I'm getting an inheritance
by Contributed - Story: 97333
Sep 1, 2013 / 5:00 am
Sep 1, 2013 / 5:00 am
Have you ever met an ‘average person’? Neither have I. But, for the sake of argument, let’s say you’re the ‘average Canadian’ and you’re getting an inheritance. If so, that inheritance is not likely to be large, so to help you make the most of that inheritance, here are some suggestions you may find helpful:
- STOP and take stock - Draw up a budget of your immediate income needs and your future income and capital needs based on your goals and dreams. Ensure proper asset allocation – meaning that money you need in the near future should not be placed in an investment that locks it in for a long time or that would be subject to redemption fees should you need the funds before the ‘locked-in’ period expires.
- Repay non-deductible debt - Use some or all of your inheritance to repay debt on which the loan interest is not tax deductible. Start with debt that carries the highest loan interest rate.
- Top it up - If you have investments held within RRSPs or TFSAs with unused carry-forward room, fill it up.
- Send your inheritance to school - Contribute to investments held within RESPs to pay for your children’s expensive (and necessary) post-secondary education.
- Invest in your retirement/estate - Look carefully at such tax-advantage wealth accumulation vehicles such as Corporate Class Mutual Funds (that allow you to switch between different investments without triggering capital gains at the time of the switch) and Permanent Life Insurance (if you need it) which could provide tax-free funds at a critical time or a source of investment income to replace an income that is no longer there.
- Know your relationship rules - In many provinces, gifts and inheritances are exempt in the case of separation or divorce. But – if you invest your inheritance in joint names with your partner or in a family home or cottage, or use the funds to pay down debt on jointly held property and then separate, the assets may become fully sharable. You may want to keep property and other investments separate from other family investments/assets.
What you do with your inheritance is up to you, but to be sure your decisions fit your unique situation, talk to your legal and professional advisor first.
This column, written and published by Investors Group Financial Services Inc. (in Québec – a Financial Services Firm), and Investors Group Securities Inc. (in Québec, a firm in Financial Planning) presents general information only and is not a solicitation to buy or sell any investments. Contact your own advisor for specific advice about your circumstances. For more information on this topic please contact your Investors Group Consultant.
Read more Financial Planning Made Easy articles
The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet presents its columns "as is" and does not warrant the contents.
- Money to minors: a major issue? Dec 1
- Mortgage insurance: you never know Nov 24
- Today’s decisions could cost tomorrow Nov 17
- Year-end tax reminders and tips Nov 10
- Cascading life insurance Nov 3
- Incorporation for professionals Oct 27
- U.S. estate taxes and you Oct 20
- A good way to give and save Oct 13
(Click for RSS instructions.)