Investment Tax efficiency for Canadian Investor

[investmd]

I am in the process of selling my business and am interested in any advice / perspective other Canadians have to offer in regards to the allocation of various types of investments among various accounts.  Given that all tax advantaged accounts will be maxed (TFSA & RRSP), what is the most tax efficient way to hold the remainder of the capital? Inside a corporation, a trust, or held personally?

Now lets assume a variety of equity holdings to be allocated between these accounts;

1. Long term holds/compounders (companies I plan to hold for a long time)
2. Undervalued situations with a shorter expected timline
3. Special Situations (usually the shortest timeline)
4. Cash
5. Borrowed funds
5. US / Foreign equities

Which investment types should be held in which accounts?

I do plan on meeting with a tax planner but was hoping for any advice/ideas from others.
If anyone can chime in on this topic it would be appreciated. TIA

I don't know enough about setting up a Trust and how that would work in your case - do get some professional advice on that one.
If you remove the Trust option, you are basically left with 1) taking $s out, paying a large amount of tax now and then investing $s vs. 2) allow $s to compound in corporation (if not affected by new tax laws) and thus deferring taxes. Usually option 2 turns out to be the winner. However, new tax laws trying to prevent passive investment in corp may change that

I agree with the RRSP comments - If one has a PC and stable income and ability to compound, no point in putting equities in RRSP. I'm 46y.o and have been taking $s out of RRSP. However, I do use my RRSP room for US equities that pay a dividend - ie: I would hold Apple in RRSP but not BRK.

[SharperDingaan]

Couple of other considerations .....

What are you going to 'do' after you've sold the business/retired?
Most folks would look at partnerships (spread the load AND the financial risk), funded from an RRSP (check the rules) in a series of tranches. It's really something to 'do', with the intent over time of paying yourself a cumulative salary > the cost of your purchase - and letting the RRSP absorb the business risk. Lots of possibilities, so talk with your adviser. 

Look at physical assets.
Most would 'buy up' (bigger/pricier house) via the primary residence, and sell 3-5 years later to capture a tax free gain (maybe); ideally the gain covers the cost of 're-decorating', you net out about even, and your 'significant other' ALSO has something to do. Variations on the same theme are being a landlord, or hotelier; and using the assets 'creatively' (talk to adviser).

Look at philanthropy.
Fund your own 'foundation' via an annual charitable donation, and use the proceeds to physically go to 'where ever' and do good works. All your costs are paid for by the charity, the government gives you a tax deduction to help the process along, and you get the satisfaction of having done something useful. The 'wealth exists to be used' approach.

Different strokes.

SD
 
 

[Studesy]

Couple of other considerations .....

What are you going to 'do' after you've sold the business/retired?
Most folks would look at partnerships (spread the load AND the financial risk), funded from an RRSP (check the rules) in a series of tranches. It's really something to 'do', with the intent over time of paying yourself a cumulative salary > the cost of your purchase - and letting the RRSP absorb the business risk. Lots of possibilities, so talk with your adviser. 

Look at physical assets.
Most would 'buy up' (bigger/pricier house) via the primary residence, and sell 3-5 years later to capture a tax free gain (maybe); ideally the gain covers the cost of 're-decorating', you net out about even, and your 'significant other' ALSO has something to do. Variations on the same theme are being a landlord, or hotelier; and using the assets 'creatively' (talk to adviser).

Look at philanthropy.
Fund your own 'foundation' via an annual charitable donation, and use the proceeds to physically go to 'where ever' and do good works. All your costs are paid for by the charity, the government gives you a tax deduction to help the process along, and you get the satisfaction of having done something useful. The 'wealth exists to be used' approach.

Different strokes.

SD

SD. It's good to hear some different angles on this.  With respect to sizing up in real estate....I'm too old for that! At 40, I'm looking to simplify and downsize and focus on quality of life....not so much "more" or "bigger" stuff!  I hear get what your saying on being creative in how your assets are utilized.

The foundation idea...which I really like, has crossed my mind and is something I plan to do at some point going forward. 

[bizaro86]

Depending on how much money you'd be putting in a foundation, it may make sense to get a donor advised fund at a community foundation. Way less administrative burden, and not very expensive. Biggest downside for folks here is you generally can't control the investments.

I have a fund at the Calgary Foundation and it's great. They take care of everything, you can donate appreciated securities, and you pick where the charitable distributions go.

[lessthaniv]

I do this too. DAF’s are a great options for many people.