Tax Planning

Tax planning allows you to use your wealth in the ways that you want, including taking care of your family in the long-term and funding any philanthropic goals.

Tax planning is especially complex for high-net-worth individuals. Tax planning is multi-faceted and tax rules are constantly changing. Tax planning should be considered as part of your wealth planning strategy and may involve a number of BMO Private Wealth specialists as well as your own tax accountants, lawyers and other advisors.

In addition to your BMO Private Wealth professional, as a Private Wealth client, you’ll have access to specialized planning consultants who are experts in tax planning for individuals, professionals, trusts, family farms and businesses. In addition to experts in Canadian tax, we have experts in U.S., cross-border and international tax. Start by talking to your BMO Private Wealth professional who will engage the appropriate tax specialist. As well, we are happy to consult with your own tax advisors or lawyers as part of a broader wealth planning engagement.

Yes. BMO Private Wealth includes specialists with expertise in cross-border tax implications. These specialists can provide guidance and highlight strategies to minimize U.S. estate tax. For example, you may wish to consider owning U.S. real estate through a Canadian resident trust, or U.S. securities through a Canadian corporation. Talk to your BMO Private Wealth professional about your specific situation.

Apart from tax-sheltered vehicles like RRSPs and TFSAs, some common tax strategies for you and your family are:

• Income splitting
• Setting up trusts for control and asset protection
• Facilitating effective wealth transfer while reducing tax for your estate
• Using a First Home Savings Account (FHSA) to save for your first home
• Using an RESP to save for your children’s education needs
• Using an RDSP to save for the financial needs of a disabled child

Along with your existing advisors, our tax experts can help determine the strategies that can best preserve your assets for your beneficiaries.

A personal holding company (PHC) is a corporation typically designed to hold income-generating investment assets. It is a separate legal entity from its owners and requires financial statements and separate filing of corporate tax returns. Quite often, individual family members (or a family trust) will hold the various common and preferred shares of the private corporation, which owns the underlying investment securities. A PHC can facilitate many tax and estate planning strategies but introduces other tax considerations that are not applicable when investments are held personally.

Some common mistakes in relation to tax planning include (but not limited to) the following:

Starting too late
Many individuals only engage in year-end tax planning to influence their current year's tax bill. However, effective tax planning often requires proactive measures well in advance. For example, structuring the sale of a business strategically ahead of time allows for the realization of tax incentives like the lifetime capital gains exemption.

Lack of awareness of tax changes and opportunities
Staying up to date with Federal Budget developments that directly impact your financial situation is crucial to effective tax planning. Collaborate with your BMO Private Wealth professional to stay informed about new opportunities, such as the First Home Savings Account (FHSA), that can optimize your tax situation.

Poor record-keeping
It is important to maintain accurate records of your tax cost base for investments and other assets such as a cottage property (e.g., renovations/betterments), as well as charitable tax receipts, among a long list of other items required at tax time. Don't risk missing out on deductions due to lost receipts or incomplete documentation.

'Do it yourself' planning
Tax planning strategies can be intricate and multifaceted. Opting for a 'do it yourself' approach without seeking advice from tax experts can result in missed opportunities and less effective outcomes. Always consider engaging appropriate counsel for complex tax strategies.

Income splitting
Utilizing effective income-splitting techniques can help you distribute income among family members in lower tax brackets, optimizing your family’s overall tax liability.

Use of family trusts
Employing family trusts not only offers control and protection over assets but can also yield you potential tax advantages through income splitting and other strategies.

Estate freeze (for Business Owners)
If you own a business, consider an estate freeze to lock in the current value of your business for succession/estate planning purposes, potentially reducing your tax burden and transferring future growth to your beneficiaries.

Tax-efficient estate planning
You can maximize the legacy you leave behind by ensuring that your Wills, Powers of Attorney, and beneficiary designations are current and drafted to reflect a tax-efficient estate plan.

Charitable giving
Charitable donations can have significant tax benefits, allowing you to support causes you care about while reducing your taxable income.

Life insurance
Incorporating life insurance into your tax planning strategy can provide both protection and tax advantages, particularly in terms of estate planning.

Remember, every individual's financial situation is unique, so it's important to work closely with your BMO Private Wealth professional to tailor these strategies to your specific circumstances.

Navigating taxes with multiple income sources requires a tailored approach. Our experts can help you develop a comprehensive tax strategy by analyzing each income stream and identifying opportunities to optimize tax efficiency. They'll take into account your employment income, investments, pension plans, and any other income sources to create a holistic plan that aligns with your financial goals.

Retirement and tax planning are closely intertwined. BMO Private Wealth professionals specialize in aligning these two aspects to maximize your financial well-being. They'll help you create a retirement plan that considers tax-efficient withdrawal strategies from your various retirement accounts, including RRSPs, pension plans, and other investments. This approach ensures that you can enjoy a comfortable retirement while minimizing tax implications.