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Martin Pelletier: Without the minority government, many wealthy Canadians would face a world full of hurt

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Martin Pelletier

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March 09, 2021 • • 1 day ago • • 3 minutes read • • 55 comments Without the minority in Prime Minister Justin Trudeau's government, many wealthy Canadians would be exposed to a world of harm as the temptation to raise taxes would be significant, writes Martin Pelletier. Without the minority in Prime Minister Justin Trudeau’s government, many wealthy Canadians would be exposed to a world of harm as the temptation to raise taxes would be significant, writes Martin Pelletier. Photo by Reuters / Blair Gable

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We are now a few months into 2021 and the markets have done reasonably well for the most part as they look beyond the COVID-19 lockdown to the looming economic recovery. However, there is one problem that still keeps us up at night due to its potential impact on Canadian investors and that is the question of tax hikes.

The federal government amassed a tremendous amount of new debt during the pandemic: its deficit spending leads the G7, and the country’s total debt-to-GDP ratio is now worse than Greece’s. We believe that without the minority government of Prime Minister Justin Trudeau, many wealthy Canadians would face a world of harm as the temptation to collect taxes would be significant.

And the country’s political dynamics could change.

As recently as last week, it was reported that Elections Canada had ordered 240,000 clear masks and 19 million disposable pens – 56 times as many writing implements as usual – possibly in preparation for a pandemic vote. At the same time, a committee of the House of Commons proposed that the election supervisor Stéphane Perrault consider allowing telephone votes, which has never been allowed in federal elections.

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While it’s too early to be sure we’ll be in the polls, it can never hurt to have a plan to make sure your affairs are managed as tax-efficiently as possible. Even if nothing happens, at least in the short term, you have identified some areas for immediate improvement in your financial planning.

When wondering where to start, try to answer two important questions

Remember, return projections are only part of the puzzle and shouldn’t be the main driving force behind a proper wealth plan.

Investing review should not be done until your goals are derived and good old-fashioned tax and asset transfer planning is incorporated.

When wondering where to start, try to answer two important questions.

First, how do you currently live from both a lifestyle and a value perspective, and how do you expect this to change in retirement? This can include family time, how often to travel, adding a vacation home, reducing work hours or switching to an income earner, a career change, starting school and / or early retirement.

The second question, especially for those who are already retired, is how much do you want to leave behind and who do you want to leave it to? There are three options here – family, philanthropy, or the CRA – and few that we have come across (especially here in Alberta) wish to leave that to the federal government.

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A proper wealth management plan will set out the tools and structures to help you achieve your desired lifestyle goals while maximizing after tax how much you want to give now or after your death. In fact, with proper planning, you can enjoy the fruits of your giving while you’re still alive while reducing the amount of tax you send to the rating agency.

Finally, it’s important that you integrate your legal, accounting, and investment teams and all work together to manage your family’s assets, including mitigating the amount of tax you pay.

Martin Pelletier, CFA, is a portfolio manager at Wellington-Altus Private Counsel Inc. (formerly TriVest Wealth Counsel Ltd.), a retail and institutional investment firm specializing in risk management portfolios, investment audit / oversight, and advanced tax and estate planning.

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