HIGH-GRADE NI-CU-PT-PD-ZN-CR-AU-V-TI DISCOVERIES IN THE "RING OF FIRE"

NI 43-101 Update (September 2012): 11.1 Mt @ 1.68% Ni, 0.87% Cu, 0.89 gpt Pt and 3.09 gpt Pd and 0.18 gpt Au (Proven & Probable Reserves) / 8.9 Mt @ 1.10% Ni, 1.14% Cu, 1.16 gpt Pt and 3.49 gpt Pd and 0.30 gpt Au (Inferred Resource)

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Message: Share Retainment

Have seen this question a few times on this board.  Been a financial advisor for over 40 years and will tell you that I am choosing the TFSA not RRSP for retention and here is why. Assumption here is that shares are presently held in an RRSP and a TFSA and the share price on a go forward basis will increase in value which I think we all expect.

RRSPs are TAX DEFERRING vehicles that provide a tax reduction in the the year of deposit and asset value accumulation without any tax reporting regardless of type of investment UNTIL the funds are removed.  No taxable gains, no dividend reporting, no interest reporting.

  • Starting at age 71 a minimum amount of accumulated funds according to a schedule are required to be removed (or you can set up a guaranteed pension like plan) and are treated as Taxable Income. You can withdraw as much as you like but it must be at least the minimum but all amounts withdrawn are fully taxable as income.
  • On death, assuming you have designated your spouse as beneficary, the withdrawals continue and now your spouse has the option of taking more than the minimum going forward (unless the pension plan like option was chosen then payment just continue to your spouse).  In essence your spouse is now the owner.  In the pension like option, there may not be anything further paid out depending on how the plan was set up and how long it was active.
  • On death and no spouse, the plan is collapsed and all remaining funds are required to be paid out and are added to your final tax return as Taxable Income.  Depending on the amount this could mean tax payable of upwards of 50% on the funds. The remainder after tax is then paid to your beneficiary(s) tax free. In the pension like option, there may not be anything further paid out depending on how the plan was set up and how long it was active.

TFSAs are TAX FREE vehicles that do not provide a tax reduction in the year of deposit and provide asset accumulation without any tax reporting regardless of type of investment even when funds are removed. No taxable gains, no dividend reporting, no interest reporting. 

  • On death the accumulated value is available Tax Free. If you have named your spouse as beneficiary then the accumualted value of the funds would be paid in cash directly to the spouse Tax Free. A recommendation to consider would be to name your spouse as successor holder which still transfers ownership to your spouse but does not require all your investments in the TFSA to be liquidated and paid in cash.  Your spouse essentially can cash anything in at anytime Tax Free but it is not forced by your death. 
  • On death and no spouse, funds are paid out in cash Tax Free to named beneficiaries.

So, imo it is better to have an existing accumulating value investment in an existing TFSA rather than an existing RRSP. Pretty much comes down to taxes.

Disclaimer, this is an opinion and should not be taken as financial advice.  You can find all this information easily available by googling "Difference between RRSPs and TFSAs" or contacting your adviser or your bank for that matter where you hold your accounts.

Hope this helps.  Good luck to all.

 

 

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