At Cumberland’s most recent event, clients and special guests gathered for an inspiring evening with Dr. Susan Reid, award-winning author of Re-Visioning Retirement, to explore what it really means to design a fulfilling next chapter in life. Hosted by Alex von Schroeter, Cumberland Partner together with the firm’s Portfolio Managers, the session invited clients to look beyond the financial side of retirement and focus instead on what gives it purpose.

While Dr. Reid’s work centres on the retirement transition, her ideas resonate just as strongly with anyone entering a new chapter, whether becoming an empty nester, selling a business, or redefining life after a major change.

A Personal Turning Point

Dr. Reid began by sharing a personal story that set the tone for the evening. After retiring at 57 from a successful entrepreneurial, academic and consulting career, she expected to feel carefree, relaxed and accomplished. Instead, during a trip to France soon after her official retirement, she found herself overwhelmed by what she later recognized as a panic attack. She realized that she’d built her whole career around helping others find their vision but had never truly created one for herself.

That realization became the spark for her transformative new book and bespoke workbook. Drawing on decades of research in entrepreneurship and innovation, Dr. Reid reframed retirement not as an ending, but as an opportunity to “re-vision” life itself. With over 1.5 billion people worldwide now at or near retirement age, a number expected to double by 2050, the question, she noted, is no longer when to retire, but how to make it meaningful.

What It Means to Have a Vision

Throughout her presentation, Dr. Reid unpacked the elements of an effective personal vision, describing it as having a clear mental image of the future you’re passionate about, and something just beyond reach that acts as both a compass and a catalyst.

She illustrated this through her research into the three aspects of vision: clarity (seeing it vividly), scope (understanding who it touches), and magnetism (feeling drawn toward it). When these dimensions align, they create a sense of direction that can outlast any single role or title.

The FUN Framework

To help participants begin that process, Dr. Reid introduced what she calls the FUN Framework, short for Foundations, Uncovering, and Nurturing. It begins with rediscovering one’s authentic self: core values, natural skills, and enduring passions. Next comes uncovering the aspirational self, or the person you want to become. Finally, nurturing brings that vision to life by cultivating openness, paying attention to what energizes you, and amplifying your intentions through simple daily practices.

From Fear to Fulfilment

Blending academic insight with personal warmth, Dr. Reid’s talk resonated deeply with an audience of entrepreneurs, professionals, and retirees alike. The conversation that followed touched on fear, purpose, and the growing phenomenon of “encore entrepreneurship,” which refers to individuals launching meaningful ventures later in life.

Guests also reflected on how the same process of re-visioning can help navigate other turning points, such as career transitions, family changes, or new personal priorities that redefine what success means.

Many guests noted that while financial security remains essential, clarity of purpose may be the true measure of a successful retirement.

Looking Inward

As the evening concluded, Dr. Reid left guests with a timeless reflection from Carl Jung:

“Your vision will become clear only when you look into your own heart. Who looks outside, dreams; who looks inside, awakes.”

At Cumberland, we share that philosophy. Our role is to help clients connect their financial plans with their personal vision, so the next chapter is both well funded and deeply fulfilling. If you’d like to revisit your own retirement vision or discuss strategies for making it a reality, please contact your Cumberland Wealth Advisor.

For families and individuals who want to make a meaningful impact through charitable giving—without the complexity of setting up their own foundation – a Donor-Advised Fund (DAF) can be a powerful and practical solution.

What is a Donor-Advised Fund?

A DAF is a charitable investment account that allows you to make a donation now, receive an immediate tax receipt, and recommend grants to your favorite charities over time. Think of it as your own personal charitable foundation—just without the legal, administrative, and operational burden.

Why Consider a Donor-Advised Fund?

Here are some of the most compelling reasons:

Simplified Giving, Less Admin Headache
If you donate to several charities each year, you know how much work it can be at tax time to track down all the receipts. With a DAF, you make a single contribution, get one tax receipt, and decide later how and when to disburse your funds.

Donate Now, Decide Later
Let’s say you’ve had a liquidity event—like selling a business or inheriting wealth. You want to make a large charitable donation this year for tax planning purposes, but you haven’t yet decided which causes you want to support. A DAF lets you donate now and take your time choosing how the funds are distributed later.

Create a Perpetual Giving Legacy
Unlike a one-time donation, a DAF allows you to create an endowed fund that continues giving year after year. For example, a $1 million gift to a charity may be spent all at once. But a $1 million gift to a DAF could generate $50,000 in annual donations in perpetuity (based on a 5% minimum disbursement per CRA requirements), preserving the capital and sustaining your charitable impact indefinitely.

Family Involvement and Multi-Generational Giving
A DAF can become a shared family project. Your children or grandchildren can help select causes and manage the fund over time, keeping your legacy of generosity alive for generations.

Donate Appreciated Securities, Not Just Cash
One of the most tax-efficient ways to fund a DAF is by donating securities that have appreciated in value. You can avoid paying capital gains tax, while still receiving a full charitable receipt for the market value of the asset. For more on this strategy, see our article, Tax-Advantaged Giving as a Force for Good.

DAF vs. Private Foundation: A simpler solution

A private foundation offers control and legacy, but it also brings legal complexity, regulatory compliance, and administrative costs. A DAF offers many of the same benefits—without the setup time or overhead. It’s a “foundation-lite” option for those who want impact more quickly, at relatively lower cost, and with less complexity.

With a DAF, you can also take advantage of immediate tax benefits and operational simplicity today, while leaving the door open to evolve into a private foundation in the future if desired.

Charitable Giving with Cumberland

Whether you’re just starting to think about charitable giving or looking to take your philanthropy to the next level, a DAF may be the perfect tool. At Cumberland Private Wealth, we help families create smart, sustainable giving strategies—through DAFs, private foundations, and other vehicles tailored to your values and goals.

We also invite you to explore our Cumberland Foundations Circle—a community of purpose-driven donors, family foundations, and philanthropists sharing ideas, best practices, and insights on making meaningful impact.

If you’re interested in learning more or joining our next Foundations Circle event, reach out to your Cumberland Portfolio Manager.

Cumberland clients recently joined CEO Charles Sims for an insightful conversation with longtime friend of the firm and research visionary Barbara Gray. In her latest presentation, Unimaginable: The New Economic Frontier, Barbara delivered a powerful vision of what lies ahead in an AI-driven economy.

A Third Wave of Capital

Barbara presented her thesis that we are entering a new era defined by the rise of AI agent capital, a third form of capital that could rival and eventually surpass both human and physical capital in driving economic productivity.

Autonomous digital workers, such as customer service bots, scheduling assistants, and research agents, are already replacing human labour in select functions. But according to Barbara, we’ve only just begun.

“AI agent capital is an infinite resource,” she explained. “Its marginal cost is approaching zero, and its capabilities are growing exponentially. That combination will unleash a capital supply shock unlike anything we’ve seen since the Second Industrial Revolution.”

She argued that this shift is not evolutionary but exponential, following an “AI disruption curve” that compresses the impact of decades into a handful of years.

EQ Over IQ: A Changing Labour Landscape

One of Barbara’s most striking predictions was that up to 70% of virtual white-collar jobs could be displaced by AI agents by 2032, representing about 25% of the total U.S. workforce. These are roles once thought safe due to their intellectual requirements, but their virtual and rules-based nature makes them highly automatable.

The consequences could be profound: a reversal in income distribution where blue- and pink-collar workers with hands-on skills, emotional intelligence, and in-person roles become more valuable than remote white-collar professionals.

“EQ will be worth more than IQ,” Barbara emphasized.

Yet she also offered a hopeful countertrend: a boom in solo entrepreneurship, as individuals use AI agents to launch microbusinesses that blend human creativity and real-world presence with scalable digital leverage. She called this an “age of rediscovery,” especially for workers willing to reinvent themselves.

From Destruction to Discovery

Beyond the workplace, AI agent capital is poised to radically advance science and healthcare. Barbara cited a case where AI cracked a decade-long superbug mystery in just two days. This is proof, she says, of an impending Research Renaissance. She envisions a world of “co-scientists,” where humans and AI expand knowledge together at an unprecedented pace.

She also introduced the concept of autonomous organizations, which are corporate structures powered by AI, with minimal human layers, capable of coordinating entire workflows without traditional management hierarchies.

Strategic and Investment Implications

Following Barbara’s presentation, Cumberland portfolio managers Levon Barker, Peter Jackson, and Phil D’Iorio joined the discussion to explore how this transformation might influence portfolios.

Capital intensity is rising, especially for traditional software firms investing in AI infrastructure. Levon pointed to data centre buildouts and GPU demand as signs of how business models are evolving. Peter emphasized that companies with high R&D-to-sales ratios and large white-collar workforces could become key beneficiaries of AI-driven productivity gains if they execute well.

The team highlighted names like Salesforce, which is making AI deployment more accessible across industries, and semiconductor leaders such as Nvidia, ASML, and TSMC as foundational players powering the shift.

At Cumberland, we view this moment not as a flashpoint, but as a multi-year transformation. Our investment team is:

• • Evaluating whether AI investments are translating into superior returns on capital
  • Tracking AI-driven efficiency gains across sectors, especially in financial services and tech
  • Monitoring international holdings linked to the semiconductor complex, where innovation is accelerating
  • Exploring ways to integrate AI tools internally while preserving our human-centered client experience.

As Barbara reminded us, “This revolution will create phenomenal wealth, but it will also force us to rethink how and where value is created.”

We believe AI will reward adaptability, enable new forms of leverage, and reshape the architecture of wealth. Our goal is to stay ahead of these shifts so we can help our clients navigate them confidently and thoughtfully.

If you have any questions or would like to watch a replay of the event, please reach out to your Cumberland Portfolio Manager.

Estate planning isn’t just about having a will, but about having the right documents, structures, and strategies in place to preserve wealth and protect family harmony. At our most recent Cumberland Private Wealth event, our clients and special guests were treated to a deeply insightful presentation by Marni Pernica, a partner in the Estates & Trusts Group at Aird & Berlis LLP.

Known for her practical approach and cross-jurisdictional expertise, Marni took our guests through a range of strategies that can reduce tax, streamline administration, and ensure that legacy plans unfold as intended. The session was hosted by Cumberland President and CEO Charlie Sims, who facilitated an interactive Q&A following the presentation.

Probate Planning: How (and When) to Avoid It

The first half of the discussion focused on probate planning, particularly in Ontario, where the Estate Administration Tax (EAT) can amount to $15,000 per $1 million of estate value. Probate is required when a will needs to be legally validated before assets such as bank accounts or real estate can be transferred. As Marni explained, it’s often unavoidable, but smart structuring can reduce or even eliminate its cost.

She walked through strategies such as designating beneficiaries on registered accounts and life insurance, considering joint ownership via bare trust agreements, using primary and secondary wills to separate assets that require probate from those that don’t, and looking at alter ego and joint partner trusts for individuals aged 65 and over.

Each approach comes with its own considerations and trade-offs. As Marni put it, “Estate planning is choose-your-own-adventure. It’s about knowing your options and choosing what’s right for your circumstances.”

Estate Freezes: Controlling Tax and Transitions

For business owners and individuals with large private investment portfolios, Marni introduced the concept of an estate freeze, a strategy used to lock in today’s value of an asset and transfer future growth to a trust or next generation.

The benefits of an estate freeze can include minimizing capital gains tax on death by capping the growth held personally, multiplying access to the lifetime capital gains exemption through a family trust, and deferring tax while retaining control through preferred share structures.

She also addressed some often-overlooked details, such as the 21-year deemed disposition rule on trusts (which doesn’t apply to alter ego or joint partner trusts) and the growing use of refreezes to manage long-term growth.

Importantly, Marni emphasized that estate freezes must be coordinated with estate planning documents and reviewed regularly, especially when family members marry, move abroad, or inherit different types of assets.

Q&A: Cross-Border Executors,
Trust Residency, and Family Dynamics

Following the presentation, attendees raised thoughtful questions about naming non-resident executors, coordinating wills across jurisdictions, and dealing with beneficiaries who move abroad. Marni shared practical guidance on these topics, including:

• Why appointing a non-resident executor can complicate both probate and tax planning
• How to structure trusts when beneficiaries live internationally
• When it’s wise to involve professional trustees or trust companies, especially in blended families or complex estate scenarios

She also cautioned that trust interests may be considered family property in Ontario divorce proceedings, underscoring the need for proactive legal planning when children in a trust structure are preparing to marry.

A Plan That Evolves With You

Marni closed with a reminder that estate planning isn’t a one-time exercise, but an ongoing conversation that must evolve along with your life, the family, and the law. At Cumberland, we’re committed to helping clients keep the conversation going through a thoughtful and personalized approach to wealth planning.

If you wish to see a playback of the event, learn more about estate planning, or revisit your current structure, please reach out to your Cumberland Portfolio Manager.

When it comes to US tariffs on Canada, the headlines may paint a simple picture, but the reality is far more complex. Canada is a critical trading partner that directly supports US industries, jobs, and consumers in ways that aren’t always obvious. Here are five key facts about the Canada-US trade relationship that might surprise you.

1. The US Has a Merchandise Trade Surplus with Canada (When Energy Is Excluded)
While the overall US-Canada merchandise trade balance shows a deficit, this picture is skewed by energy imports. When energy is excluded, the US actually had a merchandise trade surplus of $28.6 billion with Canada in 2023, a trend which has held since 2007¹, driven by high-value sectors like manufacturing, machinery, and automotive parts.

Why it matters: This surplus supports thousands of American jobs and highlights how interdependent the two countries are. As Cumberland Chief Investment Officer Peter Jackson has commented, energy imports heavily influence the deficit figures, but in key sectors like manufacturing, the US gains more than it loses.

2. Canadian Crude Imports Create a Win-Win Through Refining Arbitrage
Canada exports about four million barrels of crude oil to the US every day, accounting for 21% of US daily consumption². Canadian heavy crude oil flows into US refineries at a discount that can generally be estimated at $10–$20 per barrel as compared to lighter WTI crude³. US refineries process this Canadian heavy crude into gasoline and diesel, which are sold in the domestic market at competitive prices. Meanwhile, the US exports some of its own lighter crude globally at a premium.

The takeaway: As we have noted, this refining arbitrage benefits US refiners, oil producers, and consumers by keeping fuel prices low while allowing the US to profit from exports.

3. Canada Buys More US Goods Than Any Other Country
In 2023, the US exported $449 billion worth of goods and services to Canada, making it the US’s #1 export destination⁴. From machinery to precision instruments and aircraft, Canadian businesses are major consumers of American innovation. And it’s not just confined to border states—it’s a national relationship. In fact, 36 US states, from Michigan to Texas, rely on Canada as their #1 export destination⁵.

The impact: Industries across the US depend on Canadian demand, and disruptions in trade could ripple through local economies nationwide.

4. Canadian Imports Drive US Manufacturing Efficiency
Nearly 70% of US imports from Canada are used as inputs for the production of American goods⁶. From automotive parts to metals and chemicals, Canadian imports fuel US factories, enabling them to remain competitive globally.

Why it’s important: Tariffs on Canada could increase input costs for US manufacturers, reducing their ability to compete internationally.

5. Tariffs on Canada May Hurt US Consumers More Than Canada
Because Canadian energy and raw materials play such a large role in US supply chains, imposing high tariffs would likely lead to higher costs for American manufacturers and consumers. Tariffs on key imports, like energy and automotive parts among others, could raise production costs, making American goods less competitive globally.

It’s also critical to note that, while Canada’s overall trade imbalance with the US has increased since Trump’s first term, largely driven by higher energy prices, it is still dwarfed by the imbalances with China (close to US$300 Billion) and the Euro Area and Mexico (each around US$200 billion +/-)⁷.

The twist: Canada’s close trade ties create efficiencies that directly benefit the US economy. And, while Canada has been portrayed as a major contributor to the US trade deficit—in reality, it is not. Targeting it with tariffs is more about political narratives than economic necessity.

In our view, a closer look at the trade data reveals that Canada is not just another trading partner—it’s an essential economic ally to the U.S. As tariff debates unfold, acknowledging this deep interdependence could pave the way for more strategic solutions that ultimately benefit both nations.

At Cumberland, we’re closely tracking these developments to assess their impact on markets and position our portfolios accordingly. Our focus remains on helping clients navigate uncertainty while balancing attractive investment opportunities and prudent risk management.

Impact investing continues to evolve as more charitable foundations dedicate time and resources to this transformative approach. On Tuesday, November 12th, Cumberland was honoured to host members of the philanthropic community for a dynamic panel discussion featuring three leaders making strides in impact investing.

The event opened with remarks from Alex von Schroeter, Cumberland partner, who welcomed both new and familiar faces to this second Cumberland Foundations Circle event of 2024. She introduced moderator Charlie Sims, CEO of Cumberland Private Wealth Management, and the esteemed panelists:

• Upkar Arora, Founder and CEO of Rally Assets and Managing Partner of Realize Fund L.P.
• Andrew Spence, Founder and CEO of Spence Strategic Consulting Group and Chair of the Investment Committee of Toronto Foundation
• Riz Ibrahim, President and CEO of The Counselling Foundation of Canada

Defining Impact Investing

The conversation began with Charlie asking Upkar to define impact investing. Upkar explained the “four dimensions” that his team uses in managing Rally Asset’s impact funds:

1.  A positive impact must be intentional from the start
2. The impact must be real and tangible
3. The impact should be measurable
4. There should be an expectation of financial return

Upkar also clarified impact investing versus some of its related categories:

“There are lots of other terms like sustainable, responsible, ethical and so forth. ESG (Environmental, Social, Governance) is often integrated or confused with impact investing and, from our perspective, ESG is not the same. [With ESG], you’re looking at how the world is affecting a company, whereas impact investing is about how a company is affecting the world.”

Transforming Portfolios

Andrew Spence shared the Toronto Foundation’s journey toward a target of 70% impact investments by 2030. This required shifting core beliefs, rewriting the Investment Policy Statement, and engaging specialized advisors.

“We have about $100 million out of our $400 million now invested in intentional impact opportunities. They are delivering the returns they promised, and we are doing more good while getting the return.”

Andrew also addressed some of the governance challenges that can come with impact investing:

“When does an investment become a grant? If a well-deserving enterprise cannot stand on its own and you write off $300,000, how do you justify that to the person you give $10,000 a year to? We’re slowly getting that evaluation process in place, but that’s what keeps me up at night as a board member.”

Mid-Journey Lessons

Riz Ibrahim shared how The Counselling Foundation of Canada began exploring impact investing about a decade ago, and described his progress as “mid-journey.” He highlighted their breakthrough moment – providing a $200,000 loan guarantee to skilled immigrants seeking accreditation in Canada:

“We were using our balance sheet, not our asset base. It was within our wheelhouse. We understood what the impact could be, and the risk was nominal. We really liked it, and it got people thinking, ‘Okay this is something we can get into.’”

Over nearly an hour, the panelists provided invaluable insights into the purpose, strategy, and governance of impact investing and philanthropy more broadly. Their expertise inspired meaningful reflection on how foundations can maximize their resources to drive positive change.

Join Us to Learn More

Cumberland Foundations Circle was created to help families, foundations, professionals, and experts come together in a dynamic set of discussions to share their knowledge and experiences across an array of philanthropic topics, including impact investing.

Interested in learning more? Contact us to access a video replay of this event or to join future discussions.

Traditionally, investing focuses on profit and charity is about improving the human condition and world. Impact investing can be likened to a hybrid way of giving that aims to generate positive social and environmental impacts with financial returns simultaneously.

Impact Investing Versus Charitable Giving

One way to compare impact investing with more traditional charitable giving is to imagine how you might assist a community organization that needs physical space to sustain its highly successful outreach program.

With traditional charitable giving, a donor might provide cash that the organization could use to lease space. With impact investing, a donor might instead purchase or even construct a building and allow the organization to occupy the space it needs for free or at a below-market rate. In this way, the impact investor benefits from owning the real estate asset while supporting the community at the same time.

Interest in impact investing has surged across institutional investors, family offices, and individual investors, spurred by growing recognition that it’s possible and desirable to make a positive difference without sacrificing returns.

Social Impact With a Financial Return

Impact investing often funds scalable solutions with long-term potential. This could be anything from a real estate project as in the above example to a business that provides social or environmental goods in a sustainable manner. Since impact investing may not offer the same immediate financial support as charitable giving, many philanthropists combine both approaches to maximize their impact.

Impact investments span a wide range of asset classes, from private equity and venture capital to fixed income and more, allowing investors to diversify their portfolios and align their values with their financial objectives. Many impact investments target a rate of return similar to the market, although some are structured to accept lower returns if it leads to a high level of positive impact.

Impact Investing Frameworks

The UN Sustainable Development Goals have provided a global framework for impact investing by outlining specific goals related to issues such as poverty, hunger, clean water, education, gender equality, and climate action. Many impact investors reference these goals as a way to shape their strategies and share a common language with other impact investors.

There are also frameworks for measuring outcomes, including the Global Impact Investing Network standards and the Impact Reporting and Investment Standards. These standards help investors avoid “greenwashing,” where companies may falsely claim sustainability efforts without substantiating them.

Join Us to Learn More

Cumberland Foundations Circle was created to help families, foundations, professionals, and experts come together in a dynamic set of discussions to share their knowledge and experiences across an array of philanthropic topics, including impact investing.

Our next event takes place in Toronto on Tuesday, November 12th and will feature a panel of experts on impact investing who will share their insights and discuss the issues of the day. Please contact us if you and/ or your foundation are interested in attending the event, or accessing a replay after the event.

Is artificial intelligence (AI) the disruptor we thought it would be? Last year, we hosted a discussion with AI specialist Barbara Gray, CFA of Brady Capital Research on its potential impact. Since then, AI-driven tools, public experimentation and investment have continued to grow rapidly. On September 20, 2024, Barbara rejoined our team and our invited guests to share her latest outlook on this evolving space.

Following an introduction by Alex von Schroeter, partner on the Cumberland leadership team, our Chief Investment Officer, Peter Jackson, took the podium to lead the conversation with Barbara, who was joined on stage by two members of the Cumberland investment team, Levon Barker, Portfolio Manager, US Equities, and Phil D’Iorio, Portfolio Manager, Global Equities.

Barbara fielded the first question by walking the audience through some of the main points from her eleventh book, Secrets of AI, published last year.

The Eight secrets of AI

Barbara laid out a convincing case for the disruption already underway and yet to come as a result of AI technology. She shared the following eight “secrets” of this disruption:

1. The Magic Beans. AI is growing faster than any technology in history. ChatGPT gained 100 million monthly users within two months of launching in 2022.
2. The Serpent. AI is super-powering long-tail search. Imagine being able to ask Spotify to curate a playlist that you will love, or AirBNB to find the perfect place to stay.
3. The Vinyl Record. AI is creating a second Napster moment. It can fake or replicate virtually any content. It can translate a movie or podcast into a dozen languages.
4. The Ancient Scroll. AI will replace much of the world’s intellectual and creative labour, just as machines replaced much of the world’s physical labour.
5. The Crucible. AI will unlock the value of long-tail proprietary data. Think of a social media platform with billions of samples of text and images with which to train AI.
6. The Eye. AI increasingly has “senses,” able to not only listen to users via voice prompts and respond with audible language, but also see and create images.
7. The Robot Factory. AI will enable robots to manufacture more robots. It is already being used to train existing robots on new skills.
8. 007. AI agents are the next emerging tool. Imagine having an AI assistant that knows your tastes and preferences and can handle tasks and communications for you.

Next up, Levon and Phil answered a series of questions about how to approach AI from an investment perspective. Here are a few highlights from their comments:

• Value will emerge over decades. The winners of today may not be the winners of tomorrow, and there will be secondary and tertiary beneficiaries over time. Levon shared the examples of Microsoft and IBM. At the dawn of personal computing in 1990, IBM was worth roughly 8x more than Microsoft, and seemed poised to dominate. By 2023, it had become apparent that software created more value than hardware, and Microsoft was worth almost 19x more than IBM.
• Tech stock valuations are relatively reasonable. Based on their price/earnings ratios, the Magnificent Seven tech stocks of today are in line with long-term norms and considerably less expensive than the tech bubble leaders of 2000, the Japan financial bubble stocks of 1989, and the Nifty 50 stocks of 1973. In addition, today’s top tech stocks are growing their earnings roughly 60% faster than the broader market.
• There will be direct and indirect beneficiaries. Phil shared his perspective that AI hardware makers such as Nvidia, Applied Materials and Broadcom, as well as chip-making software providers like Cadence, are obvious direct beneficiaries, as are companies with massive pools of AI training data, like Microsoft, Google and Meta Platforms. However, there are also opportunities among indirect beneficiaries, such as S&P Global, which has a vast cache of financial data, Thomson Reuters and RELX, which are using AI to enhance information services provided to legal, tax, accounting and compliance customers, and ThermoFisher, which is a health sciences provider with the potential to leverage AI to help develop drugs more quickly.

Questions and answers

The panel fielded a variety of questions from the moderator and the audience, addressing the accelerating rate of change in the space, the need for regulators to try to keep pace, the industries that may be most vulnerable to disruption, the potential trajectory of earnings growth among today’s leading technology stocks, and Cumberland’s approach to making investment decisions in such an environment.

All three panelists expressed optimism about the economic prospects for AI, while Barbara shared some concerns about the level of uncertainty that can accompany such a profound technological innovation, particularly as a parent to two young boys. One theme that emerged was the potential for AI-driven productivity gains to spur economic prosperity across companies and sectors well beyond the tech industry itself.

A lively conversation followed as guests and panelists mixed and mingled on our patio overlooking Yorkville on a mild September evening. If you have any questions about our approach to investing in the age of AI or would like access to a video replay of the event, please contact your Cumberland Portfolio Manager or Alexandra von Schroeter at alexv@cpwm.ca.

On June 6, 2024, Cumberland hosted a webinar on a proposal in the last Federal Budget that would see the capital gains tax inclusion rate rise from 50% to 66.67%. A few days later, the government tabled legislation in Parliament to be voted into law. Here are some of the highlights.

Following an introduction by Cumberland partner and CEO, Charlie Sims, the discussion was kicked off by Peter Routly, CPA, CA; TEP, a Partner in the Canadian Tax practice at BDO who was in Ottawa for the unveiling of the budget.

He started by illustrating the impact of the higher inclusion rate using the example of someone who sold a stock for $100 that had originally been purchased for $10, thus realizing a capital gain of $90. Under the current rules, they would only add half of the gain, or $45, to their personal taxable income. Under the new rules, they would owe tax on two-thirds of the gain, or $60. For investors in Ontario’s top tax bracket, this equates to an 8.92% tax increase on capital gains.

He also outlined an important distinction: for individual tax filers, the higher capital gains tax inclusion rate is only applied to capital gains in excess of $250,000 in a given year, but for corporations and trusts, the higher rate is applied from the first dollar of capital gains.

Mitigating the financial impact

Mr. Routly provided an overview of some of the main considerations for those seeking to mitigate the financial impact of the higher tax, including:

• • Considering the sale of capital assets before the law comes into effect after June 24, 2024
  • The deemed disposition of capital assets that occurs upon death or emigration from Canada
  • Planning to crystallize accrued gains, and some of the complexities that can be involved, including Alternative Minimum Tax (AMT) rules
  • Intentionally triggering a gain inside a professional corporation, and the associated risks, such as the potential to lose the small business deduction
  • Expected changes to the Capital Dividend Account that would end the ability to withdraw 50% of a capital gain tax-free from a corporation, and reduce it to one-third

For many Canadians, selling capital assets before the deadline to take advantage of the 50% capital gains inclusion rate before it’s gone may have been the most straightforward tax mitigation strategy, and Mr. Routly outlined some key questions to help assess the potential appropriateness of this strategy:

• • How long were you originally planning to hold the asset?
  • Were it not for an imminent tax increase, would you even be considering a sale?
  • What will it cost you to sell it now?
  • What return would you have expected over your original time frame?
  • What is the total value of the asset versus its accrued gain?

It was suggested that, for many investors with significant private business interests and other valuable assets, the cost of selling before the rule change was not justified by the expected tax savings.

With so many issues to consider and the complexity of each individual situation, Mr. Routly said that it’s difficult to make blanket recommendations, and that each tax payer must conduct their own analysis along with their tax, legal and wealth advisors.

Questions and answers

Following Mr. Routly’s overview of the proposed tax, he was joined by Jeff Noble, CMC; FEW Director of Business & Wealth Transition Private Wealth at BDO for an in-depth Q&A session with Charlie and the webinar participants.

Some of the many topics covered included:

• • Comparing and contrasting the current legislation with the many changes that have been made to the capital gains tax rules dating back to the 1970s
  • The applicability of General Anti-Avoidance Rules (GAAR) to those who seek to sell and then immediately repurchase assets with the intent of avoiding the higher tax rate
  • Estate planning for families who will have significant capital gains from real estate and other assets upon death
  • Charitable giving strategies in the context of the higher capital gains tax inclusion rate and AMT
  • A deeper dive on tax planning considerations for those with capital gains inside a corporation, including the Capital Dividend Account
  • Insights into behind-the-scenes lobbying efforts that could have resulted in changes to the substance or timing of the new rule
  • Coping with the uncertainty of tax planning in a shifting legislative environment

If you have any questions about your personal tax planning situation or would like access to a video replay of the webinar, please contact your Cumberland Portfolio Manager or Financial Advisor.

The Canada Revenue Agency (CRA) will no longer require bare trusts to file a T3 Income Tax and Information Return (T3 return), including Schedule 15 (Beneficial Ownership Information of a Trust), unless they directly request these filings from an individual taxpayer.

This policy change was made to recognize that the new Bare Trust tax reporting requirements, which were only recently introduced for the 2023 tax year, would have had an onerous and unintended impact on many Canadians.

Over the coming months, the CRA will work with the Department of Finance to further clarify its guidance on this filing requirement. The CRA will communicate with Canadians as further information becomes available.

What is a Bare Trust?

A Bare Trustee corporation acts as the title holder to an asset for the benefit of someone else, such as holding the title to investments in a nominee corporation. This arrangement is often used in real estate development and oil and gas and resource exploration, but it is also used by many Canadian families for general estate and probate planning purposes.

Here are some examples of Bare Trusts that, until the recent policy reversal, would have required taxpayers to submit additional annual filings:

• • An individual holds an “in trust” bank or investment account for a child or a parent.
  • A parent corporation holds cash in trust for underlying subsidiaries, such as certain corporate “cash sweep” arrangements.
  • A general partner in a limited partnership arrangement is the title holder to the underlying assets of the partnership. This arrangement is typically used in real estate investments but may also include business operating partnerships.
  • An individual has purchased a property “in trust,” but the actual owner is not clearly identified. This arrangement is commonly used with real estate purchases or certain pooling of private investments where the title holder or purchaser is not the true underlying economic or beneficial owner of the property.
  • An individual is registered on the title of real estate they do not beneficially own, such as having a named interest on a child’s or parent’s home for estate planning purposes.

The above is not an exhaustive list, and legal counsel should be consulted to identify all informal trust arrangements and instances of a Bare Trust that may be subject to new tax reporting policies in the future.

Contact your Portfolio Manager

For now, the Bare Trust annual tax filing requirement is lifted for the 2023 tax year, and we will continue to monitor the situation for our clients. If you have any questions about Bare Trusts and how they might affect your tax, financial, and estate planning, please contact your Cumberland Portfolio Manager.