I feel like this is being vastly overthought, but I guess MMM is about optimization, and I'm just not understanding the logic.
I just put 175$ into each kids mutual funds (e-series funds), and the gov adds their 20%. When they withdrawal the earnings and the grant money it is taxed in their hands regardless of the source, therefore the vast majority comes out untaxed as it is after tax money.
Very true about optimization. We chase low MER funds, we also chase low tax solutions. You can either earn more or save more, saving on taxes is far easier than shaving my power bill any more :)
A similar strategy of capital gains harvesting (dividend payouts) can be applied to a low income spouse or when spouses retire at different times (or long term unemployment). When you wind down a cash investment account it can be done tax free. The trick is to make sure the capital gains is allocated to the non-working spouse, not to both. Its worthy of its own thread, the taxation on Investment accounts. Its complicated by the different tax rates in each province, but it might benefit us Canadians.