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upporting
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our
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38
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Volume2 Issue8
The Tax Advantages of
CORPORATECLASSFUNDS
I’ll start byassuming that you’remakingwhatever registeredcontributions
areavailable to reduce the taxbiteonyour savings, includingmaximizing
your RRSP, TFSAandRESP investments. After all, as theWall Streetmagnate
MorganStanleyonceproclaimed: “Everymanmust payhis taxes, but you
don’t need to leavea tip.” Beyond registeredoptions, if youhave supple-
mental income that youareable to invest, thereare steps youcan take that
maycreatea taxdeferral benefit using
corporateclass funds
.
Corporateclass funds are likemutual funds; however, becauseof theway
theyare structured, youcan switchassetsbetweencorporateclass funds
toalignwithyour financial planwithout triggering immediate taxes. That
means as longas you stay investedwithin thecorporateclass fund family,
you’ll defer taxonyour gains.Whenyoueventually redeemout of this class
of funds you’ll pay taxonanygains you realize, but theability todefer tax
for longperiods is avaluablebenefit becausemoreof yourmoney stays
investedandworking for you.
With traditionalmutual funds,whichare structured
as trusts,whenyou switchbetween funds inanon-
registeredaccount, the transaction triggers a
disposition for taxpurposes. The taxes associatedwith
thisdispositionareapplied to that tax year.
Simplyput,
when switchingbetween funds inamutual fund trust,
it triggersapotential taxableevent—when switching
between fundswithinacorporateclass structure, it
doesnot.
Thereare twoways tousecorporateclass funds to
increaseyour savings:
– PersonalAccount
Because theyare segregated funds (i.e., offered
throughan insurancecompany), CDSPI’s corporate
class fundsmayprovideprotection fromcreditors
whencertainconditions aremet. Theyalsoallow
you toprovideanamedbeneficiary so that
expensiveand time-consumingprobatemaybe
bypassedwhen theassetspass toyour family.
EQUITIES
INCOME
BONDS
REALASSETS
BUY
SELL
Triggers
taxable
disposition
SWITCH
Betweenclasseson
tax-deferredbasis
CORPORATECLASSFUNDS
TRADITIONALMUTUALFUNDSTRUCTURE
Taxable
Disposition
Taxable
Disposition
Taxable
Disposition
EQUITIES
BONDS
INCOME
REAL
ASSETS
RonHaik
MBA,CFP®,FMA,
FCSI,CIWM®,TEP
Vice-President,
InvestmentAdvisory
Services,
CDSPIAdvisory
Services Inc.
1-800-561-9401,ext.6859
