Problem
Victoria wants to build an education plan for her twins Brooklyn and Nicola. You recommend 4 independent scenario's she can consider:
i. Invest in RESPs in the children's names.
ii. Invest in non-registered equity investments in the children's names.
iii. Invest in TFSA's in Victoria' name.
iv. Borrow $100,000 to invest Victoria's name.
Victoria has a total of $5,000 per year committed to education funding. Using an 6% ROR (all interest income) for each scenario including re-investments; a 14-year timeframe (n=14); 50% MTR for Victoria, a 15% MTR for the twins for any taxable income over $15,000 in a year; and a 5% carrying cost on the leverage option (interest-only leverage). Show how each scenario would work with absolute optimization of the strategy from a tax perspective, redeeming all funds over a 4-year undergraduate degree (n=4) using a 1% ROR. Explain to Victoria the tax minimization strategy utilized for each scenario and 2 advantages and 2 disadvantages of each scenario. Which option would you recommend?