As you work toward achieving your goals in life, you will need to make moves that contain financial, tax and legal elements, so you may want to get some help — from more than one source.
Specifically, you might want to put together a team comprised of your financial advisor, your lawyer and other tax professionals. Together, this team can help you with many types of financial/tax/legal connections.
For starters, you may decide, possibly upon the recommendation of your financial advisor, to sell some investments and use the proceeds to buy others that may now be more appropriate for your needs. If you sell some investments you may realize a capital gain or capital loss on the sale. If you realize a capital gain, there may be taxes owing when you file your tax return.
On the other hand, if you sell an investment and realize a capital loss, you may be able to apply the loss to offset gains realized by selling other, more profitable investments and also potentially apply any unused losses against gains realized in the prior three years or a future year. As you can see, the questions potentially raised by investment sales — “Should I sell?” “If so, when?” and “If I take some losses, how much will they benefit me at tax time?” — may also be of importance to your tax advisor, who will need to account for sales in your overall tax picture. It’s a good idea for your tax and financial advisors to communicate about any investment sales you make.
Your financial advisor can also help you choose the investment or insurance vehicles that can fund an estate-planning arrangement, such as an irrevocable living trust. But to establish that trust in the first place, and to make sure it conforms to all applicable laws, you will want to work with a lawyer experienced in planning estates. Your tax professional may also need to be brought in. Again, communication between your various advisors is essential.
These are but a few of the instances in which your financial, tax and legal professionals should talk to each other. Do what you can to open these lines of communication you will be one who ultimately benefits from this teamwork.
Kevin Dorey is a Financial Advisor with Edward Jones. Based in Tantallon, Kevin specializes in helping individuals reach their serious, long-term investment goals. He can be reached via email or at (902) 826-7982. Edward Jones is a member of the Canadian Investor Protection Fund.