8 Smart Ways to Reduce Taxes and Keep More in the Family

Let’s be honest, nobody wants to think about their own death, and even fewer people want to think about the taxes that come with it. But a little smart planning today can save your loved ones a lot of stress and a lot of money later.

Here are eight strategies to help reduce the taxes your estate might face and ensure your assets land smoothly in the hands of the people you love most.

1. Leave Assets to Your Spouse

Leaving your assets to your spouse or to a spousal trust, can significantly reduce the taxes your estate pays at death.

Why? Because these transfers happen at your adjusted cost base (ACB), not at fair market value (FMV). That means the tax bill is deferred until your spouse sells the assets or passes away.

A spousal trust lets you leave assets for your spouse’s benefit while putting management control in the hands of trustees (which can include your spouse). To qualify for the tax-free rollover, the trust must be structured correctly. Your spouse must be the only person entitled to the income during their lifetime.

Pro tip: Your estate can choose whether to transfer assets at ACB or FMV. If you have unused capital losses, your executor might elect FMV to trigger gains that can be offset, one of those “strategic but worth it” tax moves your advisor will love.

2. Give Assets Away (Before the CRA Takes Its Cut)

If you know who you want to give certain assets to and you don’t need them for your own living expenses, you can gift them during your lifetime.

Yes, gifting is generally a taxable event (the CRA treats it as a sale). But if the asset is likely to grow in value or you’re currently in a lower tax bracket than you’ll be later, it can still save taxes overall.

Think of it as: give now, save later, and get to see your loved ones enjoy what you’ve passed on.

3. Choose Beneficiaries Wisely

If you’re splitting assets between your spouse and other heirs, choose carefully which assets go where.

Since assets left to a spouse can defer tax, it often makes sense to leave growth-heavy investments to them. For other beneficiaries, consider “tax-light” assets like cash, guaranteed interest accounts (GIAs), or investments that haven’t appreciated much.

If you’re not sure yet, you can empower your executor to make those calls later with advice from a tax professional.

4. Use Your Exemptions

Don’t leave money on the table. These exemptions can make a big difference in reducing your estate’s tax burden:

• Principal Residence Exemption: Offsets capital gains on your home (or another property you ordinarily inhabit; rental properties don’t qualify).
• Lifetime Capital Gains Exemption: Shelter up to $1.25 million in capital gains on qualified small business shares, farms, or fishing properties. There are conditions, so talk to your advisor to confirm eligibility.

5. Give to Charity

Charitable giving is one of those rare win-wins: your estate supports a cause you care about, and you get a tax break.

Donations made through your will can generate a tax credit for the fair market value of your gift. If you donate marketable securities, your estate won’t pay any capital gains tax on them.

It’s a meaningful way to create a legacy while lightening your final tax load.

7. Use Life Insurance to Cover the Tax Bill

Even with smart planning, some taxes are unavoidable. Life insurance can provide your estate with the funds needed to pay the CRA, so your heirs don’t have to sell assets like the family cottage to cover it.

It’s one of the cleanest ways to preserve your estate’s value and make sure your loved ones are cared for.

8. Act Now

If you have assets that could trigger taxes on death, now’s the time to act.

✅ Review your assets and how they’ll be taxed
✅ Consider which strategies make sense for your situation
✅ Review your estate plan with a qualified tax or legal professional

With the right plan, you can reduce your estate’s tax bill, simplify things for your loved ones, and make sure your legacy stays in the family.

Source: https://www.manulifeim.com/retail/ca/en/viewpoints/tax-planning/minimizing-taxes-on-death

The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets.