Apr 2019
Planning Calendar - part 2 of 2
Spring Cleaning
Planning Calendar
Part 2 of 2
Mark Halpern CFP, TEP
This TaxLetter® article presents the second and final installment of a planning calendar containing financial reminders and recommendations that will take you through 2019 and into 2020.
Due to space limitations, this planning roadmap was presented in two parts.
SEPTEMBER
Back to School
Start a Registered Education Savings Plan, RESP, for children and/or grandchildren to minimize the growing burden of tuition costs. The government will provide $400 of free money for each $2,000 of RESP investment. That’s a 20% return.
Melt & Cascade
Help your children and grandchildren. Grandparents can use the “melt and cascade” strategy to move some of their funds in registered and non-registered investments, funds they don’t need to pay bills during their retirement, and stream that money into a life insurance policy, naming their children and/or grandchildren as beneficiaries.
Read my TaxLetter® article “Melt & Cascade” from December 2015, it describes strategies for high net worth taxpayers to minimize or eliminate taxes on their registered assets (RRIFs and RRSPs) and non-registered assets and explains how to stream wealth tax-free to children, grandchildren and favourite charities.
Life insurance proceeds bypass the will, aren’t subject to estate taxes or probate fees, and flow in a tax-exempt manner to the beneficiaries who can use those funds for to defray the ever-increasing costs of expensive post-secondary education.
Contact us to explore best practices to fund education for future generations.
OCTOBER
Health Insurance
Have you reviewed your health insurance for adequacy of coverage? The wait times for medical treatments like knee and hip replacements grow longer as our population goes greyer.
Consider a policy with Best Doctors® Insurance. There is no waiting period and no requirement for a doctor’s referral to obtain treatments. The policy provides up to $5 million of lifetime funding for the finest medical care anywhere in the world, including private clinics in Canada. Not a reimbursement policy, it pays directly for any tests, procedures, specialists, medications and surgeries that may not be available in Canada. Use your Health Spending Account to deduct the premium cost instead of paying for it with after-tax dollars.
Group Benefits
If you are an employer, obtain a comprehensive review of your current group benefits plan, to benefit you and your employees. If you are an employee, get a professional review of your coverage booklet and seek advice on how to improve your coverage. Don’t forget - your coverage as an employee will change abruptly if/as/when your company decides to change the program, or if you leave the company.
My TaxLetter® article of June 2015, “Why employers should review their employee benefit programs” explains how companies can improve the value of benefits while reducing the costs.
NOVEMBER
Estate Plan
An estimated 40 per cent of Canadians have never discussed their estate intentions with their families and heirs. You need an up-to-date will and two powers of attorney – one for your financial needs and one for your physical needs. Its always a good idea to have your will reviewed every few years, make sure your list of beneficiaries is up to date.
Your will appoints an executor, designating that trusted individual who will have the legal responsibility to settle your estate after you die. If your estate is large or complicated, that process could take several years to accomplish, so you need to select someone who is experienced at managing money and able deal competently with everyone involved, including emotional family members. And just in case your designee must bow out due to illness or other reasons, you should pick an alternate executor now.
If you die “intestate” - without a will - your province will decide who gets what and your estate is certain to shrink from legal costs and probate fees. In Ontario, 1.5 per cent of your assets not held jointly with the right of survivorship are subject to probate fees.
Estate Directory
At the end of this article, you'll see how to access our Estate Planning Toolkit, available free at our website. Complete it as soon as possible. Doing so will be a huge favour to your family, providing important information and documentation on a timely basis and in one place. Without it, settling your estate may be delayed and unnecessary costs would be incurred, ultimately leaving less for your family.
Protect RRSPs & RRIFs
Remember that no tax is incurred if you leave funds from your RRSP or RRIF to your spouse. But after the death of the second spouse, the federal government automatically gets its share: in Ontario that’s 53.53 per cent of a RRIF or RRSP, 45 per cent on holding company investment income and about 26 per cent of your accumulated capital gains from investments, real estate and business equity.
How do you protect these funds? You could buy inexpensive life insurance and use the proceeds to cover those taxes, leaving more tax-free money to your beneficiaries.
DECEMBER
Property and Casualty Insurance (P&C)
Many individuals and businesses overlook the importance of their P&C coverage, and often make their purchase decisions based solely on the cost of premium.
My TaxLetter® article of Sep 2015, “P&C insurance is more than just cars and houses” explains the importance of Property & Casualty insurance, and why it deserves professional attention. As in the case of life insurance and estate planning, don’t do it alone, and don’t do it online. Seek advice from a professional who will be there to advocate for you in the event of a loss.
JANUARY 2020
Minimize taxes on death
No one likes to talk about dying, but how would you feel if your estate ended up with a $10-million tax bill? You can buy cost-effective life insurance to cover this eventuality, and you can use the Immediate Financing Arrangement (IFA) strategy to obtain the insurance you need without tying up your money paying premiums.
Read my TaxLetter® article of March 2016 “Using Immediate Financing Arrangements (IFAs) to Acquire Life Insurance and Preserve Cash”
FEBRUARY 2020
Monthly vs. Annual
How do you pay your insurance premiums? If you pay your insurance premiums monthly, you are probably paying considerably more than necessary. Pay it annually, using cash on hand or an inexpensive line of credit, and save your money. If circumstances change down the road you can always revert to the monthly payment plan.
Actions and Responsibilities
The actions and responsibilities described above certainly require your time and effort. And the time to take care of these things is right now, while the sun is shining, and options are available.
Everyone has different and unique needs so there is no “one size fits all” solution. Acting on our recommendations requires professional assistance, and our team of experienced advisors across Canada is available to help you.
Get the peace of mind that comes from knowing you have taken all the steps necessary to get properly organized now, for the benefit of your family, your business and your legacy. By any measure, it will be time well-invested.