Winter is a great time to recharge. But with many people’s attention turning toward rest and relaxation in warmer climates or on making getaway plans for later in the year, it’s still important to remember that growing your wealth doesn’t take a vacation.
A change in season is always an opportune time to make sure everything is going to plan. From rebalancing after a market run to exploring new investments and donor-advised funds, there’s always room to optimize your strategy and fine-tune your finances.
Here are some ways to level up your portfolio this winter.
Consider better ways to give
Giving may already be on your mind, considering you have to complete your donations before the end of December to get a tax receipt for 2024. But while last-minute gift-giving may work, there are more thoughtful ways to approach philanthropy. For instance, an increasing number of people are opening donor-advised funds (DAFs), which are essentially charitable investment accounts that you can donate to throughout the year. A DAF is similar to a foundation but without the costly overhead – you decide who gets what money from that account and you can ask for grant applications from charities or simply give to a worthy cause.
With a DAF structure, which invests your money in stocks and bonds, among other assets, you have an opportunity to grow your gift-related dollars. This will allow you to think more thoughtfully about where and how you donate and allow you to continue giving gifts from your estate in perpetuity.
Talking tax
While year-end tax planning should already be underway, there’s no time like the present to start thinking about ways of mitigating your next tax bill. The sooner you start planning, the more strategic you can be with your finances over the next 12 months.
If you’re an entrepreneur who expects to sell their business next year, you’ll want to familiarize yourself with the lifetime capital gains exemption, which allows you to remove some money from your corporation without triggering a capital gains tax hit. If you’re a cottage owner who may need to sell the family cabin in 2025, or if you plan on selling a chunk of high-flying stocks from your portfolio, you should get a handle on how the new capital gains inclusion rate could impact the sale of those assets. More generally, knowing the various tax deadlines you’ll need to hit next year now will help you get a head start.
Dig into diversification
It’s a good idea to meet with your financial advisor and talk about the ability of your portfolio to withstand market shocks. No shortage of market-moving events happen in a given year, so it’s worth having a discussion about your tolerance for risk and how your assets may perform in turbulent times. High-net-worth investors, like any investors, should look at their equity mix and ensure they’re not concentrated in a specific sector, geography or individual company. If you and your advisor find that you are holding too many stocks in one area, consider moving those dollars around.
You may also want to talk to your advisor about alternative assets, such as private equity. Over the last few years, these assets have become more accessible to qualified, high-net-worth investors and generally have a low correlation to stocks.
Make a plan to legacy plan
If you haven’t given any thought to legacy planning, now’s the time to get that process started. A legacy plan is essentially a roadmap for how you’ll distribute your assets and your estate in the future. For higher-net-worth families, that can be a complicated endeavour that requires careful communication, understanding family dynamics, developing a family governance plan and coming up with a family mission and vision statement.
You’ll want to talk to your financial advisor sooner rather than later. They can then bring in other estate and legacy planning professionals to inform you about what’s involved in what can be a multi-year undertaking. January is the perfect time for a kick-off.
Engage in estate planning
Have you gone yet another year without creating a Will? You’re not alone – many people, even higher-net-worth individuals, often put off completing parts of their estate plan. Make it your New Year’s resolution to finally get a few of these things done.
Start by creating a bulletproof Will that guarantees your heirs get what you want them to get. As part of that process, make sure you understand how probate works – you may not want all of your assets to go through that process – and have a power of attorney in place who can oversee your estate if you become incapacitated. (The process is a little different in Quebec, which has its own set of rules.)
Estate planning can get more complicated in blended family situations, given the complexity of emotions and potential challenges around fairly distributed assets, so it’s a good idea to start those conversations in January if you haven’t already.
Most of this winter cleaning and prepping for the future can happen by getting expert advice. A wealth professional can look at your portfolio with you, make plans to start reviewing your tax situation and begin the estate and legacy planning process. The sooner you get started, the more time you’ll have to rest, recharge and focus on having a successful year.
