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The Benefits of Gifting in Your Lifetime

Quinn Waddington - Sep 19, 2016
For many, the idea of estate planning means preparing for what happens after death. But executing your estate plan may be possible well before death.

The Benefits of Gifting in Your Lifetime

 

For many, the idea of estate planning means preparing for what happens after death. But executing your estate plan may be possible well before death. Outside of the satisfaction of seeing your beneficiaries enjoy the gifts during your lifetime, distributing assets while alive may provide additional benefits than waiting until a will is invoked.

 

Since Canada does not have a gift tax (unlike the U.S.), assets can be gifted by you and received by the beneficiary tax free. However, if your gift is not in cash but in the form of assets that may have appreciated in value, such as real estate or marketable securities, you will be considered to have disposed of the assets at fair market value at the time of gifting which may result in a capital gains tax liability.

 

Minimize Taxes During Your Lifetime — If your adult child or grandchild beneficiary is in a lower tax bracket than you, it may be beneficial to transfer investable assets to them during your lifetime. Any annual investment income will be taxed at their lower marginal tax rate instead of at your higher marginal rate, reducing the overall family tax bill. Gifts to spouses or related minor children may result in negative tax consequences to you because any income generated from the gifted property or capital gains from gifts to your spouse can be attributed back to you.

 

Reduce Taxes at Death — Gifting assets during your lifetime can reduce the size of your estate and the potential capital gains taxes that arise upon death. In addition, reducing the size of your estate during your lifetime can generally help to reduce or avoid probate or estate administration tax in provinces where applicable.

 

Maximize Charitable Donation Credits — If part of your estate plan is to provide assets to a charitable organization, you may receive greater tax benefits by making gifts annually and using the charitable donation credits to reduce your tax liability during your lifetime as opposed to having a large donation credit at death which may not be fully utilized.

 

Many factors may impact your decision to make gifts during your lifetime, including the amount of assets needed to maintain a certain standard of living, the difference between your marginal tax rate and your beneficiary’s current/future marginal tax rate and whether or not your will is subject to probate or estate administration tax. Please consult a tax advisor to discuss your particular situation.

 

This newsletter is solely the work of the author for the private information of clients. Although the author is a registered Investment Advisor at Canaccord Genuity Corp., this is not an official publication of Canaccord Genuity Corp. and the author is not a Canaccord Genuity Corp. analyst. The views (including any recommendation) expressed in this newsletter are those of the author alone, and are not necessarily those of Canaccord Genuity Corp. The information contained in this newsletter is drawn from sources believed to be reliable, but the accuracy and completeness of the information is not guaranteed, nor in providing it do the author or Canaccord Genuity Corp. assume any liability. This information is given as of the date appearing on this newsletter, and neither the author nor Canaccord Genuity Corp. assume any obligation to update the information or advise on further developments relating to information provided herein. This newsletter is intended for distribution in those jurisdictions where both the author and Canaccord Genuity Corp. are registered to do business in securities. Any distribution or dissemination of this newsletter in any other jurisdiction is prohibited. The holdings of the author, Canaccord Genuity Corp., its affiliated companies and holdings of their respective directors, officers and employees and companies with which they are associated may, from time to time, include the securities mentioned in this newsletter.

The preceding information is for general information only and does not constitute tax advice. All investors should consult with a qualified tax accountant.
Tax & Estate advice offered through Canaccord Genuity Wealth & Estate Planning Services Ltd.