Q&A: Corporate class units

Question: I have a question about corporate class units. My financial advisor has recommended the United brand to me to make my non-registered portfolio more tax efficient. Do you recommend corporate class funds in any of your newsletters? Is the strategy a good way of deferring tax and worth the higher MERs? – Phillip C.

Gordon Pape answers: Corporate class units are part of an umbrella fund. By using them, you can move money between different pools without triggering a taxable capital gain. If you own regular mutual funds, any switch is considered to be a sale for tax purposes if the account is non-registered.

As our reader mentions, corporate class units sometimes (but not always) carry a higher MER (management expense ratio). Whether the extra cost is worth it depends on how frequently you trade in and out of funds. If you move money around a lot, then they may be appropriate for you. Just don’t put them in a registered plan – there is no tax advantage to doing so.