CPP, Income Taxes & Inheritance

August1991 · February 6, 2010

Many older Canadians now think about what they will leave to their children (or nieces and nephews, if they have no children). They may leave a house (paid for), and perhaps a cottage outside of the city. Older Canadians think about their RRSPs, their savings. Boomers, looking at their parents, wonder who should get what?

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This thread is not about how to avoid taxes and make your children richer.

Rather, I mean to argue that if older people don't spend now, they are leaving more for other children. IOW, if parents don't pay taxes now, they are leaving more for their children - or possibly other children.

IOW, a tax is like a saving - someone in the future will get it. If you save, you leave more to your children (or nieces/nephews). If you are taxed, you leave more to younger people in general.

For an old person, it makes no difference whether you save or you are taxed. (OTOH, if old people spent all now, no one in the future would get anything.)

Fortunately for younger people, many older people are naive fools. The older people buy government bonds, pay taxes or contribute to the CPP - as if they were not the same. (And what's the difference between paying a government tax, buying a government bond, making a CPP contribution - or saving?)

Edited February 6, 2010 by August1991

Renegade · February 6, 2010

And what's the difference between paying a government tax, buying a government bond, making a CPP contribution - or saving?

Well, one big difference is that with saving, you still have the option to spend it during your lifetime, with taxes you do not. IOW, the difference is in who controls the funds.

whowhere · February 6, 2010

Well, one big difference is that with saving, you still have the option to spend it during your lifetime, with taxes you do not. IOW, the difference is in who controls the funds.

Its always better to have money, if you don't you rely on the goodwill of government and society and you could be left begging for food or worse homeless. Money is the elevator. The more you have the more distant you become from this fate. However, it is a waste of money and savings to have died and not spent that money along the way. Truly if you intend on doing good with your money for your heirs perhaps prebuying at todays prices of what you want them to have in the future is better than having your wealth divided among them then and that money not going as far because of inflationary forces in play.

Paying to much tax chokes off the economy and puts your money into over paid government government payrolls (relative) to non government payrolls. Doing this is not fair, so less tax and less government is better.

William Ashley · February 7, 2010

invest overseas and keep it there.

Gift funds within the limit of allowable contributions annual in trust.

Transfer money in cash off the books, or in objects and commodities that arn't easily tracable.

For example "finders laws". If someone leaves property on someones property and it is not claimed then it is assumed by another person.

Contractually - for example if there are default provisions, which can be executed on death than assumption of property for "failure of performance" which results in a monetary loss as part of a business venture.

Not for profit organization creation

Corporation creation and non valuation of shares for holding of funds.

Personally I think the overseas assets option is the best.

Although a mix of them might be useful.

You just need to research the laws that are applicable to your jurisdiction and any place you plan to keep reserves - or countries you may have safety deposit boxes.

Eg. someone accessing your safety deposit box lawfully, but divesting of the assets in a foreign country ect..

there is the markedly depreciated option also.

Some things will hold usefulness - however there are depreciation and assessment rules... you can play with these to transfer non valued but very useful or repairable for use utilities.. this is best done with business asset transfers.

August1991 · February 8, 2010

Well, one big difference is that with saving, you still have the option to spend it during your lifetime, with taxes you do not. IOW, the difference is in who controls the funds.

In general, older people don't spend their savings. If it's in an RRSP (RRIF), as one older woman said to me in giving her advice about whether to invest in an RRSP, "RRSP? You'll never see that money." To withdraw the money from the RRSP, they must pay tax - so they don't withdraw it and so leave the money to their children, or nephews/nieces.

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Renegade, my point in the OP was to make plain that if you pay taxes, buy government bonds, pay CPP - or save - you have in effect left something for others, children, future generations. To be more explicit, few Canadians re-mortgage their house, get a HELOC, spend the money and die with zero assets. Most Canadians die leaving a house and land to their children.

IOW, Canada (or its government) is not in debt. The past is leaving a positive balance to the future. (With a little common sense, this point is far more obvious except when it concerns the environment.)

invest overseas and keep it there.

Investments abroad typically amount to paper claims on real assets. If the purpose is to avoid taxes, it is probably better to buy real assets in Canada, or examine carefully Canadian tax law. Government tax authorities increasingly have ways of discovering/taxing paper (computer) claims on real assets - even abroad. Edited February 8, 2010 by August1991

Renegade · February 8, 2010

IOW, Canada (or its government) is not in debt. The past is leaving a positive balance to the future. (With a little common sense, this point is far more obvious except when it concerns the environment.)

In aggreate you are probably right. But in aggreation you lose some relevant details. It may make a huge differnce to my kids, and consequently to me, if I leave the money to them as inheritance rather than pay it all in taxes, even though you are correct that both in essence are a transfer from me to the next generation.

Topaz · February 22, 2010

Tell me if I'm wrong but life insurance is not taxed at death, so wouldn't it be better taxwise to buy more insurances? Any money in a bank account with their name on it with yours, is theirs when you die.

Alta4ever · February 22, 2010

Tell me if I'm wrong but life insurance is not taxed at death, so wouldn't it be better taxwise to buy more insurances? Any money in a bank account with their name on it with yours, is theirs when you die.

Your better off buying a segregated fund it pays to a beneficiary and bypasses probate (like life insurance), and it does not have the large cost of a whole life or similar policy.

August1991 · February 24, 2010

In aggreate you are probably right. But in aggreation you lose some relevant details. It may make a huge differnce to my kids, and consequently to me, if I leave the money to them as inheritance rather than pay it all in taxes...

And that's the $64,000 quote, Renegade.

At issue is not that we are (collectively) in debt. (We're not.) At issue is who is going to get the inheritance. IOW, the essence of government is to have the power to transfer wealth between individuals.

One reason that I consider myself "right wing" is because I would like to see this government power severely restricted. Concern about government debt or budget deficits have nothing to do with government spending. Indeed, as we are seeing in the US, it may turn out that the only way to control government spending is to cut taxes and induce large budget deficits.

If Bush Jnr had balanced the federal budget, how much larger would Obama's stimulus package have been?

Edited February 24, 2010 by August1991