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Case Study

Retiree exploring gift ideas for adult children

Their situation

Age: Mid 60’s

Overview: A retiree with three adult children, one grandchild, and a small pension income.

Assets

Home: valued at $2.1 million Investment accounts: $4 million Florida home: $1.2 million

Net Worth

$7.3 million

Liabilities

No debt

Their Goals

  • Preserve existing lifestyle.
  • Plan for gifting towards children’s weddings and first homes.
  • Ensure the most tax-effective withdrawal strategies for income needs.
  • Develop a well-thought-out estate plan to maximize value for heirs.

Watson's Solutions

1
Cash Flow Management and Tax-Effective Withdrawal Strategy
  • On an annual basis, reexamined cash flow needs and assessed income streams in the most tax-efficient way.
  • Reviewed cash flow needs annually and adjusted income distribution to optimize tax efficiency.
2
Kids' Weddings and Early Gifting
  • Re-evaluated cash flow projections, adopting a more conservative approach by assuming all children married in the same year, with a lump sum allocated for their weddings.
  • Given the additional funds being withdrawn, assessed a combination of investment accounts to tap into, considered capital gains, and explored "flow-through" strategies to help minimize the taxes owed.
3
Tax Planning
  • Implemented pension income splitting.
  • Utilized available tax credits and deductions, like age credit, charitable donations, and medical expenses, to further reduce tax liabilities.
  • Used TFSA for long-term investing to tax shelter the growth of investments.
4
Ongoing: Review Will and Power of Attorney (POA)
  • Ensured the will and POA were updated regularly to reflect significant life changes, ensuring documents remained aligned with the current financial situation and family dynamics.

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FAQ

Cash Flow

Will my cash flow be disrupted?

An Education Savings Plan in Canada supports your child’s student education plan with tax benefits and CESG grants. A Registered Education Savings Plan (RESP) offers tax-sheltered growth with a $50,000 maximum RESP contribution limit, while a TFSA provides additional savings for education in Ontario and beyond, reducing financial stress when tuition payments begin.

Combine RESP savings, TFSA contributions, and family gifting options to maximize grants and grow funds tax-efficiently.

It’s best to start as early as possible to take advantage of compounding returns, RESP grants, and long-term growth.

A solid education plan includes RESP contributions, CESG maximization, gifting options, and effective budgeting to meet education costs.

Tax Efficiency

How can I effectively save and gift for my children's weddings while minimizing tax impact?

An Education Savings Plan in Canada supports your child’s student education plan with tax benefits and CESG grants. A Registered Education Savings Plan (RESP) offers tax-sheltered growth with a $50,000 maximum RESP contribution limit, while a TFSA provides additional savings for education in Ontario and beyond, reducing financial stress when tuition payments begin.

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Aligned Capital Partners Inc. (“ACPI”) is a full-service investment dealer and a member of the Canadian Investor Protection Fund (“CIPF”) and Canadian Investment Regulatory Organization (“CIRO”). Securities advice and services are provided through ACPI (or) Watson Securities, an approved trade name of ACPI. Only securities-related products and services are offered through ACPI/ Watson Securities and are covered by the CIPF. Financial planning and insurance services are provided through Watson Investments. Watson Investments is an independent company separate and distinct from ACPI/ Watson Securities.

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