Non-Registered Accounts, also known as Open or Cash Accounts, are available for a broad array of investment products and strategies. These accounts are not registered with the Federal Government and do not have limitations on contribution or withdrawal amounts. Unlike RRSPs and TFSAs they can be jointly owned and even corporately owned for businesses that want to invest any surplus funds.
Investors that hold assets in Non-Registered Accounts will realize that taxation on investment growth is a factor to the long-term gains of their account. The tax implications of interest income, dividend income, and capital gains become more obvious than if the same investments were growing in either a RRSP or TFSA. Often times Canadians hold assets in regular bank savings account, term deposits, and GICs and don't realize that unless they were specified as registered accounts they will have to pay tax on the gains every year. It is in these scenarios that is always makes sense to at least have your TFSA maxed out before investing in Non-Registered Accounts.
Corporate Class Funds
The mutual fund industry has developed a group of funds, called Corporate Class Funds, that are specially designed for Non-Registered Investments.
Some of the features include:
- capital gains (or losses) are deferred until the investment is eventually redeemed
- distributions paid are converted into more tax-efficient capital gains
Given its name, Corporate Class Funds can also be utilized by corporations wanting to invest their holdings in something more than a savings account. They are not limited to being used by corporations though as individual investors can also take advantage of these products.
Feel free to contact me to learn more about Non-Registered Accounts and how they can be a valuable part of a long-term investment strategy.