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Rollback of TFSA contribution limit has Canadians considering their options

Canadian investors with tax free savings accounts will be reassessing their tax exposure in 2016. Starting Jan. 1, the annual TFSA contribution limit will roll back from $10,000 to $5,500.

The cumulative contribution room in the TFSA is currently $41,000, and many investors have wondered whether they would be allowed to carry forward their unused contribution room into next year. For some, the answer is yes.

If you have contributed the annual maximum in previous years but will not contribute in 2015, then you will be allowed to invest $15,500 in the TFSA in 2016.

If you have already maxed out your contribution room but still have $10,000 you would like to invest, then you will have to consider other options for putting the additional $4,500 to use, such as in stocks, mutual funds or a registered retirement savings plan.

Still, the TFSA remains an effective tool in estate planning. Not only does a TFSA allow you to name a successor holder or beneficiary of the account; the TFSA also provides confidentiality. When you designate a successor holder or beneficiary, the account will pass to that person while avoiding probate, which is public.

These matters are discussed further in one of our previous posts, "Have you considered all of the benefits of a tax free savings account?"

Keep in mind that a comprehensive estate plan can address all of your planning goals, including making your message heard, maximizing investments, protecting your legacy and your family's well-being, and limiting tax exposure.

For more on effective estate planning techniques, please see Hagel Lawfirm's estate planning overview.

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