Tax planning and estate planning often go hand-in-hand, so when changes to either are pending, it’s wise to keep an ear to the ground.

Here’s the good news: in its recent 2017 budget, the federal government announced relatively few tax changes that had a significant impact on the tax lives of Canadians.

Now the bad news – and it’s really what the government “said but didn’t do” that has wealthy Canadians worried. The government confirmed again its intentions to target tax rules and planning strategies that benefit the wealthy. This goes back to the 2016 budget when the government stated that it was looking to identify opportunities to reduce tax benefits that unfairly help the wealthiest Canadians.

But in 2017, it’s clear that change is getting closer, and a key target is tax planning strategies involving private corporations that “inappropriately reduce personal taxes of high-income earners.” Specifically, the government intends to review three strategies:

  1. Holding an investment portfolio inside a private corporation to accumulate lower-taxed investing earnings;
  2. Sprinkling income to family members using private corporations; and
  3. Using strategies to convert a private corporation’s regular income into capital gains.

The budget document stated the following about next steps:

The Government intends to release a paper in the coming months setting out the nature of these issues in more detail as well as proposed policy responses. In addressing these issues, the Government will ensure that corporations that contribute to job creation and economic growth by actively investing in their business continue to benefit from a highly competitive tax regime.”

Read the government’s full statement in Chapter 4 of the budget document that starts at page 197:

Ensure any changes are reflected in the estate plan

One fact seems clear – tax changes are coming. And lawyers and advisors to wealthy Canadians may be changing structures and strategies in response. When they do, it’s critical to ensure that the estate planning portion is aligned with these changes.

Revisiting a will? The Hull e-State Planner can ensure nothing is missed

The Hull e-State Planner is an interactive Will Planning App designed specifically for Canadian lawyers. It takes a visual approach to will planning, one that’s easy for you to use and easy for your client to understand and verify that their wishes have been properly captured.

You can find out more about it here:

Thanks for reading,

Suzana Popovic-Montag