Insure Your Freedom

Should I top up my RRSP?

2012-02-05T07:41:00.001-05:00

I have had a number of my clients calling me the last few weeks asking if they should top up their RRSP this year. I thought that I would review the process I go through with them to determine what is best in each individual situation.

Question 1 – Do you carry a balance on your credit cards each month? Credit card debt is between 18 and 20 percent. If you are carrying a balance on credit cards, you are probably better off paying down this debt rather than putting money into your RRSP.

Question 2 – What is your marginal tax rate? The higher your marginal tax rate for 2011, the larger the tax refund you will get from putting money into your RRSP. In general –“ more bang for your buck” the more money you earn.

Question 3 – Are you likely to need the money in the next two or three years? If you are likely going to take the money out in the next few years – you should top up your TFSA (Tax Free Savings Account) first. In 2012, you can deposit a total of $20,000 if you do not already have a TFSA account. If you do have an account and have never taken money out of it, you need to subtract the amount of money you have already deposited from the $20,000. If you have taken money out, the calculation is more complex – give me a call.

Question 4 – Are you likely to be a first time home buyer in the next few years? The Home Buyers Plan (HBP) lets you “borrow” up to $25,000 from your RRSP to acquire a home in Canada to be used as your principal residence. (This money must be repaid over a 15 year period.) If you are planning on buying a first home and don’t have $25,000 in your RRSP, it may make sense to top up now.

Question 5 – How old are you? The longer the money remains inside the RRSP, the greater the compounding that will occur.

You get a tax break when you put money into an RRSP. The money grows tax free inside the plan. However, you do pay taxes when you withdraw the money – so you need to think about what your tax bracket is likely to be later.

Do you have additional questions? Give me a call and we can work out the numbers for you.

Daily Living - Coping with a Broken Right Arm

2012-01-20T16:09:00.004-05:00

I wrote a blog post back in June 2010 on this topic. This week I met a friend - Anne Sowden from Here's Looking at You - who has suffered a similar incapacitation. Her suggestions are below and my original Blog Post follows hers.

General Comments from both of us:
Don’t go to hospital/fracture clinic appointments alone. Take a relative or good friend who can ask the right questions and intervene on your behalf, if necessary. Even the most intelligent of us need that kind of help when we’ve suffered a major injury. This advice also applies for medical issues.

Comments from Anne:
I broke my right wrist while on a secret mission and had a plaster and fiberglass cast on my arm from my knuckles over my elbow for four weeks. Like Heather, I learned a number of coping mechanisms that I’d like to share:

Personal Hygiene:
If you don’t want to get an electric toothbrush, get an “End Tuft” brush. The small bristles on the end make it easier to brush, especially those hard to reach places. You also don’t end up with as much toothpaste all over the place.

Flossing is impossible with one hand, so get yourself an Access Flosser. It’s like a toothbrush with a U shaped head containing floss.. All you have to do is work the floss between your teeth. And, it’s easy to replace the floss with one hand. In addition or as an alternative, chew gum.

With a huge cast over my elbow, I discovered baths were easier than showers. I didn’t have to worry about keeping my balance and a long soak in bubble bath before bed was relaxing.

Fingernails grow a lot in four weeks so I became a “regular” at my local nail bar—a habit that still continues even though my cast is off.

What to wear:
I totally agree with Heather about shoes. High heels are impossible with a cast. My go to shoes were rubber soled flats with Velcro on the straps.

Long sleeves were a challenge but fortunately winter weather was delayed and I was able to go outside wearing one of my husband’s sweaters. Yes, it was big and bulky but I’m told the colour looked amazing on me! The trick to putting on a sweater or jacket is to get the sleeve over your cast first. However, consider cardigans rather than pullovers and definitely sit while dressing.

Eating:
I was lucky that I had someone to cook and wash dishes. However, we learned that I made less of a mess while eating if my food was served in a bowl or deep sided pasta dish, except for soup. That was definitely best eaten from a mug.

While I could stab food with a fork, my favourite and most effective utensil was a spoon.

Anne Sowden, AICI CIP
Here's Looking at You
P: 416-429-8028
www.hereslookingatyou.ca

Original Post ffrom Heather:
Back in June 2010, I was having wild and passionate sex and swinging from a chandelier. No one told me you had to reinforce the chandelier first ... and the next thing I knew, I had a displaced fracture of my right humerus. If you prefer version 2, I was out walking and tripped, lost my balance and fell off the sidewalk and broke my upper right arm – so that it was in two pieces.

This started the process of not having any use of my right arm for almost three months. I was lucky and didn’t need surgery, for all but 3 weeks got to wear a plastic (Sarmiento) cast as opposed to an “old fashioned” plaster cast. However, my arm was held to my side with a strap and held in place with a sling that I was not allowed to remove (24 hours a day).

There were loads of coping mechanisms that I learned – and here some of them are. Please feel to pass them on to anyone you know who might find them useful.

PERSONAL HYGIENE:
• Did you ever try to brush your teeth with your left hand? It was humorous. An electric toothbrush came to the rescue!
• With only one functioning arm – I discovered the easiest way to put on powder was with a powder puff.
• To wash myself, I switched to liquid soap and a face cloth from the bar soap I had used before. (I didn’t drop the soap and I didn’t have to chase the bar soap.)

DRESSING:
• For the first three weeks, I needed to wear my top over the plaster cast – off to Value Village to buy some extra large men’s shirts with buttons up the front. Once the cast was changed, I could put my arm through the sleeves, but still needed a men’s shirt to fit over the cast – and the buttons as I couldn’t put anything over my head. Fortunately it was summer and short sleeves were fine – and I didn’t need a sweater or jacket.
• Pants – I couldn’t do up the zippers on my pants – so I needed pants with elastic waists. I went one step further and bought scrub pants as they have loads of pockets and therefore I didn’t need to carry a purse.
• Shoes – I converted to rubber soled loafers. My balance was off, so the flat shoes were essential and the loafers were easier to put on one armed.

Men – you can skip the next point:
• As for bras – if you can get away braless or with a sports bra – that would be my recommendation. You can also try bras that fasten in the front. I went with a size larger and assistance to put them on.

FOOD PREPARATION:
• I converted to preparing foods that only required heating with a microwave and that didn’t require much cutting. I also purchased shelf liner to put under my plate to prevent it from sliding around. I used a pizza cutter instead of a knife as I could do it one armed.
• My left arm was not strong enough to pour from containers larger than one litre – so I had someone pour liquid into single serving containers.
• When it came to washing dishes – I bought a smaller container of cleaner and used a protector in the bottom of the sink so that I could wash one handed.

SUMMARY
Now that it’s almost a year post injury and I’m able to do almost everything I could do before the accident, my main suggestion to everyone is to do all of the exercises recommended and find a good physiotherapist. I’ve spoken to a number of people who had much less serious injuries and lost a lot more mobility than I did. So - persevere with your exercises. If you have any additional suggestions – please let me know and I’ll pass them on.

Heather Freed
Insure Your Freedom
416-806-5478
www.freed.ca

More Year End Tax Tips

2011-12-10T10:11:00.004-05:00

Giving gives back!
Your donations to CRA registered charities generate a 15% – 29% tax saving. Make sure to ask for an official receipt as you will not be refunded without it.

Public Transit pays off!
If you use public transit to get around, you and any eligible dependents that you have may be entitled to a 15% non-refundable tax credit. Environmentally friendly AND financially rewarding, public transport is taking you places!

Keep your receipts
No need to send your receipts when you NETFILE your tax return, although the CRA may send you a request later for:
• Medical expenses
• Charitable donations
• Child care expenses
• Spouse or child support payments
• Moving expenses
Use a big envelope or shoe box as your "official tax slip holder" and keep all tax related information there.

Save for retirement and save on your taxes!
If you invested in your RRSPs in 2011, your contributions are exempt from taxation as long as they stay in the plan. Invest early in the year to gain tax free interest on your investment and make your money work for you.

Important tax dates for tax season 2011
• Feb 13, 2012 – NETFILE Services are open
• Feb 29, 2012 - RRSP Deadline
• April 30, 2012 – Tax Filing Deadline
• June 15, 2012 – Self Employed Tax Filing Deadline
• September 30, 2012 – NETFILE services close for tax season 2011

Additional CPP Changes effective January 1, 2012

2011-12-04T15:36:00.002-05:00

Several changes are taking effect on January 1, 2012 that may affect you. You will not be affected by these changes if you started receiving a CPP retirement pension before December 31, 2010, and you remain out of the work force.

If you are between 60 and 65, receiving CPP and still working, you and your employer now must contribute to CPP. The additional contributions will count towards a Post Retirement Benefit (PRB).

If you are between 65 and 70, receiving CPP and still working, you and your employer now have the option to contribute to CPP. The additional contributions will count towards a Post Retirement Benefit (PRB).

If you are between 60 and 70 and not yet collecting CPP, the adjustment factor that will be used will change. For those taking the benefit before December 31, 20110 the adjustment was 0.5% per month above or below age 65. This percentage will gradually increase to 0.7% per month for those taking late retirement and 0.6% for those taking early CPP . These changes will take full effect by 2016.

In addition, the number of years with zero earnings that are automatically dropped from the calculation of the CPP pension will increase.

Starting in 2012, contributors no longer have to stop working or significantly reduce earnings for two consecutive months to receive the CPP retirement pension before the age of 65. This will make it easier for Canadians to make a gradual transition to retirement.

For more information, you can check the Service Canada web site or give me a call.

Service Canada has a retirement calculator on their web site to assist you in calculating your benefit.

2011 Tax Planning Tips

2011-11-16T10:58:00.003-05:00

Tip 1 - Tax loss selling
The deadline for selling securities this year is December 23, 2011 if you need a tax loss to offset a capital gains realized earlier in 2011. Be mindful of the "superficial loss" rule when you sell an investment to realize the loss. If you buy the investment back within 30 days, the CRA can deny the loss and add it back to the adjusted cost base of the repurchased security.

Tip 2 - RRSPs / RRIFs / Annuities
Have you turned 71 in 2011? If so, you must convert your RRSP to a RRIF or an annuity before December 31, 2011. In addition, any final RRSP contribution must be done by December 31, 2011 as well. Talk to me, if you want to make an over contribution to your RRSP for this tax year.

TIP 3 - RESPs
If you have a child or grandchild who turned 15 in 2011, December 31, 2011 is the last chance to contribute to their RESP (if they do not have one already) and be able to collect the Canadian Education Savings Grant (CESG). The child must have a minimum of $2000 in their RESP by the end of the year they turn 15 in order to collect the government grants.

If you child is over 10 and you have unused RESP contribution room, consider making a contribution in 2011 to collect the CESG.

Tip 4 - Investment expenses and deductible interest
To deduct these expenses in 2011, they must actually be paid by December 31, 2011.

For more tax tips or clarification on these, give me a call.

Canadian Debt Levels

2011-10-30T10:46:00.000-04:00

The average Canadian had $1.49 of debt for every $1.00 they earned in the second quarter of 2011. (This debt includes mortgage and consumer loans.) Are you one of the many spending more than they earn? If so here are a couple of steps you should take to evaluate your spending / savings patterns.

The first step is to track your spending for a month – and yes, that includes all of the items that you buy with your spare change (such as coffee). Until you know what you spend your money on – it’s impossible to change your spending patterns. If you would like a template to track your money, let me know and I can send you one by email or snail mail.

Once you know what you’re spending your money on, you need to analyze your spending habits. Do you really need two Grande Starbucks Lattes every day?
You need to start paying down high interest debt. Start with your credit cards and take the money you’re no longer spending each month on frills and put that extra into your payments.

After each pay check – you need to arrange for a certain percent / amount to go directly into a savings vehicle – whether that’s an RESP, RRSP, TFSA or a Savings Account will vary depending on your financial plan. This is what your parents told you to do when you got your first job and it makes as much sense today as it did then.

Do you need help with any of these steps – give me a call and we can arrange to get together.

Keep on top of your money

2011-09-25T20:23:00.004-04:00

Back in May 2009, I came up with a "Tweet" of a Financial Plan - Control debt. Review insurance to protect lifestyle. Monitor spending. Save. Be tax smart. Develop & audit plan. Update will. Review planRecently, I saw an article in the Toronto Star - Improve your finances in just 30 minutes.

Both can be summarized the same way - be organized, have a system in place and stick with it. We'd all like life to be easy and not have to think about money and the "what ifs", but unfortunately, that's not reality. So the real question is how do you take care of your finances for both the planned and unplanned expenses in life without the planning getting out of control.

The system I recommend is to set aside some time every week or month to do these tasks. When you receive your mail, put all of the financial related items into an envelope or file folder. Similarly, take all the receipts out of your pockets and wallet and put them into the envelope as well.

Sit down regularly to go through this package and to ensure:
· There are no mistakes / unexplained charges on any of your bills
· Have a file folder for receipts you need to keep - items you'll declare as expenses on your taxes, warranty items, bills for repairs, etc.
· Once you've matched receipts to your bills for items like groceries, discard them

I use software to keep track of my expenses. I download my statements directly from my financial institutions and categorize everything. This way, at tax time, I can run a report and have summary numbers for all of my expenses.

At the same time as you are reviewing your statements, pay your bills. Most on-line banking systems let you date a payment for the future. If you pay by check, write it out and have it ready for when you want to send it out.

At the same time, set up a monthly rotation to review ongoing expenses such as your home and car insurance, life insurance, saving plans (RRSP, RESP, TFSA, etc), budget, etc.

Using a system ensures that you use a minimum amount of time for these tasks, and that you don't have to worry again.

Making a claim on your insurance

2011-08-07T12:07:00.002-04:00

This summer I have assisted several clients making an insurance claim. Like everything else in life, they seem to come in batches. While none were happy to be making a claim, they were all pleased to receive the insurance proceeds.

Life insurance claims are straight forward – the insurance company needs a death certificate and a claim form. The money in most cases is paid out in less than a month from when you notify me. In both cases this summer (even with a mail strike), I managed to deliver the checks to the beneficiaries in about 2 weeks.

Disability claims require more time and more paperwork. The client I am working with is an employee at one of the groups I insure. I was called as soon as he was off work. The employer and employee have completed their paperwork; we’re just waiting for the doctor to submit theirs.

Do you have long term disability coverage? If you’re an employee – look at your pay stub. If you show an amount deducted beside LTD – you have Long Term Disability coverage that probably starts if you’re off work for 17 weeks. If you have an amount listed besides WI (weekly Indemnity) or STD (Short Term Disability), then you have Short Term Disability as well. As opposed to health and dental benefits, disability only protects your income and not that of your spouse.

You should review your coverage whenever there’s a change in your life. Whether you require Life Insurance to protect your family, Critical Illness Insurance to receive a lump sum payment should you get a life threatening or life altering disease or Disability Insurance to pay you monthly while you are unable to work or a combination depends on your specific situation.

Give me a call. I’d be pleased to walk you through the calculations to determine how much insurance you need and what type meets your specific need.

The more things change, the more they stay the same

2011-08-04T16:12:00.000-04:00

We've all heard this proverb and have all probably used it, but what does it mean in your everyday life?

This week, I went on line and bought tickets, posted pictures and checked bus schedules - all activities that a few years ago would have required phone calls and / or a trip out of my office to accomplish. I spoke to a friend half way around the world on Skype for nothing (versus the expensive long distance phone call of 15 years ago). I could go on - we all have examples from our day to day lives.

The fundamentals of financial and estate planning have not changed. We are all concerned that we might outlive our money or whether we can maintain our standard of living for ourselves and our families - no matter what happens. What have you done about this? Many people bury their head in the sand and hope that nothing serious happens. Some people have reviewed their plans with a professional and know what would happen if - and many of these people are pleased to learn that they are in a much better position than they thought they were in.

Would you like to be one of the people who knows for sure? I am offering a confidential, complementary review of your current situation along with suggestions on how to ensure that you can maintain your lifestyle - to my clients and readers of this newsletter

Coping with a broken right arm – the dominant one of course

2011-06-17T11:58:00.001-04:00

Back in June 2010, I was having wild and passionate sex and swinging from a chandelier. No one told me you had to reinforce the chandelier first ... and the next thing I knew, I had a displaced fracture of my right humerus. If you prefer version 2, I was out walking and tripped, lost my balance and fell off the sidewalk and broke my upper right arm – so that it was in two pieces.

This started the process of not having any use of my right arm for almost three months. I was lucky and didn’t need surgery, for all but 3 weeks got to wear a plastic (Sarmiento) cast as opposed to an “old fashioned” plaster cast. However, my arm was held to my side with a strap and held in place with a sling that I was not allowed to remove (24 hours a day).

There were loads of coping mechanisms that I learned – and here some of them are. Please feel to pass them on to anyone you know who might find them useful.

PERSONAL HYGIENE
• Did you ever try to brush your teeth with your left hand? It was humorous. An electric toothbrush came to the rescue!
• With only one functioning arm – I discovered the easiest way to put on powder was with a powder puff.
• To wash myself, I switched to liquid soap and a face cloth from the bar soap I had used before. (I didn’t drop the soap and I didn’t have to chase the bar soap.)

DRESSING
• For the first three weeks, I needed to wear my top over the plaster cast – off to Value Village to buy some extra large men’s shirts with buttons up the front. Once the cast was changed, I could put my arm through the sleeves, but still needed a men’s shirt to fit over the cast – and the buttons as I couldn’t put anything over my head. Fortunately it was summer and short sleeves were fine – and I didn’t need a sweater or jacket.
• Pants – I couldn’t do up the zippers on my pants – so I needed pants with elastic waists. I went one step further and bought scrub pants as they have loads of pockets and therefore I didn’t need to carry a purse.
• Shoes – I converted to rubber soled loafers. My balance was off, so the flat shoes were essential and the loafers were easier to put on one armed.

Men – you can skip the next point.
• As for bras – if you can get away braless or with a sports bra – that would be my recommendation. You can also try bras that fasten in the front. I went with a size larger and assistance to put them on.

FOOD PREPARATION
• I converted to preparing foods that only required heating with a microwave and that didn’t require much cutting. I also purchased shelf liner to put under my plate to prevent it from sliding around. I used a pizza cutter instead of a knife as I could do it one armed.
• My left arm was not strong enough to pour from containers larger than one litre – so I had someone pour liquid into single serving containers.
• When it came to washing dishes – I bought a smaller container of cleaner and used a protector in the bottom of the sink so that I could wash one handed.

SUMMARY
Now that it’s almost a year post injury and I’m able to do almost everything I could do before the accident, my main suggestion to everyone is to do all of the exercises recommended and find a good physiotherapist. I’ve spoken to a number of people who had much less serious injuries and lost a lot more mobility than I did. So - persevere with your exercises. If you have any additional suggestions – please let me know and I’ll pass them on.

Do you have money put aside in case of an emergency?

2011-04-22T13:19:00.004-04:00

From the 1970s through to the 1990s, this was a no-brainer, as interest rates were relatively good on the usual savings vehicles — high-interest savings accounts and Canada Savings Bonds. But in the last decade or so, interest rates have dropped to record lows, credit has become more easily available, and we have started expecting portfolio returns significantly higher than an emergency fund would generate.

So it's understandable that the emergency account would disappear from a lot of people’s lives.

In the current economic climate, credit has been tougher to obtain and unemployment rates are rising rapidly; EI pays very little compared to many people's spend-what-you-earn lifestyle, and using a home equity line of credit in a period of declining real estate values is neither wise nor likely possible. Thanks to all that, an emergency fund is an absolute must in these economic times.

The main reasons for creating an emergency fund are to provide protection in the event of a layoff; to provide cash in the event of a sudden disability or illness requiring time off work; and to provide funds for any other possible emergency (e.g. a new roof for the home, a new furnace, car repairs, etc.).

What's in a fund?
Creating an emergency fund does not mean investing aggressively in an equity portfolio and selling when the going gets good — the money needs to be safe and secure. It should also be liquid, so that you can get easy access to your cash if need be, but it shouldn't be so accessible that it can be frittered away.

Saving grace

While this account won't be the one you use to save up for that expensive house on the beach, the more you can save the better. Still, make sure that you know that the fund isn't designed to provide money for non-essentials such as entertainment, vacations, gifts or eating out. It is designed to ensure that you can maintain a roof over your heads, put food on the table and maintain payments for essentials.

Figuring out how much you need to save requires answers to a few questions, as the amount of savings depends to a large extent on individual situations. What is your level of debt? Do you have dependents? Is your spouse employed at the same company? Is your occupation one for which there is usually a demand, so any period of unemployment is likely to be short term? Or will you be faced with the possibility of retraining in another field, which will mean substantial time and financial costs? Do you have other investments of a sufficient amount that you could access if need be? Do you have family who would be likely to help out? The general rule is that you should have at least three to six months of living expenses in your emergency fund.

Goodbye Taxman

Until the advent of the tax-free savings account (TFSA), the amounts saved in these rainy-day funds always generated interest that was fully taxable. The TFSA provides a great savings vehicle for an emergency fund and there will be no tax on the interest! With a couple both building savings of $5,000 per year each in a TFSA, there will be a solid basis of an emergency fund right there. If you feel the RRSP is more important, taking the tax refund generated by the RRSP contribution and putting it into the TFSA allows accumulation of assets that are all tax sheltered.

Tax Time is Approaching

2011-04-22T11:34:00.005-04:00

The deadline for filing your Canadian tax returns (unless you or your spouse owns a small business) is April 30th. The deadline for paying outstanding personal tax bill for everyone is April 30th. Have you started getting ready?

A couple of suggestions:
- Check your tax return for last year to make sure that you have included everything. I had a call from a client last week who did not receive his tax receipt for an RRSP contribution. (We’re assuming that it was lost in the mail.) It is your responsibility to file your taxes with the information from all of your slips.
- Even if you don't owe taxes, you should file your 2010 income tax return by April 30, 2011 to be eligible for some tax credits and benefits, such as the GST / HST tax credit, , the Canada Child Tax Benefit, the Universal Child Care Benefit, and the Children’s Fitness Tax Credit. I have a client (she’s a union employee and last year with all the odds and sods received almost $3000 back from the government. True, most was overpaid contributions.
- You can access your tax information on the Canada Revenue Agency web site using the My Account. This year, you will need a CRA user ID and password to use the service. If you don’t already have one, click on the No button to create one

Canada Revenue Agency lists a number of common ways Canadians can reduce their tax bill. Check it out.

If you have specific questions, perhaps I can help you out – or at the very least, steer you in the right direction.

March 22, 2011 Federal Budget

2011-03-23T15:58:00.003-04:00

At this time, no one knows whether the budget will come to fruition, or if Canada will have an election. There are several tax incentives of interest should the budget pass in its current form.

SENIORS
Enhancing the Guaranteed Income Supplement (GIS) for Low Income Seniors – The budget proposes a new GIS top-up effective July 1, 2011 for seniors with little or no income other than OAS and GIS will receive additional annual benefits of up to $600 for single seniors and $840 for couples.

FAMILIES
Children's Arts Tax Credit - This will allow parents to claim a 15 per cent non-refundable tax credit based on an amount of up to $500 in eligible expenses per child paid in a year for an eligible program of artistic, cultural, recreational or developmental activities. The program must be either a weekly program lasting a minimum of eight consecutive weeks or in the case of children's camps, a program lasting a minimum of five consecutive days
Family Caregiver Tax Credit - To provide new support to caregivers of dependents with a mental or physical infirmity, including spouses, common-law partners and minor children. This is an enhanced credit, proposed to begin in 2012.
Medical Expense Tax Credit (METC) - allows individuals with significant medical expenses to claim a credit in respect of eligible expenses incurred by himself or herself, his or her spouse or common-law partner, or his or her children under 18 years of age. Caregivers can also claim the METC in respect of a “dependent” relative. A "dependent" relative is a child who is 18 or older, a grandchild, parent, grandparent, brother, sister, uncle, aunt, niece or nephew, who is dependent on the taxpayer for support.
Under current rules, a caregiver may only claim the eligible expenses of a "dependent" relative that exceeds the lesser of 3 per cent of the dependant's net income and an indexed dollar threshold ($2,052 in 2011), to a maximum of $10,000. The 2011 Budget proposes to remove this $10,000 limit on eligible expenses that can be claimed under the METC in respect of a dependent relative. This is consistent with the normal METC rule, which has no maximum amount.

STUDENTS
Tuition Tax Credit - Currently, tuition fees are eligible for a federal non-refundable credit of 15 per cent of the amount paid. The 2011 budget proposes to amend the tuition tax credit to recognize exams fees paid to an educational institution, professional association, provincial ministry or other similar institution to take an exam that is required to obtain a federally or provincially recognized professional status.
Education Tax Measures – Study Abroad - The tuition tax credit is currently available to a Canadian student in full-time attendance at a university outside of Canada in a course leading to a degree only to the extent that the tuition fees are paid in respect of a course of at least 13 consecutive weeks,
The 2011 budget proposes to change this requirement by reducing the minimum course-duration requirement that a Canadian student at a foreign university must meet from 13 consecutive weeks to three consecutive weeks.

CHARITIES
Among various charity measures in the 2011 budget, the change that may have the most significant effect on individual donors is in the area of flow-through share donations,
Donation of Flow-through Shares - Over the past number of years, Canadians who wished to donate significant amounts to charity have been turning to flow-through shares as a means of funding their charitable giving at minimal cost. Flow-through shares are essentially shares issued by oil and gas, mining and renewable energy companies that renounce or "flow-through" their exploration, development and project start-up expenses to investors, who can deduct these expenses personally on their own tax returns. For tax purposes, flow-through shares are treated as having a tax cost or adjusted cost base (ACB) of zero when calculating any capital gain or loss from their ultimate disposition.
In a move that is expected to preserve $185 million of forgone tax revenue over the next five years, the government is changing the rules and is proposing to allow the exemption from capital gains tax on donations of flow-through shares only to the extent that a flow through investor's capital gain exceeds the amount paid for the shares, ignoring the deemed zero ACB of the flow-through shares.
So, following from the example above, if Jonathan were to buy $10,000 of flow-through shares issued today, his cost would still be $5,400, allowing for the flow-through deduction at 46%. Upon donation, his receipt would still be worth $4,600 (46% of $10,000), but his capital gains tax would be $2,300 (50% x 46% X $10,000) increasing the total cost of his donation from $800 to $3,100.

REGISTERED PLANS
RESPs – Asset Sharing Among Siblings - To provide subscribers of separate individual plans with the same flexibility to allocate assets among siblings as exists for subscribers of family plans, the 2011 Budget proposes to allow transfers between individual RESPs for siblings, without any tax penalties and without triggering the repayment of Canada Education Savings Grants (CESGs), provided that the beneficiary of an RESP receiving the transfer of assets was under 21 when the plan was opened.
Registered Disability Savings Plans (RDSP) – Shortened Life Expectancy - RDSPs were introduced in the 2007 budget. They allow parents and others the option to contribute up to $200,000 towards the long-term financial security of a child with a severe disability. Investment income in an RDSP grows tax-free and can be supplemented with generous government credits and bonds in the form of the Canada Disability Savings Grants (CDSGs) and Canada Disability Savings Bonds (CDSBs).
The 2011 federal budget proposes to allow RDSP beneficiaries who have shortened life expectancies to withdraw more of their RDSP savings by permitting annual withdrawals without triggering the ten-year repayment rule.
An election will be available to take advantage of this new rule. If the election is filed for a beneficiary with a shortened life expectancy, withdrawals made at any time following that election will not trigger the repayment of CDSGs and CDSBs provided that the total of the taxable portions of the withdrawals does not exceed $10,000 annually.
Once an election has been made, no further contributions to the plan will be allowed, and no new CDSGs or CDSBs will be paid into the plan. After the death of the beneficiary, any CDSGs and CDSBs remaining in the plan that were received by the plan within the preceding 10 years must be repaid.
RRSPs / RRIFs – Anti Avoidance Rules - Rules similar to the existing TFSA anti-avoidance rules are being applied.

SMALL BUSINESS
Individual Pension Plans - IPPs are defined benefit Registered Pension Plans (RPPs) established for small business owners and their spouse or other family member that are employed by the business.
The federal budget proposes two new tax measures that will apply specifically to IPPs.
• Minimum Withdrawals -The budget introduces a new rule that will require an IPP to pay out to a member, each year after the year in which he or she turns 71, the greater of the regular pension amount payable under the IPP terms and the minimum amount that would be required to be paid from the IPP to the member if the member's share of the IPP assets were held in a RRIF. According to the government, "This requirement will establish reasonable limits on deferrals of tax on IPP savings and generally ensure that such savings are received as income throughout the retirement period of the member, consistent with the basic purpose of RPPs" These rules will begin in 2012.
• Contributions for Past Service - The amount you can contribute to a defined benefit plan, including an IPP, is directly tied to the RRSP contribution limits. As a result, an IPP member's annual RRSP contribution limit is reduced by the estimated amount of annual saving in his or her IPP.
Employee Profit Sharing Plans - Finally, a heads up is warranted to business owners who use Employee Profit Sharing Plans (EPSPs). EPSPs allow business owners to share the profits of their business with their employees. While no changes have been formally announced in this budget, the government did indicate that it "will review the existing rules for EPSPs to determine whether technical improvements are required in this area."

Want to be Debt Free? Simple Steps to Get Your Plan on Track

2011-02-28T11:44:00.003-05:00

When we think of financial goals, we often think in terms o how much we want to earn or how much we need to save for retirement. A financial goal that gets less attention, but that most of us share, is to be debt free. In fact, a recent Manulife Bank survey of 1000 homeowners1 found that 84% of them considered being debt-free to be a high financial priority (rating it 7, 8. 9 or 10 out of 10). One in three considered it to be their top financial priority.

With “being debt-free” pretty high up on most "to do" lists, you might think we'd be doing well, right? Unfortunately, the same survey also found that 27 per cent of homeowners actually increased their debt over the past year. A further 17 per cent had the same amount of debt as they did 12 months earlier. The remainder did manage to reduce their debt, but 19 per cent reduced it by less than they had expected. In other words, almost two-thirds of homeowners surveyed are not achieving one of their most important financial goals.

WHAT ARE WE DOING WRONG?

The results of the survey provide insights that suggest some fairly simple steps we can take to get our plans on track with our goals.

FINDING #1:
Sixty-five per cent did not shop around the last time their mortgage came up for renewal. Instead, they simply stayed with their current lender. Within this group, a third accepted the first offer that was presented to them

WHAT'S GOING ON?

Shopping around and negotiating require time and energy and, for some of us, take us outside our comfort zone. Consequently, many of us take the path of least resistance and keep doing what we've always done in the past. The problem is that with our debt, as in many areas of our life, the path of least resistance isn't necessarily the best or most cost-effective.

Our mortgage is typically one of our largest financial obligations. Failing to shop around may end up costing us a lot of extra money in interest payments and keep us in debt much longer than necessary.

WHAT YOU CAN DO

If you haven't shopped around recently, take some time to educate yourself about the different options available. Interest rates are important, but don't forget to look at product features too, since your ability to become debt-free may be determined as much by the flexibility your mortgage provides as by the rate you receive.
When your mortgage comes up for renewal, remember to look at all of your options and choose the one that's best for you.

FINDING #2:
Forty-three percent had credit card debt that they didn’t repay in full each month.

WHAT'S GOING ON?

Credit cards can provide tremendous convenience in our day-to-day lives — allowing us to make purchases without carrying around much cash and even to earn reward points. The obvious downside is that they make it easy to spend beyond our means. And, if we don't pay our balances in full each month, we're charged interest at relatively high rates - often 20 per cent or more!

Carrying a balance on your credit card can cost you a lot of money over the long term and may make it more difficult for you to become debt-free.

WHAT YOU CAN DO

Sit down and look at your credit card bills over the past few months and identify purchases that were "wants" rather than "needs." If you haven't done this before, you may be surprised at how many items fall into the "want" category and how quickly these can add up. Understanding where your money is going is the first step towards bringing your spending back within your budget. As for your existing credit card balance, make this your first priority when it comes to allocating extra cash because it's likely your most expensive debt.

FINDING #3:
Sixty-five percent had two or more debts outstanding

WHAT'S GOING ON?

With investments, we often hear that diversification is key and that we "shouldn't put all of our eggs in one basket." This is good advice for investments. However, when it comes to debts, the opposite is true. Generally, when we have more than one debt, those debts are charged different interest rates. Ideally, we want to have all of our debt at the lowest rate. Anything else will keep us in debt longer than we need to be.

WHAT YOU CAN DO

We sometimes associate the word "debt consolidation" with bankruptcy or someone in dire financial straits. In reality, it simply means combining all of your debts into one pool at the lowest possible rate — and it's one of the easiest ways to reduce the amount of interest you pay each month. There are a variety of products on the market that allow you to do this. Some of the most attractive products combine your debts with your mortgage and generally allow you to access very competitive interest rates.

Being debt-free is a goal that most of us share but many struggle to achieve. These are just three simple steps you can take to help you become debt-free sooner.

SPEAK WITH YOUR ADVISOR
One additional step is to talk to your advisor. Your debt is an important part of your overall financial health and your advisor can help you find the tools and strategies you need to manage your debt more effectively and become debt-free sooner.

1 Source: Survey of 1,000 Canadian homeowners aged 30-55, conducted by Research House on behalf of Manulife Bank, April 2010.

Adapted from Manulife Solutions for financial planning. Winter Edition 2010/2011

RRSP versus TFSA versus Debt Management

2011-01-28T17:41:00.000-05:00

It’s the time of year where we all make (and break) New Year’s Resolutions. Two top resolutions are weight loss and saving money and many of us have already broken their resolutions already. (In my case the diet – but I’m back on it.)

The question I am often asked is if I don’t have the cash flow to save as much as I should – where should I put my money? The answer is different for each of us, but the process to decide what is optimal remains the same. There are six basic steps:
1. Set Short and Long Term Goals and prioritize them
2. Know where you stand – put all of your personal insurance, group insurance, bank statements, savings statements, RRSP, pay slips, pension information, tax information, credit card statements and mortgage information in one place so that you can review them easily
3. Review this information with a financial planner – for both short and long term planning purposes
4. Develop a personalized plan – this may involve adjusting your spending and savings patterns – but you may learn that you are on track and don’t need to make any adjustments
5. Implement the plan
6. Monitor and Review the plan on a regular basis

I can help you to analyze your current situation, to develop a plan, to implement a plan, or simply to provide you with some tools that will enable you to do it yourself. (Be aware, that much like the DIY shows on TV that happen in a magical 30 minutes, financial planning is harder than it looks.)

Jonathan Chevreau once tweeted that a financial plan is Eliminate debt. Cut up plastic. Join pension. Buy home. Pay it off. Spend little. Save tons. Invest wisely. Be tax smart. Marry for life. Unfortunately, we don’t all live in a perfect place. However, we can all develop a perfect plan for our current situation.

Give me a call and we can set up an appointment.

Web Sites to assist in your vacation plans

2010-07-04T09:33:00.012-04:00

July is here and finally, it’s summer and we all switch into “Vacation mode” or at least “I’d like to be in Vacation Mode”.

Here are some on line resources to help make your planning easier and to save you some money. I’ve divided them into categories and included some pre-travel tips at the end.

The Fine Print
This is just a list of sites. I have not used most of them and do not warranty or recommend the services that they provide. Note – the fine print on this list is upfront and in large print – just like the services I provide.

If you plan to stay in Ontario
Here are some web sites to get great bargains:
• www.AttractionsOntario.ca - this site includes discount coupons for a range of Toronto and Ontario attractions
• www.bargainmoose.ca/ - Bargain Moose finds you the best deals in Canada, and keeps you up-to-date with Canadian coupon codes, freebies and hot deals. You can even sign up to get their newsletter.
• www.groupon.com/toronto - Get 50 to 90 percent off the best stuff your city has to offer. This link is for Toronto, but many other cities are available.
• www.shoestringshopping.com/ - Find bargains and warehouse sales in the Greater Toronto Area
• www.menupalace.com/menupalace/ - Restaurants, MenuPalace.com is North America's ultimate Restaurant dining guide. It includes discount coupons.

If you’re looking for things to do, try these sites:

• www.seeTorontoNow.com – for a list of what’s on in the city.
• You can also try the event listing in Now magazine – www.NowToronto.com for what’s coming up in the next week
• if you’re looking to go to the Stratford or Shaw festivals – their websites are:
o www.StratfordFestival.ca
o www.ShawFest.com
• If you prefer to check out the smaller summer theatre festivals – a listing can be found at www.TheatreOntario.org

Looking to Travel

Looking for web sites that offer good deals? How about checking the following:
• www.Expedia.ca
• www.PriceLine.com
• www.Hotwire.com

Looking just for a rental car – www.Breezenet.com
How about specials on air fares - www.MoMondo.com – a Danish site with low air fares

Some sites with Cruise specials include:
• www.TravelZoo.ca
• www.CruisesOnly.com
• www.VacationsToGo.com
• www.OnlineVacationCenter.com

Looking for places to stay?

• www.CasaCasa.org – links travelers looking for places to stay with people who have rooms to spare. It bills itself as a budget B&B
• www.Digsville.com – a home-swapping site
• www.HomeExchange.com – is 18 years old and assists people looking to swap homes. They have 36,000 homes worldwide
• www.affordabletravelclub.net – you must be at least 40 years of age, have a permanent residence, and be able to provide clean, comfortable, and private sleeping quarters and either full or continental breakfast for two or more guests.
• www.HotelsCombined.com - A site that scans the other web sites to find the best deal in hotels

Looking for a bike tour - www.BikeToursDirect.com

Looking for a guide abroad?
• www.Viamigo.com
• www.RentaLocalFriend.com

General Tips
Do you have Travel Insurance if you’re traveling out of Ontario? Give me a call and I can point you in the right direction. Note – most group plans include Emergency Medical Travel Insurance as one of the benefits.

If you are going on an extended trip – let your credit card company know. You also need to have a trusted friend or neighbor check your house or your home insurance policy may not be valid should something go wrong.

Finally, don’t forget about potential Roaming charges on your cell phone if you travel out of the province. Check with your service provider for your options.

Do you know of additional web sites? Let me know and I will add them to this list.

Estate Planning 101

2010-06-13T10:32:00.003-04:00

If you’re like most people, getting your personal financial plan started can be a challenge. And what about planning your estate? Well, that subject might really make you shudder. But why? Too dreary? Too complicated? Too intimidating? Or simply not on your list of priorities?

Estate planning should be a financial priority at almost any stage of life. In fact, an estate plan can be essential for organizing your financial affairs and providing for the well being of your family members.

Simply put, an estate plan is a road map for planning your estate and should be updated on an ongoing basis - particularly as your circumstances change throughout your life. Why is it important to have a plan? To ensure a simple, tax-efficient and organized transfer of your assets to loved ones.

When you start your plan, there's a lot to think about. You want to live your life to the fullest, and ensure that your heirs will get the most out of the assets you're setting aside for them. Here are a few of the things you'll need to know:

Your Will
The will is a legally enforceable declaration of how a person wishes his/her property to be distributed after death. A will can be quick and easy to produce and will generally cover the following:
• Naming the executor — the individual(s) or organization chosen to administer the estate. If you should die without a will (referred to as dying intestate), the province you reside in will step in to administer your estate. In this case, you've essentially forfeited your say on how things are divided and who will be in charge of the process.
• Naming beneficiaries of the estate (e.g. immediate or extended family, institutions, etc.)
• The distribution of assets within the estate (e.g. investments, real estate, possessions)

What is probate?
Probate is the process by which a provincial court confirms the validity of your will. Potentially, it can be quite time consuming, tying up your assets for months or longer.

Probate fees are essentially the taxes that must be paid to the provincial government before your executor can begin to administer your will. The fees vary from province to province and are based on the value of the assets in your estate. In most provinces, the fee structure is tiered.

In addition to probate fees, there are fees payable to the executor for administration services and fees payable for legal and accounting services. In the end, the cost of probate can be significant.

Reducing Taxes
We all know the old cliche that the only two certainties in life are death and taxes, but how much do we really know about taxes after death?

If you have a will, upon your death it is your executor's responsibility to file a tax return for you. The government will consider you to have sold all your assets immediately before your death and any capital gains/losses will be crystallized. That may lead to a big tax bill.

Depending on your individual needs, there are strategies you can employ within your estate plan to minimize the amount of taxes you have to pay and to avoid probate. Below are a few key examples:
• Maximize asset "roll-overs" - transfers to your spouse that defer capital gains
• Get advice on setting up a trust to ensure your beneficiaries are well looked after
• Give gifts of cash or possessions while you are still alive
• Consider charitable donations to create valuable tax benefits
• Buy life insurance that is paid out to a named beneficiary on a tax-free basis
• Restructure investments with insurance companies to avoid probate on death

The reassurance of having a strategy in place to preserve the value of your estate for loved ones is something to value. After all, why pay if you don't have to? Work with your financial advisor to determine what exactly is in your estate, and then devise your plan.

Five suggestions for what to do with your tax refund

2010-05-05T16:58:00.004-04:00

Last year, the average Canadian got back approximately $1,400 on their 2008 income taxes.

Tina Di Vito, director, retirement strategies, BMO Financial Group, offers the following advice on how to make the most efficient use of your 2009 tax refund:

“Maximizing your 2010 income tax refund by contributing to your RRSP this year is always a good option,” says Di Vito.

“However, depending on your personal situation, there may be several ways to make the most efficient use of the money you get back. Meet with a financial planner to determine the best approach for you.”

Pay down RRSP loans

If you took out an investment loan to maximize your RRSP contribution and generated a larger refund, you should use your tax refunds to pay down the loan.

Pay down credit card debt

High interest on some credit cards can eat away at savings. Reduce the cost of credit by using your tax refund to reduce or pay down your credit card balances, targeting the highest rates first and transferring the balances to a lower rate credit card.

Lump sum mortgage payment

If you have a mortgage, it may be good idea to use your tax refund to make a lump sum payment. Applied directly to the principal, a lump some payment could save you thousands of dollars in interest costs over the life of the mortgage.

Top-up a TFSA

If you are not carrying any extra debt, contribute to a Tax-Free Savings Account (TFSA) to let you grow your money tax free. If you who maxed out your TFSA contribution in 2009 you have room for an additional $5,000 this year.

Save for education

Saving for a child’s education can be an expensive thing. Contributing to a Registered Education Savings Plan (RESP) can help alleviate some of the pressure that all parents feel when planning for their children’s future. If you have children, you should consider opening an RESP using their income tax refund. A $2,500 dollar contribution to an RESP can earn a $500 grant from the government. By maximizing contributions every year, you could earn up to $7,200 in grants for every child.

from BMO offers advice on how to maximize the return of tax refunds

Tax Planning Strategies

2010-04-11T11:42:00.004-04:00

Give me a call for more information about any of these points.

Newly announced changes to CPP, increases to small business deductions, and eco-friendly grants have ushered in fresh opportunities to maximize tax refunds.

Thanks to significant changes in 2008 and 2009, in addition to dependable, long-standing tax planning strategies you now have many approaches to defer taxes and save and for years to come.

Are you green?

EcoEnergy retrofit program
Are you going "green" at home? Cash grants are available to homeowners making eco-friendly renovations to their residences. The annual grant (up to $5,000 with a lifetime maximum of $500,000 is based on the effectiveness the upgrade—not the cost. The home must be assessed by a certified Natural Resources Canada energy advisor in order to be eligible. Check out www.ecoactic gc.ca for more information.

Public transit passes
A non-refundable, eco-friendly tax credit is available for dedicated public transit riders. Total annual costs for travel passes one week or longer are multiplied by the lowest personal tax rate to calculate the credit.

Thinking about Retirement?

Retirement income
In June 2009, the federal government announced significant changes to how the Canada Pension Plan (CPP) will be paid out to Canadians. Effective January 2012, you will no longer have to prove that they've stopped working in order to receive CPP benefits. This new rule could be beneficial to seniors who ease slowly into retirement through part-time and consulting work.

The collection of CPP benefits will continue to be available as early as age 60 and as late as age 70. But the recommended changes will reduce benefits received prior to age 65 by 6% per year as opposed to the current 5%. They will also increase benefits received after age 65 by 7% versus 5% beginning January 2011 for those selecting later retirement, and starting January 2012 for those selecting earlier retirement.

Until January 2012, though, it’s still a good idea to select earlier retirement whenever possible. After that, the decision to apply for CPP early and accept the lower income should be based on other factors such as whether your client needs the income to cover lifestyle expenses and longevity in their family.

Corporations and income splitting

Small business deduction increase
The 2009 federal budget increased the small business deduction to $500,000 from $400,000. Several provinces have also raised their deduction limit to match. The increased deduction increases the amount of business income earned by Canadian-controlled private corporations that can be taxed at lower rates.

Salary to spouse can increase retirement income
Many corporation owners already take advantage of the ability to split income by paying their spouse a salary. Take further advantage of this opportunity by increasing your spouse's salary to the Yearly Maximum Pensionable Earnings (YMPE), which this year is $47,200. This simple step will increase the spouse's opportunity to earn the maximum available CPP income in retirement as well as the higher RRSP contribution room created by the extra income.

Personal and corporate savings
When the higher-income-earning spouse owns a holding company and makes the majority of the income, they should plan ahead for income splitting in retirement. Maximizing contributions to the lower-income spouse's spousal and personal RRSP while saving the balance to the holding company (owned solely by the higher-income-earning spouse) will allow for tax-deferral and reduced taxation pre-retirement. Retirement income from the corporation will be attributed to one spouse and Registered Retirement Income Fund income can be attributed to the other, allowing for reduced individual taxation.

Loans to family members
The CRA’s prescribed interest rate for family loans fell to 1% in April 2009 and continues to cruise at a low altitude (rates change every quarter, so look these up). Locking in a family loan at this low rate and thereby shifting income earned on the investment of these funds to a spouse or other family member—including a minor child—who has little or no other income could provide significant tax savings for your clients. Ensure that any loan is governed by a written agreement outlining repayment terms as well as the interest rate at the time of the loan to ensure attribution rules do not apply.

Tax credits and grants

First-time Home Buyers’ Tax Credit
Worth up to S750, this credit applies to all homes purchased after Jan. 27, 2009. The credit is calculated by multiplying the lowest personal income tax rate by $5000. The first time home buyer (and spouse) must not have owned a home for any of the four preceding years. If the home buyer qualifies for the Disability Tax Credit (DTC), they do not have to meet this rule to qualify for the credit

Capital losses
The recent economic turmoil may provide a tax-savings opportunity. Capital losses in stock portfolios may allow you to claim back some of the taxes you paid on capital gains in sunnier times.

Transfer of unused tax credits to spouse
Some non-refundable tax credits can be transferred to a spouse if you are unable to claim them. Do not allow those credits to go to waste. Transferring the credits for age amount, pension income amount, disability amount, and tuition and education amounts to a spouse will maximize the tax savings available to the whole family.

Tax-efficient accounts

Open a Registered Disability Savings Plan
The Registered Disability Savings Plan (RDSP) provides individuals with disabilities, and their family members, the opportunity to save in a tax-deferred environment. Like a Registered Education Savings Plan (RESP), the RDSP tax-shelters the invested funds until withdrawal. Anyone eligible for the DTC may establish an RDSP. Parents and guardians can establish RDSPs on behalf of minor children. The maximum lifetime contribution limit is $200,000, but there is no annual contribution limit. The Canada Disability Savings Grant and the Canada Disability Savings Bond provide additional contributions to RDSPs for those who pass the income tests. More information on this useful plan is available at www.rdsp.com and www.plan.ca.

RRSPs and Spousal RRSPs
You know them and you love them. The RRSP may be a comparatively old dog, but it's loyal and dependable. Encourage the higher-income-earning spouse with the greatest contribution room to contribute to a spousal RRSP. Whilethe federal government now allows income splitting on RRIF income, one never knows when a tax law could be repealed.

Tax-Free Savings Accounts
Maximum annual contributions are $5,000, with no lifetime limit. While contributions are not tax-deductible, the growth is tax-sheltered and funds from the account can be withdrawn tax-free at any time. What's best is that withdrawals create new contribution room the following year; with an RRSP, if the client's contribution is used, it's gone, regardless of withdrawals. Withdrawals will also not affect eligibility for federal tax credits or income-tested benefits, something seniors who benefit from pension income credits and Old Age Security will want to be aware of.

Adapted from an article published March 2010 in AE Report

10 Tax Filing tips

2010-04-01T13:54:00.003-04:00

Tax-planning should be a year-round activity. There are strategies each of us can employ to make sure we pay no more tax than we need to. Below are the top ten tax filing tips.

1. Report all your income - Don't let a missing tax slip or receipt prevent you from filing on time. The CRA states that if you're unable to provide a slip by the due date, simply attach a note to your return stating the name and address of the payer, type of income involved and what you're doing to get the slip to help avoid any penalties.

2. Pool your donations - Last year's goodwill may result in both federal and provincial donation tax credits. While all donations under $200 are credited at 15% federally plus between 4% to 11% provincially, donations over the $200 threshold are eligible for a 29% federal credit plus 11% to 21% provincially (ignoring additional provincial surtax savings, where applicable). So pool your donations with your spouse or partner when filing a return to receive the higher donation credit.

3. Split that pension - Pension splitting is a tax planning technique that you can only take advantage of come tax filing time and allows Canadians who received eligible pension income to split up to half of that income with their spouse or common-law partner. Aside from benefiting from a spouse or partner's lower rate of taxation, you may also be able to preserve some or all of the age credit and avoid or minimize the Old Age Security benefits claw back.

4. Write off your kids - While you can't actually "deduct" your children for tax purposes, you may be eligible to claim the "child amount" - $2,089 per child - entitling you to a 15% credit against taxes payable. If your minor child worked part time during the year, consider filing a tax return on their behalf which will start to establish RRSP contribution room for use in future years. Be sure to explore the many opportunities for tax savings available to post-secondary students and children with lower incomes.

5. Claim those renovations - As the dust settles on home renovations completed before February 1, 2010, now is your one and only chance to collect your Home Renovation Tax Credit (HRTC), a 15% non-refundable tax credit for eligible renovation expenditures made to your home or vacation property. The credit applies to any eligible expenses over $1,000, up to a maximum of $10,000, producing a maximum credit of $1,350. If you own a condominium, common expenses may be eligible for this tax credit as well.

6. Claim legal fees - If you lost your job in 2009, you may be able to make a claim for legal fees that you paid last year. The Income Tax Act permits employees to deduct legal expenses "to collect or to establish a right to salary or wages owed by an employer or former employer." You can also deduct legal expenses paid to collect or establish a right to a pension benefit or retiring allowance. The term "retiring allowance" is broad enough to include damages or settlements for wrongful dismissal.

7. Defer stock option benefits - If you exercised employee stock options to acquire shares of your publicly traded employer's stock in 2009, this may be your last chance to defer paying any tax liability on the stock option benefit until the year of sale. A stock option benefit deduction equal to 50 per cent is available to tax the stock option at capital gains-type rates, even though it's still classified as taxable employment income. Note that the ability to defer paying tax on future stock option exercises is restricted after March 4, 2010, as a result of the recent 2010 Federal Budget.

8. Report any offshore property investments - If you owned any foreign property investments, outside of a registered plan, totaling more than $100,000 in 2009, be sure to complete the T1135 or the "Foreign Income Verification Statement" as the penalties for failing to disclose are severe: $25 per day, to a maximum of $2,500. While historically the CRA used to waive these harsh penalties for first time, non-filing offences, in recent years it has been assessing them on first time offences.

9. Don't be late! - Those owing tax must pay remaining balances by midnight on Friday, April 30th to avoid a 5% penalty on unpaid balances and an additional 1% each month thereafter to a maximum of 12%. While the majority of Canadians must file by the April 30th deadline, self-employed individuals and their spouses or partners have until June 15th, 2010 to file a return, but any balance owing is still due by April 30th.

10. Avoid that refund! - Last, but not least, if you've already filed your 2009 tax return, chances are it's because you're expecting a refund. To help pay less tax all year round, complete a Form T1213 from the CRA which, once approved, will enable your employer to reduce the amount of tax withheld at source.

Adapted from advisor.ca

Propsed Federal Budget March 4, 2010

2010-03-05T15:33:00.002-05:00

It's being touted as a jobs and growth budget, with neither tax increases nor major new tax relief. Aside from some targeted measures that should benefit the disabled, charities and families, there's little to attract the attention of advisors in Finance Minister Jim Flaherty's latest economic blueprint.

"The government was pretty clear that there weren't going to be any significant tax giveaways or special spending and true to their word, there really isn't much here to write home about," says Doug Carroll, vice president, tax and estate planning at Invesco Trimark, who was in the Ottawa budget lock-up with Advisor.ca.

Still, Carroll says there are a number of minor, but useful adjustments to Ottawa's taxation rules included in Thursday's budget.

Improving the RDSP
Changes to the Registered Disability Savings Plan (RDSP) will allow a ten-year carry forward of Canada Disability Savings Grant and Canada Disability Savings Bond entitlements "in recognition of the fact that families of children with disabilities may not be able to contribute regularly to their plans," the budget documents state.

"The carry over otherwise would have been lost from year to year," says Carroll. "So if the financial circumstances are such that you can't start up an RDSP at an earlier age, when you start up later, the accumulated amount will be available to catch up. It won't go back any earlier than when the RDSP program was implemented [in 2007]. But if they decide they are not in a position to open up an RDSP today, they know they are not giving up on the grant and bond money altogether."
(For an example, see Benefits of the RDSP Carry Forward below)

The carry forward is estimated to come with a price tag of $20 million in 2010-11, and $70 million in 2011-12. In addition, current RRSP rollover rules will be extended to allow a rollover of a deceased individual's RRSP proceeds to the RDSP of a financially dependent infirm child or grandchild.

"They won't attract the bonds or grants on this rollover and it will reduce the contribution room, but it does provide an additional source of money for funding up an RDSP for parents who are concerned about making choices: Should I be funding the RDSP or should I be putting money into my own RRSP?" Carroll explains. "This allows parents a little more flexibility and the knowledge that they can eventually get that money rolled over into their RDSP."

Payments made to an RDSP or to a Registered Education Savings Plan through a program funded by a province will be treated the same way as federal grants, meaning they will not be eligible for federal grants or bonds.

Help for charities
Ottawa is proposing to basically scrap the disbursement quota, introduced in the 1970s and intended to ensure a significant portion of a charity's resources be devoted to charitable purposes. Specifically, the amount a charity spends each year on charitable activities must be at least the sum of 80% of the previous year's donations (the charitable expenditure rule) and 3.5% of all assets (the capital accumulation rule).

Charities argued the rules imposed a complex and costly administrative burden. This year's budget proposes to eliminate the charitable expenditure rule and to modify the capital accumulation rule.

"The budget suggests that the government is comfortable that the Canada Revenue Agency's ability to monitor charities may very well be sufficient; that taking away the disbursement quota will not mean that those charities will either intentionally or unintentionally abuse their status as charities," Carroll notes.

The removal of the quota will be helpful for charities, he adds, allowing them to do what they want without having the overlay of regulatory monitoring on their day-to-day activities.

"From an estate-planning standpoint, this could very well change how people decide they are going to make a donation to a charity," Carroll says, because the disbursement quota will no longer be an issue that has to be worked around. "Estate planners will be looking at this part of the budget very carefully, particularly for high net worth clients who may be making large donations and looking at ways to make those donations more effective."

Child care support
Ottawa is also changing the rules regarding the Universal Child Care Benefit (UCCB) so that single parents receive comparable tax treatment to two-parent families.

"When there are two parents, the UCCB is taxed to the lower income parent, when you are a single parent you could be facing higher effective taxation on that benefit," says Carroll. Under the budget proposals, single parents will be allowed to include the benefit as part of the income of the dependent child. "In most cases, that child will not be taxed, so that should assist single parents, who are dealing with different issues than two-parent families."

For 2010, Ottawa estimates, the change will provide up to $168 in tax relief for single parents with one child under six years of age. In shared-custody situations, the UCCB taxable benefit will be split between the two parents.

Closing loopholes
The budget contains several initiatives Ottawa says will protect the integrity of the Canadian tax system; essentially the closing of tax loopholes. For instance, new rules on stock options are intended to address tax planning practices which have allowed stock-based employment benefits to escape taxation when such options are cashed out.

"Stock options are not supposed to be tax-free," Flaherty said at a news conference, noting Ottawa loses as much as $300 million a year in tax revenues from "a loophole used by some relatively well-off people."

Ottawa will also begin consultations on a new reporting regime for so-called aggressive tax avoidance schemes.

The bigger picture
Flaherty's decision not to increase taxes, and to hold the line on scheduled future personal and corporate tax reductions, will have an impact on government coffers.

Personal income tax revenues, the largest portion of budgetary revenues, are projected to decline to $108.2 billion in 2009-10, down $7.8 billion or 6.7%. Corporate tax revenues will drop even more: 24.3% to $22.3 billion. Flaherty doesn't appear to be worried.

"Unlike other countries, we are in a position to ensure our deficit will be temporary," the minister said in his budget speech. "We can meet our current needs without jeopardizing our long-term growth. Reducing the tax burden is a key part of Canada's advantage in the global economy."

This and that
The thorny and perennial issue of a national securities regulator appears to be moving forward. The government says it will release draft securities legislation this spring, to be considered by the Supreme Court of Canada, which in turn will offer an opinion on whether Ottawa has the constitutional authority to enact and implement a federal securities regulatory regime.

A transition office is scheduled to provide an organizational plan for a new national regulator by the summer.

The Red Tape Reduction Commission — an initiative described by one reporter as "Monty Python-esque" — will be established to review federal regulations in areas where reform is needed to reduce the compliance burden. The Canadian Federation of Independent Business estimates that businesses in Canada spend more than $30 billion per year complying with regulations.

Finally, the government will introduce legislation to enable credit unions to incorporate and operate federally.

US Social Security Benefits
Prior to 1996, Canadian residents receiving US social security benefits were only required to include 50% of these benefits in income, pursuant to the Canada-United States Income Tax Convention. Tax changes in 1996 increased the inclusion rate for these benefits to 85%. The Budget proposes to reinstate the 50% inclusion rate for Canadian residents who have been in receipt of US social security benefits since before January 1, 1996 and for their spouses and common-law partners who are eligible to receive survivor benefits. This measure will apply to US social security benefits received on or after January 1, 2010.

________________________________________
Budget 2010: Benefits of the RDSP Carry Forward
Roger, a low-income adult who has been eligible for the Disability Tax Credit his whole life, opens a Registered Disability Savings Plan (RDSP) in 2011.

In each of 2008 (the year RDSPs became available), 2009, 2010 and 2011, Rogers will have accumulated $500 in grant entitlements at a 300% matching rate, $1,000 in grant entitlements at a 200% matching rate and $1,000 in Canada Disability Savings Bond (CDSB) entitlements based on his family income.

When Rogers opens his RDSP in 2011, his RDSP will automatically receive $4,000 in CDSBs.

After the RDSP is opened, Roger's family contributes $400 to his plan in 2011, for which his RDSP receives $1,200 in Canada Disability Savings Grants (CDSG). Roger carries forward $1,600 in unused grant entitlements at the 300% rate and $4,000 in unused grant entitlements at the 200% rate. When these unused entitlements are added to his grant entitlement for 2012, Roger has $2,100 in grant entitlements at the 300% matching rate and $5,000 in grant entitlements at the 200% matching rate.

In 2012, Roger's family contributes $3,000 to his RDSP. The first $2,100 of this contribution uses up Roger's grant entitlements at the 300% matching rate. The next $900 is matched at the 200% matching rate. In total, Roger's RDSP receives $8,100 in CDSGs in 2012. In addition, his RDSP receives a CDSB of $1,000 based in his bond entitlements for 2012.

Doug Watt / March 04, 2010 – advisor.ca

TFSA or RRSP? Which should you use?

2010-01-16T14:48:00.003-05:00

Which mix of savings vehicles is right for you? There are Registered Retirement Savings Plans (RRSPs)and Tax-Free Savings Accounts (TFSAs. Determining which savings plan, or combination of savings plans, is best depends on your personal situation and your objectives.

Until 2009, most Canadians held their retirement savings in an RRSP, where they could claim a deduction for their contributions and then defer tax on withdrawals until retirement. The introduction of TFSAs has provided another powerful savings vehicle that allows investment growth to accumulate and be withdrawn at any time tax-free. Unlike an RRSP, you cannot claim a tax deduction for the contributions you make to a TFSA. On the plus side, if you need to withdraw money from your TFSA, you have an opportunity to replace that money because all TFSA withdrawals are added back to your unused contribution room in the following year.

The Savings Dilemma

If you are saving for retirement, then you may be torn between an RRSP and a TFSA. Ideally, you would maximize contributions to both, but if that's not an option here are some thoughts to consider.

Whether the best choice is to save in an RRSP or a TFSA depends on your savings needs, as well as your current and expected future financial situation and income level.

Generally, an RRSP is used for saving for retirement, while a TFSA can be used for both saving for retirement and other shorter-term purchases. Because TFSA withdrawals are added back to your available TFSA contribution room in the following year, there is very little downside to using your TFSA savings for mid-sized to large purchases.

If you are in a low tax bracket, saving in a TFSA may be more advantageous than saving in an RRSP since TFSA withdrawals have no impact on federal income-tested benefits and credits such as child tax benefits and Old Age Security. On the other hand, RRSPs may be a better option if your tax rate at the time you contribute is higher than it will be when you withdraw your savings. You'll benefit from a tax deduction when you make your contribution and withdrawals will be taxed at your lower future rate. If the reverse is true, a TFSA can provide better results.

Would you like to receive a table that outlines the differences in these plans? Send me an email.

Employment Insurance for Self Employed

2010-01-10T13:20:00.005-05:00

Are you self employed? Do you know some one who is self employed?

Beginning in January 2011, self-employed Canadians will be able to access Employment Insurance (EI) special benefits.

There are four types of EI special benefits:
maternity benefits;
parental benefits;
sickness benefits; and
compassionate care benefits.

If you enter into an agreement between January 31, 2010 and April 1, 2010, you will be able to make a claim for EI special benefits as early as January 2011. However, if you enter into an agreement with the Canada Employment Insurance Commission after April 1, 2010, you will have to wait 12 months before you will be able to make a claim for EI special benefits.

To determine if you should consider enrolling into this program, speak to your accountant.

If you would like to book an appointment to discuss these or other strategies, please don't hesitate to contact me directly.

For more information on this program, check out the Government of Canada web site.

Tax Deadlines are Looming

2009-11-21T09:38:00.003-05:00

Plan now to reduce your 2009 taxes

If you're like many people, you're probably waiting until April to start thinking about your taxes. However, by the time taxes are due, it's usually too late to realize tax-saving opportunities.

Now is the time to determine whether there are any tax breaks you can take advantage of, by acting before the end of the year. With this in mind, there are a number of tax-related questions and issues we may need to discuss soon, so that you get the most out of this tax year. For example:

Are you giving to charity? Three years ago, the Conservative government eliminated the tax on "in-kind" donations of securities, mutual funds and segregated funds to registered charities. If you're planning to give cash, property or securities, it is important to make sure that all donations are made by December 31 in order to realize the tax benefits on your 2009 return.

Do you have any non-registered mutual fund purchases planned? Many mutual funds distribute their earnings at the end of the year, so investors who purchase them in December will be liable for taxes on those earnings as if they had been invested for the entire year. We can get an estimate of this year's distributions to determine whether it is worthwhile to postpone non-registered mutual fund purchases until January.

Did you open a tax-free savings account? Tax-free savings accounts came into effect on January 1 of this year. Hopefully you’ve already opened one, but if not, it's time to activate one now. You can save up to $5,000 in a variety of investment options and, if you need those dollars at any point, you can pull them out tax-free.

Can you benefit from tax-loss selling? With most portfolios taking a hit this year, there's a good chance you could take advantage of tax-loss selling. In short, losses on certain assets — mainly stocks — can be offset against capital gains that were realized during the previous three years. Now's the time to review your portfolio and determine whether there are any equities for which you should lock in the losses before year-end.

In addition, final payments must be made before December 31 in order to claim a tax deduction in 2009 for various items, including alimony payments, child-care expenses, interest expenses on money borrowed to earn investment income, and investment counseling fees.

If you would like to book an appointment to discuss these or other potential tax-saving strategies, please don't hesitate to contact me directly.

Life Insurance to Ease your Taxes

2009-11-21T09:28:00.004-05:00

They get a bum rap, but life policies can ease tax bite

Of all the financial products available to help Canadians protect their life's assets, perhaps the most overlooked is life insurance. Blame it on its natural association with death, the necessity of monthly premiums or even the memory of aggressive direct marketers.

Whatever the reason, life insurance has received a bum rap, experts say.

When built into a larger financial strategy, life insurance can reduce taxes and enhance wealth. You still can't beat death, but you may be able to beat the taxman with life insurance payouts.

The primary role of life insurance is to cover known liabilities, says George Denier, a Toronto-based retired partner at KPMG working on contract with the firm's high-net-wealth services unit.

Life insurance policies can be used to cover capital-gains taxes on real estate, RRSPs or the value of a business in the event of the owner's death, so that heirs need not sell assets to pay taxes. The advantage of using a whole life or term life policy to cover these costs is that the policy is paid out almost immediately and is tax free.

A life insurance policy can also serve as a tax-free source of retirement income, Mr. Denier notes. He gives the example of an individual with a policy that over the years has built up $500,000 worth of cash surrender value and/or a $1.5-million mortality benefit.

"I go to a financial institution and say, 'What will you lend me against this?' and I pledge the proceeds of that policy to them as security for a loan. What I have done is accessed money to fund retirement without incurring any taxation."

The sudden need to come up with a pile of cash to pay off accumulated - but not necessarily unexpected - liabilities upon the death of a private business owner is a big reason only 10 per cent of family businesses in Canada make it past the second generation, said Hugh MacDonald, president of Canadian Succession Protection Co., a firm that specializes in using life insurance in succession planning. A corporate-owned policy will provide a spouse with tax-free cash when the business is weakest, after the death of an owner.

Life insurance can also provide an effective way to avoid probate fees and other entanglements that can come with the windup of an estate, adds Mr. MacDonald. "If you name your wife, kids or grandchildren as a beneficiary of a life insurance policy, it is outside your will, and you save probate," he says. "It is one of the few vehicles other than a trust which has creditor protection."

Insurance policies can also be used to cover the value of RRSPs, income property or vacation property. Mr. MacDonald gives the example of a cottage originally bought for $100,000. Now it's worth $400,000, and a widow wants her children to inherit it. "That $300,000 [difference] is a capital gain triggered on death, almost half of which is taxable in Ontario, triggering a $70,000 liquidity problem for the children. You can buy a permanent policy [on the mother] to cover that liability."

Taking out a policy on mom to pay for a middle-aged couple's retirement may sound ghoulish, but it is proving to be increasingly popular, said Frank Wiginton, a Toronto-based certified financial planner with TriDelta Financial Partners. The "mom as retirement vehicle" scheme does not work in all cases, he noted: The parent must be in good enough health to be insurable and not too young, he said.

In an ideal scenario, a mother is in her late 60s or early 70s while the son, the policy holder, is in his 40s. The yearly premium is $16,500, or $247,500 over 15 years.

"About the time you are likely to go into retirement, that is when mom is likely to die," he said. In a case where the mother lives 20 more years, the result is a tax-free payout of $500,000, which Mr. Wiginton says results in an annual after-tax return in excess of 5 per cent. "It is a very attractive strategy," he says.

From the globeandmail.com - Friday, November 6, 2009

Article by Paul Brent

Critical Illness

2009-10-24T08:35:00.002-04:00

No one plans on becoming ill, but when something serious befalls us, we can help ourselves and our families by being financially prepared.

We all know someone whose life has been affected by a heart attack, stroke or cancer. The good news is that advances in medical science means there's a better chance of surviving a critical illness than ever before. However, a critical illness often brings overwhelming medical and financial burdens.

That's why critical illness insurance was envisioned by a physician and can be so important to you and your family. It's coverage I strongly believe in and now Great-West Life is offering a two month premium holiday if you apply before Dec. 31, 2009. That's the equivalent of two months of coverage in the first year at no charge, after the policy is in force and the initial payment is made.

Many of us put off making buying decisions, waiting until tomorrow or until the economy turns around. If you delay purchasing adult or child critical illness insurance, age or health may affect the ability to qualify for coverage later.

When you insure against a critical illness today you help protect yourself and your family from the financial and emotional impact of a critical illness and receive a two month premium holiday from Great-West!

Give me a call to discuss how critical illness insurance can make a difference and how you can take advantage of this special premium holiday offer.

Retirement planning with Guaranteed Minimum Withdrawal Benefit products

2009-10-06T14:25:00.001-04:00

Guaranteed Minimum Withdrawal Benefit (GMWB) products have become hugely popular with clients. This popularity is most likely attributable to the growing awareness that individuals will increasingly have to be responsible for looking after their own retirement needs. Companies and perhaps Governments too, face significant challenges in providing retirement income to their retirees and citizens.

Canadian’s are aging and within the next 5 to 10 years there will be the largest number of people at retirement age our country has ever had in its history.

This group of Canadians aged 65 and older will control the majority of investible assets for many years to come. In 2008 they controlled $1.93 trillion and are forecasted to control $4.75 trillion in 2018. They are and will increasingly demand products that will help them fund their retirement years.

On the face of it, segregated funds with the GMWB don’t guarantee anything more than the equivalent of principal return, but these features allow the client to enjoy some upside without risking capital — a guarantee that appeals to aging Canadians.

The principal features of GMWB products address the three key risks facing pre-retirees and retirees, outliving one’s money, poor market returns and inflation. These three risks are addressed by guaranteeing income for life or a fixed period of time. Clients participate in the stock markets with limited downside risk and the potential to lock-in market gains. As well, a notional bonus adds 5% a year to the deposited capital for every year that the client does not take his or her first withdrawal.

The income period can vary, as well. Starting in the year in which the client retires — as early as age 50 and as late as age 70 — the plans offer 4%-7% of the deposit back in annual income, with most plans continuing until the client dies. And let’s not overlook the basic features of segregated funds, guarantees at maturity and death, probate avoidance and creditor protection.

If you do not have a company Defined Benefit Plan or pension – give me a call and we can see how this product class fits into your financial plan.

Do you have adequate coverage?

2009-09-07T11:20:00.003-04:00

Do you have adequate coverage? Don't wait to find out? Call me for a no nonsense assessment.

How to spot a ponzi scheme:

2009-07-17T14:28:00.001-04:00

In light of the "advisor" Earl Jones scandal, Advocis offers some tips for spotting an investment scam.

"The first and most important warning sign is the advisor offers you some unrealistic and/or consistent returns on the investment," says Greg Pollock, Advocis' president and CEO. "Such promises are fundamentally contrary to the very nature of a stock market. Stock markets go up and stock markets go down. Legitimate results vary."

Other warning signs include pressure to invest beyond your comfort level.

A responsible financial advisor or planner will understand your financial goals and objectives and how much money you are willing to risk in any investments.

A fraudulent advisor will lead investors to believe that all their money has been placed into one financial vehicle when, in fact, returns are the investors' own money or more recently recruited investors.

Another hallmark of an investment fraud is a promise of exclusivity — sometimes described as a "special deal." Legitimate investments are generally available to a broad range of investors.
Pollock uses an old saying investors should consider when deciding on an investment: "If it's too good to be true then it probably is."

To avoid an investment scam, Pollock recommends clients do the research. Get referrals from other clients and find out if the advisor has the appropriate licences and professional designations.

The next step is to verify all the information gathered. Verify that the money invested is going to a legitimate third party, such as a bank. The statements should include key information, such as a street address (not a post office box), a list of the investments and their activity over a period of time.

Then, verify with the appropriate licensing body that the advisor is duly authorized to do business in the province.

Finally, investors should ask questions. A fraudulent advisor may refuse to answer questions.

If you have any questions, feel free to call me.

Reprinted from Advisor.ca, July 16, 2009

Looking to save money on Drug Prescriptions?

2009-06-17T11:10:00.004-04:00

As you know, the cost of your prescriptions is made up of two components – the dispensing fee and the cost for the medication. There is a large variation in the cost of having your prescription filled.

One way to save some money is to select a pharmacy with lower filling fees. A recent study by Emergis was done on the average cost of dispensing fees in Ontario between July and December 2008. The results are as follows:

Pharmacy Average Dispensing Fee Submitted

Average for All Pharmacies $9.70

Costco $4.11
Pharmex (mail order) $6.69
Walmart $8.60
Zellers $9.07
Loblaws $9.22
Dominion / Miracle Mart $9.31
IDA $9.77
Pharma Plus $9.79
Shoppers Drug Mart $11.01

Health and Dental Options for Self Employed

2009-06-17T11:07:00.003-04:00

The recent outbreak of H1N1 (Swine Flu) has received a lot of news coverage, and many of us have decided to take precautions to remain in good health.

In times like these, self-employed people may be especially concerned. Without the sort of comprehensive health and dental coverage that many employees receive from their employers, small business owners are right to worry about what would happen should they, or their families, ever require expensive medication or treatment that isn't covered by their provincial plans.

Private health insurance isn't nearly as expensive as you might imagine. Depending on your age, health, the level of coverage and the insurance company, you may be able to obtain both drug and dental insurance for yourself, your spouse, as well as a child, for as little $165 a month (based on two non-smoking 40-year-old adults, with a 15-year-old child).

The best part is that you may be able to write off the entire amount as a business expense. In 1998, the federal government made these premiums tax deductible for self-employed individuals!

If you'd like to discuss the various health and dental plans available in the Canadian marketplace, I hope you won't hesitate to contact me at the number above. I'd be happy to shop around and find a plan that's right for you.

Out of RRSP contribution room?

2009-05-04T09:46:00.001-04:00

The Registered Retirement Savings Plan (RRSP) is probably the single best tax shelter available to Canadians. You can deduct your contributions from your income, and you are able to shelter your earnings from taxation for as long as they remain inside the plan.

But what do you do if you've filled it up and have no more contribution room? It's a problem. But what a nice problem to have!

While it's difficult to think of another savings vehicle quite as attractive as the RRSP, the good news is that there are other tax-advantaged savings options available to those who have already maxed-out.

Universal Life Insurance
Universal life insurance is perhaps best described as a life insurance plan built around a tax-sheltered, savings account. Every month, the base insurance premium is "billed" to this savings account. Any amount that remains in the account after this minimum charge has been paid can be invested however you choose, and the earnings accumulate tax-free for as long as they remain inside the policy.

Mortgage Debt
Now that your RRSPs have been topped up, consider the benefits of making an additional mortgage payment. Most lenders will allow you to make prepayments to a maximum of 20% or 25% of the original loan, and the savings can be significant. For example, a $10,000 prepayment on a $150,000 mortgage at 5% with 20 years remaining would save you $15,399 in interest. There aren't many other investments that can generate an immediate 150% after-tax return!

If you'd like to discuss these or any other tax shelter opportunities in greater detail, please do not hesitate to contact me at 416-806-5478 or by email at heather@freed.ca

Severance package options

2009-05-04T09:40:00.002-04:00

Hopefully we'll never need to manage through such an unpleasant contingency, but there is always a chance that you or someone you love might face a layoff in the future, particularly during this time of economic uncertainty.

You might already be acquainted or all too familiar with the vexations that come with being dismissed suddenly. When this happens, or at any other time you receive news that affects your financial plan, please contact me immediately. Not only is it your responsibility to let me know when there are "material changes" to your plan, it is usually imperative that we manage your cash flow, investments, benefit plans and the tax implications that usually accompany employee severance packages.

Although receiving a large or modest severance package can help soften the blow of losing your employment, the sudden influx of cash can have serious tax consequences if not managed properly. In some cases, it might even be beneficial to negotiate with your employer and arrange to receive severance payments after January 1.

Your life and health insurance benefits also need to be addressed rather quickly — often your group insurance can be converted into an individual policy without the need to provide medical evidence, but there might be only a short period of time to do so. Unless you are in excellent health, this could be your only chance to obtain sufficient insurance coverage at a standard rate.

2008 RRIF minimums and 25% re-contributions

2009-03-19T11:45:00.002-04:00

Do you know anyone who is taking money out of their RRSP or RRIF? If so please forward the following to them. If they want to re-contribute, they must do so before April 14, 2009

2008 RRIF minimums and 25% re-contributions
On November 27, 2008, the Federal government proposed legislative changes to the calculation of the 2008 required minimum withdrawal for RRIF, LIF and other locked-in RRIF plans (collectively known as a “RRIF”). The change allows the annuitant to re-contribute up to 25% of the 2008 minimum amount back to their RRIF (or to an RRSP if the annuitant is 71 years of age or younger at the end of the year in which the contribution is made) provided the RRIF annuitant received the full minimum amount in 2008.

Bill C-10 received Royal Assent on March 12, 2009 and the legislation implementing the Budget measures is now law.

This means that policyholders have until April 14, 2009 to re-contribute up to 25% of their 2008 RRIF minimum.

How to submit re-contributions
Contact your financial planner or institution and let them know that you would like to take advantage of this offer.

Tax receipts
• A 2008 RRIF re-contribution “receipt” (or RRSP receipt if applicable) will be issued to the annuitant
• To ensure that a 2008 RRIF re-contribution “receipt” (or RRSP receipt if applicable) is issued,
clients must indicate on the letter of direction/financial service form that they are making a recontribution.

More information on the legislative changes can be found on the CRA’s website:
http://www.cra-arc.gc.ca/whtsnw/tms/rrf-fq-eng.html

Be Tax Efficient

2009-03-09T15:22:00.004-04:00

Medical Expenses

Most people are unfamiliar with the many medical expenses that can be claimed beyond dental bills, prescription drugs and living aids, such as prescription glasses and wheel chairs. You are able to include any medical expenses not paid for by a provincial or private plan. In fact, even if you have private coverage, the premiums you pay are eligible medical expenses.

Canada Pension Plan (CPP)

If you are retiring early, it’s generally better to begin taking your CPP as soon as you are eligible (i.e. age 60) versus waiting until age 65. The extra five years between age 60 and 65 when you haven’t made CPP contributions may mean that you won’t receive the full amount even if you do wait. Because you will receive benefits, even though reduced, for an extra 60 months, you could be in your 80’s before you start to reap the benefits of waiting.

Focus on Family

Some tax credits can be claimed by either spouse. Medical expenses and charitable donations are two examples. Generally, it is almost always better for the spouse with the lower net income (provided he/she is in a taxable position) to claim medical expenses because the credit reduces by a percentage of net income. The credit for charitable donations is a two-tiered federal credit of 15 per cent (2008) on the first $200 and 29 per cent on the balance (plus provincial credits). Spouses are allowed to claim the other’s donations and to carry forward donations for up to five years. By carrying forward donations and then having them all claimed by one spouse, the first $200 threshold with the lower credit is only applied once.

Optimize Holdings Inside and Outside Your RRSP for Tax Efficiency
Consider tax efficiency as one factor when deciding which investments to put inside your RRSP and which to keep outside. Consider putting funds inside your RRSP that generate interest, or have a history of large taxable distributions. Keep funds outside your RRSP that you expect will pay relatively fewer taxable distributions or that generate more dividend and capital gains returns.

Salaries to Family Members

One effective income-splitting technique for individuals with a business is to pay family members a salary or wages for any services they provided in the year. The services must have genuinely been provided and the salary or wages must be reasonable. A family member could also be a director for a corporation and receive reasonable director’s fees. This also generates RRSP contribution room for your family members.

Tax tips for business owners

2009-03-09T15:17:00.001-04:00

1. Take advantage of income splitting by employing your spouse or children. Remember, though, that family members must actually do the work, and their salaries must be reasonable.
2. If you pay salaries to family members, those people may become eligible for Canada or Quebec Pension Plans (CPP/QPP) and RRSP contributions. Talk to your tax advisor for more details.
3. If you have a home office, you might be surprised at the variety of expenses you can deduct at tax time. They include the business portions of your rent, mortgage interest, property taxes, utilities, home insurance, repairs, maintenance and even landscaping. Have a separate phone line installed for your business to maintain accurate records for deductions.
4. If your business incurs non-capital losses and you’re not incorporated, you can save taxes by applying the losses against any other income source reported on your tax return for the year.
5. With some restrictions, you can deduct the costs of attending two professional conventions each year as long as they’re related to your business.
6. Employee benefit plans may be a business expense. Check with your accountant to see if you are eligible.

For further information on any of these points, give me a call at 416-806-5478

Budget Proposals - January 27, 2009

2009-01-28T09:20:00.003-05:00

As you know, Finance Minister Jim Flaherty delivered his federal budget on Tuesday in Ottawa.

This budget has a few items that could affect your financial plan and present additional opportunities. In case you haven't had a chance to review the media coverage, I thought you would appreciate a quick overview of the federal budget.

For small business owners: The government plans to increase the amount of small business income eligible for a reduced 11% federal tax rate from the current $400,000 to $500,000 retroactive to January 1, 2009.
RRSPs, RRIFs and estate planning: There will income tax provisions to recognize a decrease in the value of RRSP or RRIF investments that occur after the annuitant's death and before they are distributed to beneficiaries.
RRIF withdrawal reductions: There will be a one-time 25% reduction in the mandatory withdrawals of RRIFs for the 2008 taxation year. s
Senior age credit increase: The government increased the age credit amount by $1,000 for a total of $6,408.
Home renovation tax credit: Planning to upgrade or retrofit your home? This new credit, effective between January 28, 2009 and February 1, 2010, allows you to claim 15% on the portion of eligible expenditures exceeding $1,000, but not more than $10,000, for a maximum tax credit of $1,350.
First-time homebuyer's: An increase in the amount first-time homebuyers can withdraw from their RRSPs to purchase or build a home — from $20,000 to $25,000. It also proposes to establish a first-time homebuyer's tax credit which could amount to $750 worth of savings on closing costs.

I hope you find these highlights useful. If you'd like to discuss these and other federal budget initiatives and how they affect your financial plan, please don't hesitate to contact me at 416-806-5478.

Creditor protection

2008-12-30T10:12:00.002-05:00

Creditor protection for RRSPs and RRIFs upon bankruptcy

We never plan to have financial difficulties – but in these tough economic times, it’s good to know that our personal savings have some protection.

July 2008 ushered in changes to the federal Bankruptcy and Insolvency Act. The new legislation contains the long-awaited change extending creditor protection in the event of bankruptcy to all RRSP and RRIF savings in Canada.

Before the change (and depending on specific provincial exemptions), only employer-sponsored registered pension plans and insurance-based products such as segregated funds, enjoyed protection from the claims of creditors upon bankruptcy.

The new law formally exempts all RRSPs and RRIFs, including registered bank deposits, registered mutual funds and self-directed plans, from being liquidated on behalf of creditors when an investor declares personal bankruptcy.

The only condition is that any RRSP contributions made in the 12 months prior to bankruptcy will not be exempt from seizure unless your provincial law states otherwise. This is a major win for professionals and business owners.

How much should I save for emergencies?

2008-11-20T09:20:00.001-05:00

What if your car breaks down, the roof leaks, or the TV dies? Can you get enough cash, quickly, to handle emergencies? Or, to take advantage when a great opportunity comes along – like a special deal on a new computer, a great clothing sale, or that sell-off vacation you always dreamed of?
The usual rule is you need to save enough to pay today’s bills plus living expenses for three to six months. What’s right for you depends on whether you’re single or raising a family, how much you earn, and the other choices you have if you need money fast.

Where should I keep my emergency savings?
You may want to consider investments called "cash equivalents." These products are a lot like cash. You can usually get your money out within 90 days or less. Cash equivalents include:
· Chequing accounts
· Savings accounts
· Tax Free Savings accounts
· Money Market Funds
· Canada Savings Bonds
· Cashable Guaranteed Investment Certificates
With cash equivalent products, there is little risk of losing money and you often know how much you will make. Many are guaranteed to not loose capital. Just be sure you understand when you can get your money out – and if there are any special fees or penalties for early withdrawals.

For more information, check out my web site at www.freed.ca or give me a call at 416-806-5478

Tax-Free Savings Accounts (TFSA)

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Effective January 1, 2009 Canadians will be able to save up to $5,000 per year in an account and have this money grow on a tax-free basis. Contribution room will be added each year for any contributions not made. As money is needed for purchase of a home, education, retirement, or any other lifestyle needs, funds can be withdrawn on a tax-free basis.

This withdrawal also creates "re-contribution room," allowing your total potential pool of tax-free savings to never be depleted. At death, the entire account can be paid out free of tax as well. That's the quick version — grow tax free, withdraw tax free, re-contribute withdrawals, and pay out at death tax free.

Should you put your money into an RRSP or a TFSA?

First you need to determine your tax rate now and your anticipated tax rate during the withdrawal phase. If the two tax rates are identical, the TFSA is better option because it is more flexible and withdrawals do not affect income-tested benefits.

I suspect that most of you will fall in the category where your tax rates in the accumulation phase are higher because you are in your peak earning years and are paying the highest tax rates of your working life. Presumably, when you are retired you will be paying much lower taxes. Since your contribution tax rate is much higher than the withdrawal tax rate, a RRSP contribution is likely to be the better option. For the few Canadians who pay a higher rate in their withdrawal years than in their contribution years, a TFSA is probably the superior option.

However, a TFSA is a great vehicle to use to put 3 to 6 months of savings in to use for unexpected expenses. A TFSA can hold any investment vehicle that you can hold in an RRSP.

Tax Tips for 2008

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If you're like many people, you're probably waiting until April to start thinking about your taxes. However, by the time taxes are due, it's usually too late to realize tax-saving opportunities.

Now is the time to determine if there are any tax breaks you can take advantage of by acting before the end of the year. With this in mind, there are a number of tax-related questions and issues that we may need to discuss soon in order for you to get the most out of this tax year. For example:

Are you giving to charity? Two years ago, the Conservative government eliminated tax on "in-kind" donations of securities, mutual funds and segregated funds to registered charities. If you're planning to give cash, property or securities, it is important to make sure that all donations are made by December 31 in order to realize the tax benefits on your 2008 return.

Do you have any non-registered mutual fund purchases planned? Many mutual funds distribute their earnings at the end of the year, meaning that investors who purchase them in December will be liable for taxes on those earnings as if they had been invested for the entire year. We can get an estimate of what this year's distributions will be to determine if it might be worthwhile to postpone non-registered mutual fund purchases until January.

Did you open a tax-free savings account? While you can't add cash into this new TFSA until January 1, it's a good idea to open the account before December 31 so you can start saving as soon as the banks re-open after New Years. In 2009 you can save up to $5,000 in a variety of investment options and, if you need those dollars at any point, you can pull them out tax-free.

Can you benefit from tax-loss selling? Losses on certain assets mainly stocks can be offset against capital gains that have been realized during the previous three years. Now is the time for us to review your portfolio to determine if there are any equities for which you want to lock in the losses before year-end.

In addition, final payments must be made before December 31 in order to claim a tax deduction in 2008 for various items including alimony payments, child-care expenses, interest expenses on money borrowed to earn investment income and investment counselling fees.

If you would like to book an appointment to discuss these or other potential tax-saving strategies, please don't hesitate to contact me directly at 416-806-5478