Tax Planning for High Net Worth Individuals in Canada: Strategies to Preserve Wealth in 2026

By Bader A. Chowdry, CPA, CA, LPA | Insight Accounting CPA

When your wealth reaches the high net worth (HNW) threshold typically $1 million in investable assets or more standard tax planning approaches no longer suffice. High net worth individuals in Canada face unique challenges: top marginal tax rates exceeding 53%, complex estate planning requirements, intergenerational wealth transfer concerns, and aggressive CRA scrutiny.

At Insight Accounting CPA, we help high net worth clients in Mississauga, Toronto, and across the GTA implement sophisticated tax strategies that preserve wealth legally, reduce lifetime tax burdens, and create sustainable legacies. This comprehensive guide explores advanced tax planning techniques for Canadian HNW individuals in 2026.

Understanding the HNW Tax Landscape in Ontario

Top Marginal Tax Rates (2026)

Federal top rate: 33% (income over $246,752)
Ontario provincial top rate: 13.16% (income over $220,000)
Combined top marginal rate: 53.53% on ordinary income
Capital gains inclusion rate: 50% (effective rate 26.76% for HNW)
Eligible dividends: 39.34% effective rate
Non-eligible dividends: 47.74% effective rate

For high net worth individuals in Ontario and the GTA, half of every additional dollar earned above the top threshold goes to tax. Strategic planning becomes essential.

Strategy 1: Income Splitting with Family Members

Spousal Income Splitting

The Tax on Split Income (TOSI) rules restrict income splitting, but legitimate opportunities remain:

Prescribed Rate Loans (Currently 2%)

Loan funds to lower-income spouse at CRA prescribed rate
Spouse invests and pays tax on investment income at their marginal rate
Interest paid on loan is deductible for the lender (if loan structured properly)
Effective when spouse is in lower tax bracket

Spousal RRSPs

Higher-income spouse contributes to spousal RSSP
Lower-income spouse withdraws in retirement at their lower rate
Three-year attribution rule applies to prevent immediate income splitting

Example: Dr. Sarah Chen earns $600,000 annually as a surgeon in Mississauga. Her spouse is retired with $30,000 pension income. By loaning $500,000 at the 2% prescribed rate, investment income of $25,000 (5% return) is taxed at her spouse’s 20% rate instead of Sarah’s 53.53% rate saving $8,382 annually.

Minor Children Income Splitting

TOSI rules severely restrict splitting business or investment income with minor children, but these remain viable:

Capital gains on arm’s-length investments (not caught by TOSI)
RESP contributions (government grants, tax-deferred growth)
Trust distributions for capital gains (if structured correctly)
Salary for legitimate work in family business (must pass reasonableness test)

Learn more about corporate tax planning strategies for business owners.

Strategy 2: Estate Freeze and Intergenerational Wealth Transfer

What Is an Estate Freeze?

An estate freeze locks in the current value of your estate for tax purposes, allowing future growth to accrue to the next generation typically through a trust or holding company structure.

Benefits:

Locks in current tax liability (prevents estate value from growing)
Transfers future growth to next generation (lower tax brackets)
Maintains control during your lifetime
Facilitates gradual wealth transfer
Minimizes probate fees (if structured through trust)

Common Estate Freeze Structures:
Section 86 Share Exchange:

Exchange common shares for preferred shares (fixed value)
Issue new common shares to children or family trust
Future growth accrues to new common shares
You retain control through voting rights on preferred shares

Family Trust Structure:

Estate freeze with family trust as common shareholder
Discretionary distributions to family members in lower tax brackets
21-year deemed disposition rule requires planning
Protects assets from creditors and matrimonial claims

Example: Michael and Linda Singh own a successful manufacturing business in Brampton valued at $8 million. They execute an estate freeze at age 55, exchanging their common shares for $8M in preferred shares. New common shares are issued to a family trust with their two adult children as beneficiaries. Over 20 years, the business grows to $20M. The $12M growth accrues to the children, who pay tax at their lower marginal rates upon distribution.

For business owners considering succession, see our guide on second-generation succession planning.

Strategy 3: Holding Company Structures

Why HNW Individuals Use Holding Companies

Tax Deferral:

Investment income taxed at corporate rates (approximately 50% on passive income)
Allows compounding before personal distribution
Flexibility in timing personal income (draw dividends in low-income years)

Creditor Protection:

Operating business held in OpCo (operational risk)
Investments and real estate held in HoldCo (protected from business liabilities)

Estate Planning:

Facilitates estate freeze structures
Enables income splitting with adult children (if they own shares)
Capital gains exemption multiplication (if structured correctly)

Tax-Free Intercorporate Dividends:

Dividends flow between connected corporations tax-free
Allows efficient movement of funds without personal tax

Example Structure:

“`

Individual (you)

HoldCo (Holding Company)

|— OpCo 1 (Operating Business)

|— OpCo 2 (Real Estate Holdings)

|— Investment Portfolio

“`

Tax Optimization:

Excess profits from OpCo 1 paid as dividends to HoldCo (tax-free)
HoldCo invests surplus funds (corporate tax rate)
You draw personal income from HoldCo only as needed (manage marginal rate)

Our fractional CFO services help HNW clients optimize holding company structures.

Strategy 4: Charitable Giving Strategies

Donation Tax Credits

Federal credit: 15% on first $200, 29% above (33% above $246,752)
Ontario credit: 5.05% on first $200, 11.16% above (13.16% above $220,000)
Combined top credit: 53.53% for high-income donors in Ontario

$1,000,000 donation at 53.53% credit = $535,300 tax savings

Advanced Charitable Structures

Private Foundation:

Establish your own charitable foundation
Immediate tax deduction for donations to foundation
Distribute 3.5% of assets annually (Disbursement Quota)
Control investment strategy and charitable causes
Involves $10,000-$25,000 annual compliance costs (audits, T3010 filings)

Donor-Advised Fund (DAF):

Lower cost alternative to private foundation
Immediate tax deduction for contribution
Recommend grants to charities over time
No annual compliance costs (managed by fund sponsor)

Charitable Remainder Trust:

Donate assets to charity, retain income for life
Immediate partial tax receipt based on actuarial value
Estate reduces tax liability on death
Works well with real estate or investment portfolios

Donating Publicly-Traded Securities:

Zero capital gains tax on donation of appreciated shares
Full fair market value tax receipt
Most tax-efficient way to donate for HNW individuals

Example: James Park, a tech entrepreneur in Toronto, holds $2M in publicly-traded shares with $1.5M in unrealized capital gains. If he sells and donates cash, he pays $400,500 in capital gains tax (26.76% on $1.5M). If he donates shares directly, he pays zero capital gains tax and receives a $2M tax receipt worth $1,070,600 in credits (53.53%).

Net benefit of donating shares vs. cash: $400,500 saved in capital gains tax.

Explore our guide to tax-efficient charitable giving strategies.

Strategy 5: Offshore Structures and Foreign Property Compliance

When Offshore Structures Are Legitimate

Many HNW Canadians hold foreign investments or operate international businesses. Offshore structures are legal when:

Used for legitimate business purposes (not solely tax avoidance)
Fully disclosed to CRA (T1135, T1134, T1141, etc.)
Comply with foreign reporting requirements
Structured with proper tax and legal advice

Common Legitimate Uses:

Holding U.S. real estate investments
Operating global business entities
Hedge funds or private equity in foreign jurisdictions
International estate planning (for families in multiple countries)

Foreign Reporting Obligations

T1135 Foreign Income Verification Statement:

Required if you own foreign property with cost > $100,000 CAD
Includes foreign bank accounts, real estate, shares, trusts
Severe penalties for non-filing: $2,500 plus $500/month (max $12,000)
Additional penalties if income not reported: 5% of unreported income

T1134 Information Return Relating to Controlled and Non-Controlled Foreign Affiliates:

Required if you own 10%+ of foreign corporation
Detailed financial information required
Penalties: $2,500 per return plus criminal prosecution for willful non-compliance

FBAR (FinCEN Form 114) For U.S. Persons:

If you’re a U.S. citizen or green card holder living in Canada
Required if foreign financial accounts exceed $10,000 USD at any time during year
Severe U.S. penalties for non-filing (up to 50% of account balance)

See our international tax compliance guide for multinationals.

Strategy 6: Capital Gains Exemption Multiplication

Lifetime Capital Gains Exemption (LCGE)

The LCGE allows Canadian residents to shelter capital gains on the sale of qualified small business corporation shares (QSBC) or qualified farm/fishing property.

2026 LCGE Limit: $1,016,836 per individual (indexed annually)

Multiplication Strategy

By issuing shares to multiple family members (spouse, adult children), you can multiply the LCGE:

You: $1,016,836 exemption
Spouse: $1,016,836 exemption
Adult child 1: $1,016,836 exemption
Adult child 2: $1,016,836 exemption

Total sheltered gain: $4,067,344 (family of four)
Requirements:

Shares must be QSBC shares (>50% active business assets, Canadian-controlled)
Shares held for 24 months before sale
Each family member must own shares directly (not through trust initially)
TOSI rules must be satisfied (adult children 18+, spouse legitimately owns shares)

Example: The Kumar family owns a software company in Mississauga valued at $6M. They restructured five years ago, issuing 25% of common shares to each adult child (ages 22 and 24). Upon sale in 2026, the family shelters $4.1M in capital gains, saving $1.1M in tax vs. sole ownership.

Read our complete LCGE planning guide.

Strategy 7: Individual Pension Plans (IPPs)

For HNW business owners over age 40, an Individual Pension Plan (IPP) can significantly exceed RRSP contribution limits.

IPP vs. RRSP

| Feature | RRSP | IPP |

|———|——|—–|

| Max contribution (age 50, $200K income) | $31,560 | $45,000+ |

| Catch-up contributions | No | Yes (past service) |

| Investment growth shortfalls | You absorb | Company funds |

| Creditor protection | Provincial (varies) | Full federal protection |

| Deductibility | Personal | Corporate expense |

IPP Benefits for HNW Individuals:

Higher contributions than RRSP (especially age 50+)
Past service contributions (catch-up for prior years)
Corporate tax deduction (vs. personal RRSP)
Superior creditor protection
Defined benefit guarantee (company must fund shortfalls)

Costs:

$3,000-$5,000 setup
$2,000-$4,000 annual actuarial reports
Generally worthwhile for T4 income > $120,000, age > 40

Explore our detailed IPP planning guide.

Strategy 8: Tax Loss Harvesting and Superficial Loss Rules

Tax Loss Harvesting

Selling investments at a loss to offset capital gains is a core strategy, but HNW investors must navigate superficial loss rules:

Superficial Loss Rule:

Loss denied if you (or affiliated person) repurchase identical property within 30 days before or after sale
Affiliated person includes spouse, controlled corporation, or trust

Strategies to Avoid Superficial Loss:

Wait 31 days before repurchasing
Purchase similar (but not identical) security immediately (e.g., different ETF in same sector)
Have non-affiliated person purchase (e.g., adult child in separate account)

Example: In December 2026, you sell $500,000 in stock at $200,000 loss to offset gains earlier in the year. To maintain market exposure, you immediately purchase a similar sector ETF (not identical). After 31 days, you sell the ETF and repurchase the original stock.

Strategy 9: Estate Planning and Probate Minimization

Probate Fees in Ontario (2026)

First $50,000: $0
Over $50,000: 1.5%

On $5M estate: $74,250 probate fees

Probate Avoidance Strategies

Joint Ownership with Right of Survivorship:

Assets transfer automatically on death (no probate)
Risks: creditor claims, deemed disposition issues, loss of control

Beneficiary Designations:

RRSPs, TFSAs, life insurance bypass probate if beneficiary named
Ensure beneficiaries are current (after divorce, remarriage, etc.)

Alter Ego Trust or Joint Partner Trust (Age 65+):

Transfer assets to trust, retain income/control for life
Assets distribute to beneficiaries on death without probate
21-year deemed disposition applies (plan accordingly)
Legal costs: $5,000-$15,000

Multiple Wills Strategy:

Primary will for assets requiring probate (real estate)
Secondary will for assets not requiring probate (private company shares)
Reduces probate fees on secondary will assets
Legal costs: $3,000-$8,000

See our estate planning guide for business owners.

Strategy 10: Tax-Efficient Investment Structures

Corporate Class Mutual Funds

For HNW investors with holding companies:

Investments structured as shares in mutual fund corporation
Switch between funds without triggering capital gains (share exchange, not sale)
Defer tax until final redemption
Strategy works in non-registered accounts (RRSP/TFSA already tax-sheltered)

Flow-Through Shares (Resource Sector)

Invest in mining, oil & gas exploration companies
100% tax deduction on investment amount (federal + provincial)
Combined credit can exceed 50% in some provinces
High risk only suitable for investors with risk tolerance

Example: Invest $100,000 in flow-through shares. Receive $53,530 in tax credits (53.53% Ontario top rate). Effective cost: $46,470. If shares return $75,000 on exit, net return is 61.3% but significant risk of loss.

Explore our corporate class insurance guide for wealth building.

Strategy 11: Income Deferral with RCA (Retirement Compensation Arrangement)

For HNW business owners earning T4 income beyond RRSP/IPP limits:

What Is an RCA?

A Retirement Compensation Arrangement is a tax-deferred retirement savings plan with no contribution limits.

How It Works:

Company contributes to RCA on your behalf (tax-deductible for company)
50% refundable tax paid to CRA on contributions (held in trust)
Investments grow inside RCA
On retirement, funds distributed to you (taxable as income)
CRA refunds the 50% tax as distributions occur

When RCAs Make Sense:

High T4 income ($300K+)
Maximized RRSP/IPP contributions
Desire to defer income to retirement (lower tax bracket)
Willing to accept 50% refundable tax drag

Costs:

$5,000-$10,000 setup
$3,000-$5,000 annual administration
Legal and actuarial fees

Strategy 12: Tax Planning for U.S. Investments and Cross-Border Issues

Many HNW Canadians hold U.S. real estate, stocks, or business interests.

U.S. Estate Tax

Non-U.S. citizens face U.S. estate tax on U.S.-situs assets:

Exemption for non-residents: $60,000 USD (vs. $13.6M for U.S. citizens)
Tax rate: 18%-40% on assets above exemption
U.S.-situs assets: U.S. real estate, U.S. stocks, U.S. business interests

Strategies to Minimize U.S. Estate Tax:
Canadian Corporation Ownership:

Hold U.S. real estate or stocks through Canadian corporation
U.S. estate tax does NOT apply to corporate-held assets
Tradeoff: passive income in corporation taxed at ~50%

Life Insurance:

Purchase Canadian life insurance to cover potential U.S. estate tax liability
Beneficiaries receive tax-free proceeds to pay U.S. estate tax

Canada-U.S. Tax Treaty Relief:

Prorated exemption based on worldwide estate
If worldwide estate is $10M and U.S. assets are $2M, prorated exemption = $2.72M (20% of $13.6M)
Reduces or eliminates U.S. estate tax for most HNW Canadians

See our cross-border tax guide for U.S.-Canada businesses.

Strategy 13: Income Smoothing and Tax Bracket Management

For HNW individuals with variable income (business owners, professionals, executives with bonuses):

Income Smoothing Techniques

Defer Bonuses:

Structure employment agreements to defer bonuses to low-income years
Avoid bumping into higher brackets unnecessarily

RRSP Contributions:

Contribute in high-income years
Withdraw in retirement (lower brackets)
Carry-forward unused contribution room for high-income years

Capital Gains Timing:

Realize losses in high-income years
Defer gains to low-income years (if business sold over multiple years)

Holdco Dividend Timing:

Leave profits in holding company (corporate rate ~50%)
Draw dividends in years with lower income (travel, sabbatical, semi-retirement)

Example: Dr. Anita Patel earns $450,000 in 2026 but plans to take a six-month sabbatical in 2027 (income drops to $200,000). She defers her 2026 year-end bonus of $100,000 to February 2027. Tax savings: $53,530 (2026 top rate) vs. $43,530 (2027 rate) = $10,000 saved.

Common Mistakes HNW Individuals Make

1. Failing to Plan for Tax on Death

Deemed disposition of all capital property on death
RRSP/RRIF fully taxable in year of death
Combined tax liability can exceed 50% of estate value
Solution: Life insurance, estate freeze, spousal rollovers

2. Not Updating Estate Plans After Life Changes

Divorce, remarriage, birth of grandchildren, business sale
Outdated beneficiary designations (ex-spouse still named)
Solution: Review estate plan every 3-5 years

3. Ignoring Foreign Reporting Requirements

T1135, T1134, FBAR, FATCA
Severe penalties for non-compliance
Solution: Work with CPA experienced in international tax

4. Aggressive Tax Avoidance Structures

CRA’s General Anti-Avoidance Rule (GAAR) targets abusive schemes
Criminal prosecution for tax evasion
Solution: Ensure structures have legitimate business purpose beyond tax

5. Triggering TOSI Unnecessarily

Income splitting with adult children without meeting “excluded amount” tests
Top tax rate (53.53%) applied to split income caught by TOSI
Solution: Ensure adult children meet safe harbor tests (20+ hours/week, age 25+)

Learn about CRA audit defense strategies if facing scrutiny.

When to Engage a HNW Tax Specialist

Tax planning for high net worth individuals requires specialized expertise:

Income > $500K annually: Advanced planning justified
Net worth > $5M: Estate planning and wealth preservation critical
Business ownership: Corporate structures, estate freeze, succession planning
Cross-border assets: U.S. tax compliance, treaty planning
Complex investments: Private equity, hedge funds, real estate syndications
Philanthropic goals: Foundations, DAFs, charitable remainder trusts

At Insight Accounting CPA, we serve high net worth clients in Mississauga, Toronto, Oakville, and across the GTA. Our team includes CPAs with expertise in:

Advanced tax planning and compliance
Estate planning and wealth transfer
International tax and offshore structures
Corporate reorganizations and holding company strategies
Audit representation and CRA dispute resolution

Learn more about our tax planning services or about our team.

FAQs: HNW Tax Planning in Canada

How much should I expect to pay for advanced tax planning?

High net worth tax planning fees vary:

Annual tax compliance (T1 + corporations): $5,000-$15,000
Estate freeze or corporate reorganization: $10,000-$50,000 (legal + accounting)
Ongoing advisory retainer: $15,000-$50,000/year

ROI is typically 5-10X the fees paid through tax savings.

Is income splitting still possible after the 2018 TOSI rules?

Yes, but within limits. Legitimate income splitting includes:

Dividends to spouse (if they own shares with fair market value capital contribution)
Dividends to adult children 25+ working 20+ hours/week in business
Capital gains on arm’s-length investments
Prescribed rate loans
Spousal RRSPs

Should I set up a family trust?

Family trusts make sense when:

You want to income split with multiple family members
You’re executing an estate freeze
You want creditor protection for business assets
You have minor children and want future flexibility

Costs: $5,000-$15,000 setup, $3,000-$8,000 annual compliance.

What is the 21-year rule for trusts?

Every 21 years, trusts face deemed disposition (as if all assets sold). Capital gains tax is triggered. Planning required to minimize impact (distribute assets before 21 years, crystallize exemptions, etc.).

Do I need a separate advisor for U.S. tax issues?

If you hold significant U.S. assets (>$500K USD), work with a cross-border tax specialist. U.S. estate tax, FBAR, and FATCA compliance requires expertise in both Canadian and U.S. tax law.

Take Control of Your Wealth with Strategic Tax Planning

High net worth individuals in Ontario and the GTA face complex tax challenges but also significant planning opportunities. From estate freezes and holding company structures to charitable giving and offshore compliance, the right strategies can save hundreds of thousands in lifetime tax.

At Insight Accounting CPA, we help HNW clients preserve wealth, plan for succession, and navigate CRA compliance with confidence. Our Mississauga-based team brings deep expertise in advanced tax planning, estate structuring, and international tax.

Ready to optimize your tax strategy?

(905) 270-1873

info@insightscpa.ca

insightscpa.ca

Book a confidential consultation today. Let’s build a tax plan that protects your wealth for generations.

Bader A. Chowdry, CPA, CA, LPA is the founder of Insight Accounting CPA Professional Corporation, a Mississauga-based firm specializing in tax planning, CFO advisory, and AI governance for $500K+ businesses and high net worth individuals across the GTA. His patent-pending AI governance framework has been featured in Yahoo Finance.