Why tax milestones are an opportunity to demonstrate value

For clients, one life milestone leads to another. For the tax man, every life milestone prompts a change in the rules. For a smart advisor, wedding tax plans into those life milestones might be the best way to demonstrate value.

Lisa Gittens, senior tax expert at H&R block, walked WP through the life of a hypothetical client, showing where a smart advisor can demonstrate their value as a holistic financial planner and establish either a client for life, or transition into the next generation of a family. With tax season approaching, she thinks that advisors have a chance to show the crucial role they play in their clients’ lives.

“Advisors want to look at their clients’ overall life situation,” Gittens explained. “Not just where they are currently, talk to them about their goals a year from now, five years from now. You can offer not only the financial planning but tax planning as well. You can ensure they're accurately filing their returns and maximizing their tax savings when they file.”

She thinks advisors should start talking about taxes with their clients’ children. A high schooler working a part-time job is the ideal candidate. An advisor can show them the benefits of filing a tax return and start to establish a habit of smart tax filing in that young client’s life. When the next milestone comes around, they’ll turn to their advisor to find the best tax benefits.

Say that young person moves abroad for a year or two, a tax filing habit and a good relationship with a financial planner can prepare them for Canadian tax liabilities applied to foreign income. They’ll be able to avoid double taxation while earning credits they’re entitled to.

Now the young person has moved back to Canada and they’re living with a partner. After 12 months of co-habitation, or if they have a kid together before that 12-month mark, they can file for common law status. The tax benefits from that status, whether both partners work or not, can be huge. Gittens thinks it’s on an advisor to make sure their client know what they can file for and when.

If that kid comes along, too, the young client is entitled to receive the Canada child benefit. It could also open the door for paternal and maternal benefits to the client’s EI.

Now the couple needs a home to raise their new baby in. First-time home buyers are entitled to a $5,000 credit. If it’s a newly built home, too, the couple can get back some of the GST paid on the sale of the home. If a parent with mobility issues moves in, too, that client can spend up to $10,000 on renovations that can be claimed on income tax returns.

Through all these life milestones, Gittens thinks advisors can play a crucial role. She thinks that advisors can go a step beyond helping to plan for the immediate milestone, by showing their clients how that step fits into the overall life plan.

“As an advisor, it's your job to go deeper,” Gittens said.  “It's not just about getting the quick refund in your hand this year. It's about knowing what goes on the tax return and how it impacts you in the future.”