3. They can make loans to their corporation. To date, the medical corporation has not retained any income. Bob and Marilyn have used after-tax dollars to pay for their real estate purchases and their non-registered investments. It would be useful to explore a transfer of their equity in financial assets to the medical corporation through a shareholder loan, he suggests.
The company would repay Bob with after-tax dollars equal to the amount he and Marilyn have lent the company. Return of capital would have no tax in comparison with taxable dividends from the corporation. Taxes on money generated by the loan would be deferred as long as Bob wishes.
4. They can plan a trust for distribution of income or assets to their children or to charities. At the death of the first spouse, the survivor will lose the ability to split pension income. That failure to split will raise tax liability. The alternative is to have a testamentary trust ready to take over assets. The trust could invest and apportion capital for the survivor's needs with a view to tax savings and the interests of the couple's children and charities.
“The complexity of the couple's finances requires that any plan they choose be reviewed by their legal counsel, accountant and investment adviser,” Mr. Moran says. “They can have a comfortable retirement. It is only a question of deciding what the goal of their work has been and then financing it tax efficiently.”
Client Situation
| The People | Physician and wife living in Alberta |
| The Problem | Substantial and complex assets make retirement planning difficult |
| The Plan | Design a retirement and estate plan for efficient asset management |
| The Payoff | Tax reduction and increased growth of net worth |
| After-tax monthly income | $22,500 |
| Assets | Residence $550,000; B.C. condo $350,000; B.C. rental property $500,000; Toronto condo $350,000; Non-registered assets $400,000; RRSPs Dr. Bob $600,000; RRSPs Marilyn $450,000; Medical partnership value $80,000; Total: $3,280,000 |
| Monthly disbursements | Mortgages $1,100; Line of credit int. $200; Food $700; Utilities, phones $700; Property tax home $400; Prop. tax. B.C. condo $200; Car maintenance $400; Car insurance $100; Gas $150; House cleaner $600; Life insurance $400; Entertainment $1,000; Clothes $300; Grooming $200; Travel $2,000; Gifts and charity $2,000; RRSP: $3,000; Misc. $800; Savings $8,250; Total $22,500 |
| Liabilities | Mortgage house $200,000; Line of credit $80,000; Total $280,000 |
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