For those who have either worked hard to build wealth, inherited significant family assets, or even struck it lucky on the lottery, growing – or at least preserving – your portfolio is imperative. Navigating the breaks and rules to your advantage is a legitimate tactic to not only keep more money in your wallet but also fuel your family’s legacy, whether that’s through charitable donations, community work, or simply ensuring the kids’ and grandkids’ futures.

Most successful wealthy families have a defined purpose that steers their business and philanthropy. Very rarely does this involve giving more than required back to the CRA. By working with a trusted advisor, high earners can be models of tax efficiency.

Registered accounts

It’s not rocket science but it’s vital you maximize you registered accounts. Registered Retirement Savings Plan (RRSP) contributions are tax deductible, while filling up your Tax-Free Savings Account is also advised as, while not tax deductible, any investment growth and withdrawals are tax-free. Registered Education Savings Plans (RESP) are another avenue if you are saving for your child’s post-secondary education. This account benefits from tax-deferred growth and government grants, and  when your child attends school and withdrawals are made, it’ll be taxed in your child’s hands, likely at a lower tax rate than yours.

Income splitting

This is another fundamental planning strategy, especially for retirees. If you or your spouse has significantly higher income than the other, sharing this income can bring it down to a lower tax bracket. Not every type of income is eligible. For example, RRSPs are but CPP is not.

An alternative method is if the higher-income family member loans lower-income members (spouse or common-law partner or even minors via a family trust) money through a prescribed rate loan. This also shifts the money, which can be invested, into a lower tax bracket. The rate is set by the Canadian Revenue Agency (CRA) every quarter and fluctuates, so it is best to use when rates are low. The strategy works because while your spouse or family trust pays you annual interest on the loan the return on the investments is higher, if done correctly.

Family trust

As mentioned, a family trust can distribute wealth to family members with little income to lower the overall tax exposure of the family. A trust is regarded as a taxpayer for Canadian income purposes and can be used to mitigate taxes around the transfer of property, estate planning, or preserve assets for minors.

Crucially, income earned in the trust that’s paid to beneficiaries can be taxed at their marginal tax rate. Each person can also receive certain amounts of income tax-free annually, while the income earned in the family trust can be used to pay for your child’s expenses like private school fees and lessons. Every 21 years from the date of creation of the trust, it is deemed to have disposed of its assets at fair market value. If that date is approaching, speak to your advisor for planning advice.

Charity tax credits

A key part of a family’s legacy, and another avenue to make your tax return as efficient as possible, is to donate to your favourite charity or cause, which is tax deductible (a non-refundable tax credit). The federal charitable tax credit rate is 15% on the first $200 and 29% on the remaining $200, while there is also a provincial charitable tax credit available.

High-net-worth individuals can also donate to their favourite charity through a donor-advised fund and receive the tax receipt up-front. With the fund, there is no obligation to give to a specific charity straight away, but you can keep adding to the fund and watch the money grow.

Another tactic is to donate investments like segregated funds, mutual funds, and government bonds. Any capital gain realized as a result will not be subject to tax. Each individual case is different, of course, but this method is often more beneficial than selling the investments and facing capital gains.


Incorporating your business enables you to keep funds within the company structure and, therefore, enjoy preferential tax treatment. (The tax rate for small businesses, for example, is much less than the personal tax rate or dividend rate.) In addition, some business may be entitled to a significant lifetime capital gains exemption.

The money saved on tax can be invested through the corporation until you decide to withdraw it as income. But by that time, it would have had all the benefits of deferring tax and had the opportunity to compound. Plus, by the time you withdraw, it’s likely to be in a lower tax bracket.

Individual pension plan

For when an RRSP is not enough. An IPP is a registered defined benefit pension plan that is sponsored by an employer – ideal for someone who earns a substantial amount like an executive or small business owner. This option allows your company to make larger tax-deferred annual contributions than allowed to an RRSP while you can also split IPP retirement benefits with your spouse, lowering your family’s overall tax burden.

These plans are typically based on the age and years of services, becoming effective around your mid-40s with contribution room rising until age 65.

Tax exempt life insurance

If your surplus assets are simply invested in non-registered funds, the income earned will not only be exposed to your high marginal tax rate but, at death, will risk being exposed to any additional tax obligations. To protect these assets, tax exempt life insurance can preserve the value for your beneficiaries while also growing your money pot. When you die, proceeds are distributed to your beneficiaries on a tax-free basis, bypassing estate costs.