change which may impact the information contained in this document.

Information in this communication is not intended to provide legal, accounting, investment or tax advice, and should not be relied upon in that regard. Professional advisors should be consulted prior to acting on the basis of the information contained in this publication.

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