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
Showing posts with label plan. Show all posts
Showing posts with label plan. Show all posts
Thursday, August 4, 2011
Friday, April 22, 2011
Do you have money put aside in case of an emergency?
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.
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.
Sunday, June 13, 2010
Estate Planning 101
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.
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.
Monday, May 4, 2009
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.
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.
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