{"id":501603,"date":"2026-06-19T22:42:08","date_gmt":"2026-06-19T22:42:08","guid":{"rendered":"https:\/\/www.newsbeep.com\/il\/501603\/"},"modified":"2026-06-19T22:42:08","modified_gmt":"2026-06-19T22:42:08","slug":"whats-the-most-tax-efficient-way-for-sonali-70-to-draw-funds-as-her-husband-needs-more-health-care","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/il\/501603\/","title":{"rendered":"What\u2019s the most tax-efficient way for Sonali, 70, to draw funds as her husband needs more health care?"},"content":{"rendered":"

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

For more tax-efficient corporate withdrawals, Sonali should work with a professional to make use of her corporation\u2019s capital dividend account, says Shaun Sun, a certified financial planner and portfolio manager at RGF Integrated Wealth Management.Nick Iwanyshyn\/The Globe and Mail<\/p>\n

Spouses Felipe and Sonali are approaching a major life transition: Felipe, who is 85 and in failing health, may soon need to move to a nursing home to get health care he can\u2019t access at home.<\/p>\n

Private nursing-home care will cost $10,000 a month or more, Sonali, 70, writes in an e-mail. Fortunately, the couple has substantial savings and investments, some of which are in Sonali\u2019s corporation. <\/p>\n

During her working years, Sonali left the net profits in the corporation and its only business now is passive investing. Both she and Felipe are shareholders.<\/p>\n

To supplement their Canada Pension Plan benefits and Felipe\u2019s registered retirement income fund (RRIF) withdrawals, both Felipe and Sonali draw dividends from the corporation. Surplus dividends go to their non-registered investment portfolio.<\/p>\n

Sonali\u2019s pre-tax income for 2025 was $165,080, including $126,273 in taxable dividends from her corporation. Felipe\u2019s income was $161,116, including another $126,273 in taxable dividends from the corporation. <\/p>\n

With travel and entertainment curtailed by Felipe\u2019s poor health, they spent only about $65,000 a year after tax in 2025. <\/p>\n

Longer term, Sonali is thinking of moving to the United States to be closer to family. If she does, it would affect some of her personal investments. <\/p>\n

Her questions: What is the most tax-efficient way to draw income with a view to emptying her corporate accounts? Are their investments suitable? \u201cWill there be enough to pay for a nice retirement residence when I am 80?\u201d Sonali asks. <\/p>\n

After paying off a large debt, can Ivan, 63, retire this year?<\/a><\/p>\n

We asked Shaun Sun, a certified financial planner and portfolio manager at RGF Integrated Wealth Management in Vancouver, to look at Sonali and Felipe\u2019s situation.<\/p>\n

What the expert says<\/p>\n

First, the planner suggests some ways to save taxes and possibly generate better investment returns so the couple will have more money to draw on. <\/p>\n

\u201cTaxes are top of mind for Sonali, who upon reviewing their most recent tax returns, finds they\u2019ve paid about $65,000 in personal income taxes and social benefit repayments,\u201d also known as the Old Age Security clawback.<\/p>\n

With a possible move to the U.S., Sonali wants to begin the long process of drawing down the corporation\u2019s portfolio as quickly as possible. <\/p>\n

\u201cMoving to the United States and giving up her Canadian residency will trigger a tax event known as a deemed disposition,\u201d Mr. Sun says. Tax law treats this as if she had sold all the assets she owns and immediately re-acquired them. This departure tax means she would have to report any capital gains or losses in a single year. <\/p>\n

\u201cSonali should get professional cross-border tax advice before this transition because triggering capital gains could create a large tax liability, particularly for the non-registered investment portfolio and the shares in Sonali\u2019s corporation,\u201d Mr. Sun says.<\/p>\n

Certain assets such as RRIFs, tax-free savings accounts and Canadian real estate are exempt from the tax. <\/p>\n

As it is, the dividends Sonali is drawing from her corporation are taxable. For more tax-efficient corporate withdrawals, Sonali should work with an accountant or tax professional to make use of her corporation\u2019s capital dividend account, Mr. Sun says. This is a notional account that allows the payment of tax-free capital dividends to shareholders.<\/p>\n

Here\u2019s how it works: When capital gains are realized, only 50 per cent of the amount is taxable. When this happens within a corporation, the other 50 per cent gets added to the CDA balance, the planner says.<\/p>\n

The CDA balance can be increased by realizing or triggering a capital gain on the corporation\u2019s Canadian stocks and exchange-traded funds, which, in Sonali\u2019s case, have increased in value to $575,000 from their adjusted cost base of $323,000 (this includes their cost and any fees paid). \u201cSelling these investments will trigger this gain, which could be done over time,\u201d Mr. Sun says. <\/p>\n

As it is, interest makes up a significant portion of the passive income Sonali\u2019s corporation is generating from high-interest savings accounts and guaranteed investment certificates.<\/p>\n

Because capital gains are taxed more favourably than interest income, \u201cthe combination of favourable tax treatment and the credit to the capital dividend account makes capital gains a powerful tax-planning tool,\u201d Mr. Sun says. For example, triggering the entire current capital gain on her corporate stock holdings would create the potential for a $126,000 tax-free capital dividend, he says. <\/p>\n

\u201cThis will be particularly important given the additional minimum taxable income Sonali is required to take from her RRIF this year, which will be about $40,000.\u201d<\/p>\n

Can Naresh and Whitney, both 51, retire in five years and leave no money behind?<\/a><\/p>\n

It\u2019s important to note that the taxable dividends Sonali and Felipe are drawing from the corporation have the effect of pushing them over the OAS clawback threshold, because they require a dividend gross-up, artificially increasing the amount of income they report, the planner says.<\/p>\n

By incorporating tax-free capital dividends into their income planning, Sonali and Felipe could reduce their net income so that it falls within the range that will qualify them for some OAS benefits, the planner says. <\/p>\n

Next, Mr. Sun illustrates how they might be able to reduce future taxes by changing where the securities are held. By shifting the stocks and balanced ETFs from their personal accounts to Sonali\u2019s corporation, they may be able to take advantage of the CDA again. <\/p>\n

\u201cThe equity and balanced ETFs, which are the most likely to increase in value and generate future capital gains, should be held within Sonali\u2019s corporation,\u201d Mr. Sun says. <\/p>\n

This shift can be achieved without triggering tax consequences or changing the couple\u2019s portfolio, he says. For example, Sonali could sell the ETFs in her RRIF and buy equivalent securities in her corporation using the corporation\u2019s cash and GICs as they mature. She\u2019d use the proceeds of the ETF sale in her RRIF to buy high-interest savings accounts and GICs.<\/p>\n

Next, Mr. Sun looked at whether their investments are suitable. They have a roughly 60-40 asset mix, with 56 per cent cash and GICs and 3 per cent bonds along with 41 per cent stocks and exchange-traded funds.<\/p>\n

Having such a heavy cash and GIC component makes sense given the likelihood of Felipe\u2019s significant long-term care costs and Sonali\u2019s concern about possibly having to pay capital gains tax on her stock holdings if she leaves the country. <\/p>\n

But having such a high proportion of GICs exposes them to reinvestment risk. As their GICs come due, they will likely be renewing at lower rates than they are getting now. \u201cWith inflation creeping closer to 3 per cent, increasing the allocation to bonds can be a good way of protecting their purchasing power.\u201d<\/p>\n

To ease Sonali\u2019s concerns, Financial Facelift asked the planner to run a simplified retirement forecast for the couple using some basic assumptions.<\/p>\n

In the forecast, Sonali and Felipe continue to spend $65,000 a year after tax for basic living expenses, rising with inflation. Felipe\u2019s health care costs are $120,000 a year for 10 years. In a few years, with Felipe getting more care, Sonali increases her travel expenses by $10,000 a year. At 80, Sonali moves to a retirement home in Canada at a cost of $60,000 a year. <\/p>\n

The projection assumes an inflation rate of 2.5 per cent, and rates of return of 3 per cent for cash and equivalents, 5 per cent for fixed income and 7 per cent for stocks.<\/p>\n

\u201cBased on these assumptions, the good news is that Sonali and Felipe\u2019s financial future appears secure,\u201d Mr. Sun says. \u201cAt 95 Sonali will have about $640,000 in financial assets remaining,\u201d plus the additional proceeds from selling their home, now valued at $600,000. <\/p>\n

He says Sonali will need to revisit her plans as her circumstances change and see how much money she has at her disposal at the time.<\/p>\n

\u201cEngaging with a financial planner who can crunch the numbers to illustrate these different outcomes and walk the couple through each of these scenarios to stress-test their financial plan will provide them with peace of mind as to what the future could hold.\u201d<\/p>\n

Client situation<\/p>\n

(Income, expenses, assets and liabilities provided by applicants.)<\/p>\n

The people: Sonali, 70, and Felipe, 85.<\/p>\n

The problem: How to draw down their savings in the most tax-effective manner.<\/p>\n

The plan: Take better advantage of Sonali\u2019s capital dividend account.<\/p>\n

The payoff: Financial security.<\/p>\n

Monthly after-tax income: As needed.<\/p>\n

Assets: Cash $4,500; joint non-registered portfolio $1,081,000; Sonali\u2019s corporate investments $1,050,000; Sonali\u2019s RRIF $901,000; Felipe\u2019s RRIF $183,000; Sonali\u2019s TFSA $134,000; Felipe\u2019s TFSA $135,000. Total: $3,488,500. <\/p>\n

Monthly outlays: Condo fee $650; property tax $425; home insurance $55; electricity $90; heating $100; maintenance $400; garden $25; transportation $275; groceries $600; clothing $50; gifts, charity $125; vacation, travel $1,740; personal care $50; recreational program $400; dining, entertainment $100; sports, hobbies $80; subscriptions $55; health care $140; communications $75. Total: $5,435. <\/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: For more tax-efficient corporate withdrawals, Sonali should work with a professional to make…\n","protected":false},"author":2,"featured_media":501604,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[114,268,13205,85,46,266,267],"class_list":["post-501603","post","type-post","status-publish","format-standard","has-post-thumbnail","category-personal-finance","tag-business","tag-finance","tag-financialfacelift","tag-il","tag-israel","tag-personal-finance","tag-personalfinance"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/501603","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/comments?post=501603"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/501603\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media\/501604"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media?parent=501603"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/categories?post=501603"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/tags?post=501603"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}