A list of documents you need to gather

Can you imagine what would happen if you died and your beneficiaries didn’t know where to find your will? Or your money? To make sure this doesn’t happen to your family, always have the following key documents safely stored together in a place where they can easily be found:

1. Your will: Outlines who gets what when you die. It also appoints guardians for your underage children. Without a will, your assets will be divided according to provincial law, not your own wishes. Worse, your children might end up not living with the guardian of your choice.
2. A living will: Spells out how you want to be treated if you are unable to make decisions about your own health (i.e., whether you want to receive life-sustaining treatments like respiration or resuscitation or whether you want organs donated).
3. A power of attorney: Gives someone the power to make financial decisions for you in the event you’re no longer able to do so. Without this document, the courts will have to appoint a guardian to look after your affairs, and that can take a lot of time – and money. NOTE: You should ensure that there is a second signature on all of your bank accounts as well.
4. Proof of ownership: Gather together all documents that show you own your house, land, vehicles, stocks and any other assets. Without these, your family might not know what you own or be able to prove it.
5. Three years of tax returns: Tax returns give your executor a sense of the assets and finances that are part of your estate.
6. A list of bank accounts and safety deposit boxes: According to the Bank of Canada, there are approximately 1.3 million unclaimed balances in Canada worth some $465 million. You want your family to be able to find your money – show them where it is by listing all your accounts.
7. Stock certificates and savings bonds: Hang onto your investment account statements and store them safely with your certificates (if you have any on paper), so your family can easily determine exactly what you own.
8. Pension, retirement and annuity documents: Help your family access any remaining retirement benefits they are eligible for through your retirement plan. If you’re getting money from an annuity, the contract will help your beneficiaries understand what they are entitled to and from which company.
9. Insurance policies: You bought insurance so your loved ones would be financially covered when you die, so be sure to keep copies of all insurance-related documents on hand so your family will know what policies you have.
10. A list of your debts and loans: A list like this will ensure your family won’t end up having any unwanted surprises down the road, such as debts they did not know about.
11. Marriage licence and/or divorce papers: Legal proof of marriage and divorce can make it easier for the executor of your estate and for your family.
12. Your user names and passwords: With social media and online accounts becoming increasingly important, you want to be sure your loved ones will be able to access your accounts.
13. Contact information: Do you have a lawyer, financial planner, or other professionals who assist you.

Make sure that their names and contact information are also listed.
Review your list once a year to ensure that it’s kept up to date.

Five suggestions for what to do with your tax refund

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

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 heather@freed.ca