{"id":399433,"date":"2026-01-10T00:46:08","date_gmt":"2026-01-10T00:46:08","guid":{"rendered":"https:\/\/www.newsbeep.com\/ca\/399433\/"},"modified":"2026-01-10T00:46:08","modified_gmt":"2026-01-10T00:46:08","slug":"how-kelvin-and-rosita-both-64-can-transfer-wealth-to-their-four-kids-with-an-estate-freeze","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ca\/399433\/","title":{"rendered":"How Kelvin and Rosita, both 64, can transfer wealth to their four kids with an estate freeze"},"content":{"rendered":"

Open this photo in gallery:<\/a><\/p>\n

Kelvin and Rosita have a mortgage-free house in the Greater Toronto Area and substantial savings.Sammy Kogan\/The Globe and Mail<\/p>\n

Kelvin and Rosita are both 64 years old and they have four adult children. The youngest is still living at home and going to university.<\/p>\n

They have a mortgage-free house in the Greater Toronto Area and substantial savings.<\/p>\n

Kelvin plans to retire from his $250,000-a-year executive position in the spring of 2027. He\u2019ll continue his part-time management consulting business, which generates $90,000 a year gross. \u201cI\u2019ll keep going until 70 at least,\u201d Kelvin writes in an e-mail, \u201clonger if I\u2019m still enjoying it. It\u2019s fun, I get to help people, it offers good social connections, keeps my brain active and it pays well.\u201d<\/p>\n

In addition to his salary, Kelvin is collecting a defined benefit pension of $52,828 from a previous employer, indexed to inflation. He\u2019ll get a second defined benefit pension of $46,760, also indexed, when he retires.<\/p>\n

Short term, the couple plan to travel and spend more time with family. They also want to help their children financially and \u201cbegin the tax-efficient transfer of wealth to our kids.\u201d<\/p>\n

\u201cWe would like to give them money along the way to help them with buying houses, paying down mortgages, investing for our eventual grandkids\u2019 educations,\u201d Kelvin writes.<\/p>\n

Their retirement spending goal is $125,000 a year after tax.<\/p>\n

We asked Warren MacKenzie, an independent Toronto-based financial planner, to look at Kelvin and Rosita\u2019s situation. Mr. MacKenzie holds the chartered professional accountant designation.<\/p>\n

Financial Facelift: What\u2019s the best way for Mark, 62, and Rebecca, 59, to use a $1-million inheritance?<\/a><\/p>\n

Financial Facelift: Marguerite is back living with her partner and returns for a second Financial Facelift<\/a><\/p>\n

What the Expert Says<\/p>\n

Kelvin and Rosita have been successful in raising their four children and in building financial independence, Mr. MacKenzie says. One of their goals is give $100,000 to each of their four children over the next few years to help them purchase their first homes.<\/p>\n

Based on reasonable assumptions \u2013 a 5 per cent average rate of return on their investments and a 2 per cent inflation rate \u2013 Kelvin and Rosita can achieve their goals, he says. \u201cIf they live to be 100 years old, they\u2019re on track to leave an estate of more than $2-million with today\u2019s purchasing power.\u201d Most of that will be the value of the family home.<\/p>\n

Of the $400,000 the couple plan to transfer to their children, $160,000 \u2013 $40,000 each \u2013 should be used to open first home savings accounts (FHSAs), the planner says.<\/p>\n

When Kelvin retires, Rosita should convert her registered retirement savings plan to a registered retirement income fund and begin drawing on it because it will be important for them to split pension and RRIF income, Mr. MacKenzie says. \u201cOverall, tax paid by the family will be lowest when both spouses are taxed at the same marginal tax rate.\u201d<\/p>\n

In 2028, Kelvin\u2019s first full year of retirement, the cash inflow will consist of Kelvin\u2019s two indexed pensions totalling $106,000 a year and a $45,000 withdrawal from Rosita\u2019s RRIF.<\/p>\n

They will split all pension income, so cash outflow will consist of income tax of $26,000 and spending of $125,000 a year. Going forward, any shortfall will be covered by RRIF withdrawals.<\/p>\n

Their target spending of $125,000 a year is more than 50 per cent higher than their current spending level, but they want to spend more on travel, Mr. MacKenzie says.<\/p>\n

Because their goal is to transfer wealth to their children and grandchildren, Kelvin should consider an estate freeze for the corporation, Mr. MacKenzie says.<\/p>\n

Here\u2019s how it would work.<\/p>\n

Kelvin is sole owner of a consulting corporation whose value consists of the $85,000 or so in Kelvin\u2019s corporate bank account.<\/p>\n

\u201cThe steps are to ask a lawyer to issue new preferred and common shares,\u201d the planner says. Kelvin gets preferred shares valued at $85,000. \u201cThe kids are issued new common shares which initially have zero value.\u201d But as Kelvin continues to work part time, earning about $90,000 a year in consulting revenue, this money is left in the corporation and accrues to the common shares. \u201cLater, when the company starts to invest the available cash, its value could grow at, say, 5 per cent a year \u2013 and all this investment income will accrue to the common shares.\u201d<\/p>\n

\u201cEventually, the company is liquidated. Kelvin gets $85,000 and his children get the rest of the value as a capital gain. Since Kelvin and Rosita don\u2019t need the consulting income, and Kelvin wants to continue working, it makes perfect sense,\u201d Mr. MacKenzie says.<\/p>\n

Kelvin and Rosita are both in good health, so they have delayed the start of Canada Pension Plan and Old Age Security benefits until age 70, the planner says. As a result, CPP benefits will be 42 per cent higher and OAS 36 per cent higher than if they started collecting at age 65.<\/p>\n

Two of the couple\u2019s four children are joint executors of the parents\u2019 estates. \u201cMany parents believe that any dispute over the administration of the estate is unlikely because their children get along well,\u201d Mr. MacKenzie says. \u201cParents should realize that eventually children may get married and then relationships with siblings can change and conflicts over the administration of a large estate are common,\u201d he notes. Kelvin and Rosita should consider appointing a corporate executor, he says. \u201cIt would be better for the children to be angry with a bank than to be angry with one another.\u201d<\/p>\n

Kelvin is a do-it-yourself investor. \u201cHe mentions that one of his goals is to manage the capital wisely and avoid the possibility of a 1929-style market crash,\u201d Mr. MacKenzie says. Their investment portfolio is about 90 per cent in stocks. \u201cGiven that the stock market is near its all-time high, and that they can achieve their goals with a lower-risk portfolio, they are taking more investment risk than necessary,\u201d the planner says.<\/p>\n

But because Kelvin\u2019s indexed pensions are more than enough to achieve all their spending goals, they can afford to take more investment risk and still not be in danger of running out of money.<\/p>\n

Kelvin and Rosita should ensure that each of their children opens an FHSA even if a child doesn\u2019t have the funds to immediately make a deposit. \u201cBy opening the account, they will start to create \u2018carry forward\u2019 room so that when they start working, they\u2019ll be able to deduct their FHSA deposits from their taxable income.\u201d<\/p>\n

If Kelvin and Rosita live to be 100, their main asset will be their personal residence. If they decide to move to a retirement home at some point, the sale of their personal residence will be more than enough to cover the cost of a luxury retirement home.<\/p>\n

Client situation<\/p>\n

The people: Kelvin and Rosita, both 64, and their children, 25, 29, 31 and 33.<\/p>\n

The problem: Can they meet their retirement spending goal, help their children financially and arrange a tax-efficient transfer of wealth?<\/p>\n

The plan: Kelvin retires next year and continues with his corporate consulting work, leaving the proceeds in the corporation. He might consider an estate freeze as a way of passing the couple\u2019s surplus wealth to their children.<\/p>\n

The payoff: Peace of mind.<\/p>\n

(Income, expense and asset values have been provided by the Facelift applicants.)<\/p>\n

Monthly after-tax income, current: $15,750 (after pension income splitting).<\/p>\n

Assets: Joint bank account $25,000; his tax-free savings account $150,000; her TFSA $55,000; his RRSP $214,000; her RRSP $661,000; commuted value of his DB pensions $1,400,000; residence $1,600,000; corporate account $85,000. Total: $4,190,000.<\/p>\n

Monthly outlays: Property tax $580; home insurance, utilities $1,000; maintenance $200; transportation $800; groceries $2,000; clothing $200; charity $200; vacation, travel $800; dining, drinks, entertainment $300; personal care $250; pets $150; subscriptions $40; health care $70; communications $200; TFSAs $3,000. Total: $9,790.<\/p>\n

Liabilities: None.<\/p>\n

Want a free financial facelift? E-mail finfacelift@gmail.com<\/a>.<\/p>\n

Some details may be changed to protect the privacy of the people profiled.<\/p>\n","protected":false},"excerpt":{"rendered":"Open this photo in gallery: Kelvin and Rosita have a mortgage-free house in the Greater Toronto Area and…\n","protected":false},"author":2,"featured_media":399434,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[45,49,48,133,7325,131,132],"class_list":{"0":"post-399433","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-business","9":"tag-ca","10":"tag-canada","11":"tag-finance","12":"tag-financialfacelift","13":"tag-personal-finance","14":"tag-personalfinance"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/399433","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=399433"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/399433\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/399434"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=399433"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=399433"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=399433"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}