Saturday, November 21, 2009

Tax Deadlines are Looming

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

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 - Friday, November 6, 2009

Article by Paul Brent

Saturday, October 24, 2009

Critical Illness

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.

Tuesday, October 6, 2009

Retirement planning with Guaranteed Minimum Withdrawal Benefit products

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.

Monday, September 7, 2009

Do you have adequate coverage?

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

Friday, July 17, 2009

How to spot a ponzi scheme:

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, July 16, 2009

Wednesday, June 17, 2009

Looking to save money on Drug Prescriptions?

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

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.

Monday, May 4, 2009

Out of RRSP contribution room?

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

Severance package options

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.

Thursday, March 19, 2009

2008 RRIF minimums and 25% re-contributions

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:

Monday, March 9, 2009

Be Tax Efficient

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

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

Wednesday, January 28, 2009

Budget Proposals - January 27, 2009

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.