“Many people don’t have a grasp of what it means to be taxed
at the highest rates,” says Suzanne Schultz, an estate-planning specialist at RBC Wealth Management and author of Tax Tips for Canadians for Dummies. “They also think they can earn 10% from their investment risk-free and live off the interest.” She says a qualified CPA can point out opportunities to save
on taxes or split income with other taxpayers in the family. Permanent life insurance is one possible vehicle. “For example, if older clients have legacy goals and want [the money] to last through the generations, we might do a permanent life insur- ance policy on the lives of the children so that the money even- tually goes to the grandchildren tax free.” Kett also points out that some lottery winners have never had
financial advisers before because they’ve never needed that level of advice. “CPAs have to be approachable because sometimes we can seem intimidating, especially to someone who isn’t used to dealing with lawyers and accountants. We can be helpful in determining what is possible and reasonable, and helping clients focus on coming up with a concrete plan for their money.”
Mistake No. 4: buying a high-maintenance property A dream home or vacation property might be at the top of the wish list, but problems arise when winners look only at the pur- chase price and don’t take into account maintenance, including condo fees, property taxes and general upkeep. “People don’t think about what happens when a property sits
empty for nine months,” says Tony Maiorino, vice-president and head of RBC Wealth Management, which has worked with hun- dreds of winners. “They focus on immediate expenditures and not the potential long-term depletion of capital.” He says winners can work with a financial expert to determine
the best approach for buying property in Canada and elsewhere. “If you buy a family cottage, it might be better to go through a family trust, or you might choose to do a nonrecourse mortgage to buy property in the US,” he says.
Mistake No. 5: becoming the resident ATM There’s nothing like the news of a jackpot to get borrowers seeking venture capital coming out of the woodwork. “Lottery winners need to learn to say ‘no,’ or at least ‘not right now,’ ” says Maiorino. “Otherwise you lose sight of your objective and are pulled into other things.” He says he hears time and time again from clients who get
requests for loans or business investments from family and friends, including those who haven’t been in touch in years. It comes back to taking time to make decisions, he says. “Waiting 30 to 90 days to help a friend or family member won’t change anything to a large degree,” he notes. “The people who have the biggest regrets are usually those who made decisions without sitting down and talking to a trusted professional first.”
ROSALIND STEFANAC is a Toronto-based freelance writer MARCH 2015 | CPA MAGAZINE | 45
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