Deferring taxes—it sounds like a dream come true, right? Keep more of your money now, invest it, grow it, and worry about Uncle Sam (or the CRA) later. But here’s the thing: later always comes. And when it does, the bill might be bigger than you ever imagined.

Let’s Break It Down:

When you defer taxes through an RRSP, a trust, or any other vehicle, you’re essentially taking a loan from the government. You’re saying, “Hey, let me keep more of what I earn today, and I’ll settle up down the road.” Sounds smart, right? But here’s what most people don’t consider: What will the tax rate be when you finally have to pay? Will it be the same as today? Higher? Lower? It’s a guessing game, and one where the odds aren’t always in your favor.

The Cost of Deferral:

Let’s say you’ve been deferring taxes for decades. The money’s grown, and that’s great—but so has your tax liability. Every dollar you’ve deferred is like a snowball rolling downhill, accumulating more and more tax. When you finally tap into those funds—whether it’s in retirement, or worse, through your estate after you’re gone—the taxman is going to want his share. And if tax rates have gone up, your deferred gains could be hit harder than you anticipated.

RRSPs and Trusts:

Take RRSPs, for example. You’re deferring taxes now, enjoying the compounding growth, but when you start drawing down in retirement, that income is fully taxable. If you’re in a high tax bracket, you could lose a significant chunk of your nest egg. And what about trusts? They’re fantastic for controlling how and when your assets are distributed, but unless you’re using tax-efficient strategies, the taxman still gets his due.

Living vs. Estate:

Now, here’s where it gets real. Deferring taxes while you’re alive gives you control—you decide when to pull the trigger, ideally when tax rates are favorable. But when it comes to your estate, you’re handing that control over to the government. Estate taxes can be brutal, and if you’ve deferred a lot, your heirs could be left with a massive tax bill.

So, What’s the Play?

Deferring taxes isn’t inherently bad—in fact, it’s a smart move when done strategically. But you’ve got to have a plan for the day those taxes come due. Think about how life insurance could play into this. It’s tax-free, and it can be a powerful tool for covering those deferred taxes, ensuring your legacy doesn’t get chipped away by the taxman.

At the end of the day, deferring taxes is about balance. You want to keep more of what you earn now, sure. But don’t forget that the bill will come due. The question is, will you be ready when it does?