How can this couple owning five rental apartments arrange a tax-efficient future for heirs?

The Globe and Mail – By Dianne Maley

At the age of 67, Ed and Alexa are reaping the rewards of years of saving and investing: Rising income and the prospect of big capital gains down the road. They are retired with three grown children.

They have amassed a nice-sized real estate portfolio comprising five rental apartments in Vancouver in addition to their own principal residence. They also have substantial financial investments. As the mortgages on the rental properties are paid down over time, Alexa and Ed’s income has been rising – and so has their tax bill.

“We’ll soon have to convert our RRSPs to registered retirement income funds (RRIFs), resulting in even more taxable income,” Alexa writes in an e-mail. They’re worried about having their Old Age Security (OAS) benefits clawed back if their income is too high.

“We have three children and we intend to pass down our assets to all three equally,” Alexa adds. “We’d like to avoid as much tax as possible and organize our affairs so that our beneficiaries inherit the maximum amount.

What can we do about our rental property capital gains?”

We asked Brinsley Saleken, a fee-only financial planner and portfolio manager at Macdonald Shymko & Co. Ltd. in Vancouver, to look at Alexa and Ed’s situation.

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