Defer Tax, Save Money Every Year

If you could invest outside of an RRSP and defer taxes, would you?

If you could defer taxation on your investments until you decide to trigger the tax, would you?

If you could turn interest income into capital gains income and keep the investment into bonds, would you?

If you answered yes to any of the three questions, then you need to learn about corporate class mutual fund plans.

Corporate class mutual funds offer the ability for investors to invest in a variety of mutual funds, but defer taxation until you decide to withdrawal the money.

There are two tax structures that mutual funds are set up under. One is which most are established known as a mutual fund trust.

The second type of structure is a mutual fund corporation.

Investing in mutual fund corporations allows you several benefits, usually without any additional cost. These benefits include tax deferral, tax-free switching, all income taxed as capital gains and diversification options.

I had a friend that wanted to switch out of a fund that she held for over ten years. The fund changed management and she wasnt comfortable with the funds new direction. Her options were to pay the capital gain of over $30,000 and switch to a new investment or leave it as is because she had such a large tax bill.

It now becomes a tax decision more than an investment decision. By establishing funds inside a corporate share structure, you are eliminating this problem down the road and can make sound financial decisions regardless of the tax.

A second example is a market downturn. If an investor wanted to switch to cash or a short-term fund because of the volatility, then they can switch without any tax consequences.

A financial planning tip I would strongly recommend to look at is examine the funds you own, figure out the capital gains and losses on switching these funds around today, then imagine if they were all in corporate share structures, it would eliminate the taxes upon switching.

Several companies now offer corporate structures and most financial professionals usually only recommend corporate share funds for clients. As one investor put it to me, why would you not have all of your investments in corporate class?

Written by Grant Hicks

Grant Hicks, C.I.M., FCSI is a professional speaker, co-author and a Retirement Planning Specialist with Manulife Securities and Hicks Financial. A leader in the financial industry, Grant has been helping Vancouver Island residents plan and create their retirement lifestyles since 1989.

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