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Protect your wealth in a volatile market

Nov 4, 2020 10:00:00 AM The MacMillan Estate Planning Team Investment Trust, Enhanced Tax Planning Strategies


As we emerge from a pandemic and the US election results, the news inundates us with frightening messages about struggling markets. While dramatic moves in the market can make you question your investment approach, it’s important not to panic. When the market does drop, the historical facts show that it always comes back even stronger. Rather than worrying, the best plan of action is to take back control and explore some of the tried and tested estate planning strategies available. We share some of those with you below.

Protect your money via an Investment Trust

There is an innovative trust planning tool available that allows investors to grow their wealth via the stock market with minimal risk. Essentially a bespoke trust for investments, or in layman’s terms, an Investment Trust, this tool benefits from the features afforded to both inter-vivos trusts AND investments held under The Insurance Act. The primary benefits of the Investment Trust include, principal guarantees, growth protection via regular resets, creditor and lawsuit protection and the ability to bypass probate.

Plan with low interest rates

Low prescribed interest rates open-up a lucrative opportunity for families to reduce their overall tax bill. The strategy involves a high-income earning individual making a loan at the prescribed interest rate to a trust that is established for the benefit of a spouse or common-law partner, (grand)children or other family members who face lower tax rates. Subsequently, the trustee invests the loaned funds for the purpose of generating investment income. This means that interest, dividends, and capital gains earned in the trust will be taxed as if the beneficiary earned these types of income personally (at the lower tax rate).

Lock in low values with an Estate Freeze

An estate freeze is an asset protection strategy whereby a business owner seeks to defer capital gains tax on a portion of their business’s value, by ‘freezing’ its present value from a tax perspective, and then allowing others (i.e. family members) to share in its future growth. Given the current economic climate, it is as good a time as any to give due consideration to this opportunity.

Take advantage of enhanced tax planning strategies

With a possible wealth tax on the horizon to pay for Coronavirus related spending, now is the time to take advantage of some of the generous opportunities currently permitted by the CRA. One such opportunity is the Maximum Tax Actuarial Range (MTAR), which enables you to utilize insurance to pay your estate tax. You may use up to 25% of your estate to do this. For example, you can relabel 25% of your $10 million estate ($2.5 million) and have it grow tax exempt throughout the balance of your life. Subsequently, that amount is passed to your children completely tax free. And if you do it via in a company you may get twice the amount.

Borrow to invest to recover from market losses twice as fast

With traditional investing, you invest your own money. With leveraged investing, you invest borrowed money – giving you the ability to buy more high-quality blue-chip stocks at cheaper prices, with a principal guarantee. If applied correctly, leveraged investing can help you to recover twice as fast. We saw this strategy work for numerous clients during past market corrections and are confident it could be an effective option today too.

Want to know more? MacMillan Estate Planning offers a holistic approach to estate planning with all the people, processes, and technology that you need to plan your estate – either in person or virtually. Our team of lawyers, accountants, financial planners, and counsellors offer a refreshing alternative to the banks, law firms and accountancy firms. Register for one of our upcoming seminars.

You can also take advantage of our complimentary virtual consultations; call us or email us: 1-833-266-6464 and inquiry@macmillanestate.com.

At MacMillan Estate Planning, our team of professional trust and estate practitioners, chartered accountants, financial planners, and legal professionals look forward to assisting you with the design of your estate plan and will ensure you build, protect, and enjoy your wealth. The information provided is general and may not be suited to your objectives or sufficient to ensure the protection of you and your family. You should not act on this information without providing MacMillan Estate Planning with the opportunity to ensure that it is suitable for your unique situation.

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