Death & Taxes

If you’re like most people we know, sometimes your day is a grind. That doesn’t mean that every day is tough, but some days stand out more than others. Sometimes it’s family, sometimes it’s work, sometimes there’s no reason for it – but sometimes it’s a grind.The one thing that is on our side when we’re having a rough day, however, is that it’s generally easy to bounce back from it. We can take a break, work out, eat Haagen Dazs; there’s always something you can do.Unfortunately, it’s not the same with your wealth. There are times when our wealth has a bad day, and it's hard to know if it will bounce back without some careful planning in advance. One of those times is at death. When a death has happened but planning hasn't, it gets complicated and risky. This is true whether it is the death of a person, or the death of a relationship.For example, if a person dies unexpectedly and without an estate plan, the risk of a major, negative event is significant. Considerable risks also present themselves, however, when relationships end. Whether it be the result of litigation, a divorce settlement or a sibling disagreement, wealth can be at great risk because in many cases assets must be sold and massive losses are incurred.The other kind of event or force that will destroy your wealth is tax.Tax is more efficient at grinding away at your wealth and your family’s legacy than bad markets, bad business ideas, and family members who are over-spenders. Tax will relentlessly pursue you at every turn. It will impact you, your kids, your grand kids and beyond. It will grind away at your estate, take it’s share when you transfer wealth, when you make money, when you spend money and when you give it away to worthy causes. Tax grinds.Here’s the good news. In principle, tax structures in Canada are designed to benefit the business owner (believe it or not) and that means there are dozens of ways to minimize the tax grind through intelligent and comprehensive legacy planning. Each instance of tax minimization has a positive compounding effect – just like every missed opportunity has its own compounding effect. Tax isn’t just an asset protection or cash flow management issue, it’s a legacy issue.Take the time to protect your wealth from the negative consequences of death, and understand the finer points of tax friction, because you can’t bounce back from death, or from taxes.