Time to Take the Tax Free Savings Account Seriously

The Tax Free Savings Account (TFSA) was introduced in 2009. In 2009 and subsequent years through 2012, the TFSA dollar limit was $5,000 per year. For the years 2013 and 2014, the TFSA dollar limit is $5,500. For anyone who has not yet contributed to a TFSA, that means the contribution limit for 2014 is $31,000.

Since the limits have become substantial, and will continue to grow as the years go by, we must now view the TFSA as a serious savings vehicle. TFSAs are not limited to interest-bearing accounts. The reality is that the TFSA is much like the Registered Retirement Savings Plan (RRSP). These accounts can hold many different types of investments, including mutual funds, stocks, bonds, and yes interest bearing accounts.

There was some confusion initially about the TFSA. The word “Savings” seemed to imply for most people that the TFSA deposit must be made into a guaranteed interest account. Many were using the TFSA as a bank account. They would deposit money in January and then take it out in July for a vacation. The bank account concept worked very well for these short-term objectives. If your goal is short-term, then an interest-bearing account is probably the best option for your TFSA. If you have a more long-term objective, then you may wish to consider some alternative investments. You are not locked into your interest bearing account unless you signed up for a specific term. Once your term has expired, you are free to transfer your TFSA to another investment vehicle. The process is similar to transferring your RRSP from one institution to another. You must complete and sign government paperwork to effect these transfers. You must follow the correct procedure, or you may find that you have broken some significant TFSA rules and could face tax penalties.

Let’s assume that you have made the maximum contribution of $31,000 for 2014 and then decide that you want to transfer your account. You cannot simply withdraw your TFSA money from one institution and then walk down the street and deposit your money into another TSFA at another institution. This is considered a withdrawal from the first institution and a new deposit at the second. When you withdraw money from your TFSA, you cannot make another deposit until the next calendar year unless you have available contribution room. If you don’t have the room, then you are considered to have over-contributed and are subject to a penalty tax of 1% per month. There are currently thousands of Canadians in this tax penalty situation.

If you are looking to broaden your investment options using your TFSA, you may wish to seek professional advice. The TFSA should become part of your overall financial strategy. You must integrate this unique savings vehicle into your plan, along with other programs such as RRSPs and pensions. The ultimate objective of course is to achieve your financial goals. Speak to your financial planner about your options. If you don’t have a planner you may wish to get one. Their job is to recommend investment options to meet your goals, within your risk tolerance, and in the most tax efficient manner.

The foregoing is for general information purposes and is the opinion of the writer. This information is not intended to provide personal advice including, without limitation, investment, financial, legal, accounting or tax advice. Please call or write to Rick Sutherland CLU, CFP, FDS, R.F.P., to discuss your particular circumstances or suggest a topic for future articles at 613-798-2421 or E-mail rick@invested-interest.ca. Mutual Funds provided through FundEX Investments Inc.

Posted in financial goals, financial planning, investing, saving, Taxes | Leave a comment

Four Elements of Financial Planning

When most people hear the term “financial planning”, they automatically assume it has something to do with saving and investing. While saving and investing are integral components of financial planning, they represent only one part of the equation. As we shall see, there are other factors that need to be considered when developing your personal financial plan.

A sound financial plan is based around four major elements, known as the four pillars: cash flow, risk, debt, and asset management. If any one of these pillars is weak, a person’s financial well-being may be in jeopardy.  Cash flow is vital to the success of any financial plan. As we go through life, we expect to establish cash flow through some form of income and accumulate wealth to some degree. Income allows us to cover our needs food, shelter and other basic necessities of life. Extra income over and above that required for necessities is referred to as discretionary income, and is either spent or saved. Discretionary spending is money used for optional items such as big screen TVs, vacations, or any number of other life-enhancing products and services. It is your lifestyle. Controlling discretionary spending is crucial to your savings and investment plan.

Risk management is the area of financial planning that protects us from catastrophic financial loss in the case of adverse events. We typically purchase insurance products to protect us from the threats that are most likely to affect us at our particular stage of life and with our particular mix of assets. For example, property and liability insurance cover us against damage to our house, car, and their occupants. Health and dental coverage, including travel insurance, are common forms of cost containment from the high price of health care. Life and disability insurance protect us in the event of death or disability. In recent years, the need to cover the cost of a critical illness or a stay in a long-term care facility have become popular components of risk management. There are many ways to protect our income, and each person’s risk profile is different. This makes risk management an area that requires careful consideration and a critical eye to ensure that you are properly protected against the risks that are most relevant to you and your family.

Debt management is control over your loans to banks and other lenders. Debts come in many forms; some examples are personal loans for things like a car, and mortgages for your real estate. Other sources of debt stem from the use of credit cards and lines of credit. This is an area where many people have difficulty. These days, it is very easy to apply for and obtain a loan or credit card. The trick is to have a plan in place to pay it off. You also want to be mindful of the interest rate to make sure you are receiving the best and most attractive interest cost and terms for repayment.

Managing assets of discretionary income is often the first thing people think about when they want to develop a financial plan. In its simplest form, asset management is management of discretionary income. What you do with the money you have left over after you have paid for the necessities of life can either be saved or spent. We already discussed how discretionary spending determines your lifestyle. What about the saving component? A sound financial plan establish both short- and long-term savings goals. Set up different accounts that can meet both objectives. A short-term savings account allows you to deposit money and then withdraw it when needed. It tends to pay the least interest but it is safe and secure. It is ideal for saving for such things as an annual vacation. This approach allows you to pay for your “extras” without relying on a loan or credit card debt. Long-term objectives, such as retirement or education funding, should be met with long-term investment vehicles, such as RRSPs and RESPs. Retirement savings allow you to maintain your desired lifestyle once you have removed yourself from work and no longer receive an income. Generally we expect to receive a higher rate of return from long-term investment strategies.

When you are building your personal financial plan, be sure to consider all four pillars, and aim to remain flexible in the face of unexpected contingencies. It’s not easy, and professional advice can be very helpful. Building a strong financial foundation is an important step towards realizing your dreams and goals, and will go a long way towards reducing the worry that so often surrounds financial matters.

Rick Sutherland has been a resident of OOS since 1985 and has been a regular contributor to OSCAR since 1991. The foregoing is for general information purposes and is the opinion of the writer. This information is not intended to provide personal advice including, without limitation, investment, financial, legal, accounting or tax advice. Please call or write to Rick Sutherland CLU, CFP, FDS, R.F.P., to discuss your particular circumstances or suggest a topic for future articles at 613-798-2421 or E-mail rick@invested-interest.ca. Mutual Funds provided through FundEX Investments Inc.

Posted in budget, credit, debt, financial goals, financial planning, Insurance, investing, retirement, saving, security | Comments Off

Growing Pains for Small Businesses

Running a small business is never easy, but it can be extremely fulfilling for the entrepreneur who makes it work. The early days of any new business revolve around market development, cash flow, and general administration, such as keeping compliant with laws and regulations. Whether the business provides services or products, there are many necessary things to do in order to ensure that the business not only survives but also thrives.

So what happens when a small business is ready to grow?

Planning for growth

When the initial start-up period is over, many small businesses think they can run before they walk. Ambition is a great thing when it comes to growing a business; but beware of over-ambition. Business owners should plan their growth with care so as to not only keep their current customers but also maintain the quality of service they have provided while developing new markets.

There are a number of factors to take into account when planning business expansion. If working from home, will the business be able to handle growth from that base, or would it be appropriate to move to rented premises? If a decision is taken to move, then all the additional costs associated with that must be evaluated. In addition to the rent, there will also be utility bills and insurances, and if products are being made, there will be extra costs for raw materials and manufacturing, packaging, etc.

Correct financial budgeting is essential, and a solid business plan outlining development for the next two to three years should be prepared. If overdraft facilities or a capital loan are needed, this is the document that a bank or other lender will want to see. It is important to be realistic and to demonstrate that the plan has been carefully thought through, the figures add up, and the potential for real growth is clear.

Employing others

When a small business starts to grow, it can become a burden for just one person to continue to do everything. The entrepreneur needs to keep focused on the core of the business, because that is where the profit lies. At some stage, a decision will be needed as to whether to employ others, and how that should be done. Employing anyone, whether full or part time, means that payroll has to be handled and the appropriate insurances secured. There are costs associated with recruitment, reviewing applications, interviewing, and all the while the business must continue to operate.

Administrative assistance

For many businesses it’s the administrative requirements that can prove a problem. One way of handling this is to use an umbrella company, such as Crystal Umbrella, to take over the day-to-day administrative tasks of running the business, such as invoicing, preparing tax forms, and offsetting business expenses. It is an attractive solution that frees up the entrepreneur to concentrate on further business growth.

Luke Davis is a freelance writer specialising in the business and finance sectors.

Posted in budget, financial planning | Comments Off

Do You Need a Power of Attorney?

In our line of work we are occasionally required to act on the instructions provided by a third party. In order to accept instructions from a third party we must have a duly executed Power of Attorney, or POA. A POA is a legal document that gives someone else, the Attorney, the right or legal authority to act or make decisions on behalf of another person, the Grantor.

POAs can be for property or for personal care. For the purposes of this essay we are specifically referring to the Power of Attorney for property. The POA can be continuing with no set time limit, or it can be non-continuing with a certain time limit.

Unless the POA has limiting powers, it is considered a General Power of Attorney. In this case the Attorney may make any decisions on behalf of the Grantor, except make a will. When the POA is Limited it is often dealing with specific assets, a specific transaction, or it may only be valid for a certain period of time. For example, it may be useful to have a limited POA if you will be out of the country for a period of time and you want someone else to act on your behalf to deal with a pressing matter, such as a real estate transaction.

The Power of Attorney falls under provincial jurisdiction and the rules may vary by province. In Ontario, a valid POA must be in writing and be signed before two witnesses. Certain people cannot be a witness. They are the Attorney or the Attorney’s spouse, the Grantor’s spouse, the Grantor’s child, and any person under 18 years of age.

A Power of Attorney is an important legal responsibility and should be carefully considered by both the Grantor as well as the Attorney. Both parties should examine the POA to ensure they fully understand the terms, conditions and responsibilities it entails. They need to make sure that the POA is valid and has been drafted according to the applicable provincial jurisdiction. If there is any doubt, professional legal advice should be obtained.

According to the Alzheimer’s Association the risk for dementia doubles every five years after the age of 65. POAs are particularly useful when dealing with seniors who may have developed diminished capacity. In this case the Grantor will have established a POA where their child or other person, for example, becomes responsible for making decisions regarding their property in the event of dementia or other form of cognitive set back.

When dealing with seniors the key is to determine when to activate the POA. You want to make sure that the person has developed diminished capacity to the point that they cannot, or do not, understand the implications of the decisions they make. Certain warning signs may assist when coming to this decision, such as inconsistency of verbal communications, memory loss, gaps in narrative communications, behavior that is out of the ordinary, or simply being non-communicative.

We recommend that everyone should consult their legal professional and have a Power of Attorney as part of their estate plan. Without a legally executed POA there is a lengthy process one must go through for Statutory Guardianship over another person’s property in the event of incapacity. Review your plans with your loved ones and ensure that your affairs are in order.

Rick Sutherland has been a resident of OOS since 1985 and has been a regular contributor to OSCAR since 1991. The foregoing is for general information purposes and is the opinion of the writer. This information is not intended to provide personal advice including, without limitation, investment, financial, legal, accounting or tax advice. Please call or write to Rick Sutherland CLU, CFP, FDS, R.F.P., to discuss your particular circumstances or suggest a topic for future articles at 613-798-2421 or E-mail rick@invested-interest.ca. Mutual Funds provided through FundEX Investments Inc.

Posted in financial planning, security | Comments Off

Tips for Gambling Responsibly

Responsible gambling is really a matter of common sense. It means being in control of the amount of money that we spend on gambling as well as not spending more time than we should doing it. Whatever form of gambling you enjoy, whether it is playing at an online casino like Lucky Nugget pokies, buying a lottery ticket, or betting on a horse or sporting event, it is important to look on it as a form of entertainment and just part of your balanced lifestyle. Just as you would expect to pay for going to the cinema, to a club, or to a concert, expect to pay for the pleasure of gambling and only pay as much as you really can afford.

It is very important to pay for gambling only with your disposable income, which is the portion remaining after you have paid all of your essential and important bills. People get into trouble with irresponsible gambling when they start financing their gambling using money that should have been allocated to more important expenses such as their rent or mortgage. Similarly, you should never borrow money to pay for your gambling. If you ever use a credit card to buy chips or to make a deposit at an online casino, then you should always clear what you have spent at the end of the month. The last thing that you want to do is to pay interest charges on any gambling losses.

Knowing when to stop gambling is also important. If you find that you are having a losing streak, don’t keep throwing good money after bad. Once you have spent your budget, simply stop playing and come back another day; don’t keep on playing in the hope of winning back what you have lost. Similarly, if you are on a winning streak and you have won as much as you could reasonably expect, don’t keep on playing just to win more. If you do, then your winning streak could easily turn into a losing one. In other words, don’t chase your losses, and learn to quit when you are ahead.

This post was written by Dexter Jackson. Coming from Manchester, United Kingdom, Dexter’s hobbies include writing and recording music and gaming online. He also runs events to do with video games where people come to watch tournaments. Dexter is currently studying in his final year at university, reading Finance and Accountancy.

Posted in budget | Comments Off

The Purpose of Your RRSP

You are probably hearing a lot these days about the options for your Registered Retirement Savings Plan, or RRSP. The reason is that the deadline for 2013 eligible contributions is fast approaching.

Thanks to various government programs, the RRSP has become more than just a plan to save for your retirement. In addition to retirement savings, your RRSP allows you to reduce your income taxes owing, assist toward the purchase of a home, or help finance post-secondary education.

Tax benefits are widely considered to be the most important reason for contributing to your RRSP. Contributions are tax deductible and grow tax free while in the RRSP. Every dollar contributed to your RRSP, up to your RRSP limit, is deducted from your 2013 taxable income. This means that you will either receive a tax refund or reduce the amount of tax you have to pay when you complete your 2013 income tax return.

Some people will contribute to their RRSP with the ultimate goal of purchasing a home by participating in the Home Buyers Plan (HBP). An RRSP holder can borrow up to $25,000 from their RRSP and use the money toward the purchase of a residence. This loan must be repaid into the RRSP within fifteen years from the second year of the withdrawal. The HBP can be used more than once in a lifetime, as long as the borrower has not owned a residence in the previous five years and has no outstanding balance owing on a previous HBP loan.

Much like the HBP, the Life-Long Learning Plan (LLP) allows for a tax free loan to be made on an RRSP. This program allows individuals to use the loan proceeds to enroll in a post-secondary education program. The RRSP holder can withdraw up to $10,000 per year with a lifetime maximum of $20,000. The first repayment under the LLP must be made at the earliest of these two dates: 60 days after the fifth year of the first withdrawal, or the second year after the last year the student was enrolled in full-time studies.

Let’s not forget about the main purpose for introducing the RRSP back in 1957: to provide a person with a source of retirement income after they cease to work. The idea is to contribute over your working lifetime and allow the money to grow tax-free until you begin to make withdrawals to fund your retirement.

Whatever your reason for contributing, you have very limited time to make and apply these contributions toward your 2013 taxes. March 3rd, 2014 is the deadline for making your RRSP contribution and receiving a deduction on your 2013 tax return.

The foregoing is for general information purposes and is the opinion of the writer. This information is not intended to provide personal advice including, without limitation, investment, financial, legal, accounting or tax advice. Please call or write to Rick Sutherland CLU, CFP, FDS, R.F.P., to discuss your particular circumstances or suggest a topic for future articles at 613-798-2421 or E-mail rick@invested-interest.ca. Mutual Funds provided through FundEX Investments Inc.

Posted in financial goals, financial planning, retirement, saving, Taxes | Comments Off

Your Investment Policy Statement

Welcome to 2014! We thought we would begin the year with a suggestion for a New Year’s Resolution. Establish your personal Investment Policy Statement, or IPS.

An IPS is a document that puts in writing a number of parameters that you and your investment professional will follow regarding how your investment account is managed. It gives you a direction on how to invest your hard-earned dollars and eliminates the temptation to rely on “hot tips” or follow the recommendation of friends and relatives.

Your Investment Policy Statement spells out the reasons why you are investing. It outlines what you are hoping to gain from your investing endeavours and when those gains should materialize. By reviewing your IPS regularly, you can confirm whether you are on track to meeting your goals or whether you may have to make some adjustments.

Your IPS acts like a rudder on a ship. It guides you through both the calm as well as the rough waters, and it keeps you headed in the right direction. It helps you ignore the day-to-day market turbulence and to avoid making emotional decisions that may otherwise turn out to be mistakes.

Your Investment Policy Statement need not be elaborate. A simple IPS will allow you and your planner to analyze your progress in an easily understandable format. There may also be a need for more than one IPS for investments with different objectives.

Your IPS will reflect your commitment in terms of the dollars you are prepared to put aside on a regular basis. This could be a monthly or weekly contribution, whatever suits you best.

Your Investment Policy Statement may spell out an asset allocation policy for your investment account. Rather than setting hard-and-fast rules, you may want to set ranges for different asset classes. It may look something like this: 5-10% cash, 20-30% fixed income, 60-75% equities. Of course each of these asset classes can be broken down into sub-categories, such as short- and long-term fixed income and Canadian, US and International equities.

Once you’ve established an asset allocation strategy, you and your planner can make an estimate of returns. Historical averages for your chosen asset allocation will help in choosing a projected rate of return. You must be prepared at all times for contingencies and be prepared to make adjustments.

One area to be cautious is regarding your personal risk profile. Most investors judge themselves as having a very high tolerance for risk when markets are going up, and as conservative investors when markets are going down. Ask yourself what you would do if you received a statement and your investments were down 10%, 20%, or maybe even 30% or more. Would you sell everything, do nothing, or invest more? The answer to this question gives great insight into your risk profile.

It is not easy to draft an IPS. The best course of action is to work with your trusted financial planner. Reaching out for advice may be one of the best decisions you can make when it comes to developing your personal IPS.

The foregoing is for general information purposes and is the opinion of the writer. This information is not intended to provide personal advice including, without limitation, investment, financial, legal, accounting or tax advice. Please call or write to Rick Sutherland CLU, CFP, FDS, R.F.P., to discuss your particular circumstances or suggest a topic for future articles at 613-798-2421 or E-mail rick@invested-interest.ca. Mutual Funds provided through FundEX Investments Inc.

Posted in financial goals, financial planning, saving | Comments Off

Panic Doesn’t Pay

The US market dropped about 5% during the month of August. This caused memories of 2008-2009 to surface. Some investors began to feel anxious and wanted to make decisions about how to protect themselves against losses. People often feel tempted to alter their investment plan in an attempt to avoid loss during market declines. Historical data, however, shows that this strategy tends to backfire.

Fidelity Investments recently conducted a study of actual results of their client portfolios with the view to understand whether attempting to time the market really works. They looked at three sub groups over the period from the fourth quarter of 2008 and the first quarter of 2009, near the bottom of the market downturn, until the first quarter of 2013, which was the market high at the time of the study.

The first group sold all equities in the fourth quarter of 2008 or the first quarter of 2009. This group remained out of the equity markets as of the first quarter 2013. The second group sold all equities in the fourth quarter of 2008 or the first quarter of 2009 and then came back into equities prior to the end of the first quarter of 2013. The third group did not sell any equity holdings and remained invested in equities throughout the period up to the first quarter of 2013.

The results were significant. The first group, who sold their equity holdings and stayed out, saw their investments grow by about 15% over this time period. The second group, who sold their equities and then later reinvested back into equities saw their investments grow by about 50% and the third group, who stayed invested in equities, saw their investments grow by almost 85% over this same time period. Results did vary somewhat based on the total allocation to equities. Higher bond and cash allocations tempered the growth.

We looked back at our articles that appeared in OSCAR during the last quarter of 2008 and the first quarter of 2009. Our essays had a “don’t panic – stick to your plan” strategy throughout this period of dread and panic. Those who followed this advice should have reaped benefits similar to those in the third group of the Fidelity study.

There will be another significant market decline at some point in the future, and it may be sooner than you might expect. When the next significant market setback occurs, and we promise you it will, we encourage you to read our short essays here in OSCAR. We will be recommending the same strategy. Don’t panic, remain calm, and stay invested to suit your objectives and plans. Better yet, if you have the resources, continue to invest. Significant market setbacks have always gone down in history as prudent buying opportunities for the future.

The foregoing is for general information purposes and is the opinion of the writer. This information is not intended to provide personal advice including, without limitation, investment, financial, legal, accounting or tax advice. Please call or write to Rick Sutherland CLU, CFP, FDS, R.F.P., to discuss your particular circumstances or suggest a topic for future articles at 613-798-2421 or E-mail rick@invested-interest.ca. Mutual Funds provided through FundEX Investments Inc.

Posted in financial goals, financial planning, investing, security | Comments Off

Year End Tax Tips

Tax planning is probably the farthest thing from your mind at this time of the year. However, the year 2013 is drawing to a close. That means you are running out of time to take advantage of any last minute tax reduction strategies. Here are a few ideas, reminders and last minute tips that can save you some tax dollars and put a few extra bucks in your pocket.

Tax Credits – Most tax credits are based on the calendar year. Make sure you have all receipts for children’s fitness and arts programs. Public transit receipts are also good tax savers. Students get a tax credit for interest paid on qualified student loans. The interest claimed by the student can be for the current year as well as the preceding five years as long as the interest was not claimed in a prior year. If you purchased a qualifying home in 2013 and you are considered a first time home buyer, you are eligible for a $5,000 Home Buyers Credit. The charitable donations tax credit is available in two stages. The lower rate applies to donations up to $200. The higher rate applies to donations above $200. To take advantage of the higher credit, only one spouse should claim all charitable receipts. Medical expenses are limited by an income threshold. The spouse with the lower income should claim all family medical expenses.

Tax Deductions – Unlike tax credits, which generally reduce your taxes at the lowest tax rate regardless of your income, deductions will reduce your taxable income and thereby give you a higher tax break when your income puts you in a higher tax bracket. One of the most popular tax deductions is the Registered Retirement Savings Plan, or RRSP. Every dollar deposited up to your RRSP limit is deducted from your taxable income. You have until 60 days after the end of the year to make RRSP contributions and apply those contributions to your 2013 taxes. For those collecting a pension, you can deduct and split up to 50% of your pension income with your spouse. Moving expenses are tax deductible if you moved at least 40 kilometers to be closer to work, open a new business or to attend full time studies in a post-secondary education program. Unused moving expenses can be carried forward to the next year. Interest expenses on money borrowed to earn investment income is tax deductible.

These are only a few ideas that merely scratch the surface of potential tax saving strategies you can implement to save tax on your income tax return. It is recommended that tax planning be done early and on a year-round basis. If you feel too rushed or hurried to make any final year-end tax decisions for 2013, you can make it your New Year’s Resolution for 2014. Start planning early and watch your tax savings accumulate throughout the year. Have a wonderful holiday season and we look forward to talking to you in 2014.

The foregoing is for general information purposes and is the opinion of the writer. This information is not intended to provide personal advice including, without limitation, investment, financial, legal, accounting or tax advice. Please call or write to Rick Sutherland CLU, CFP, FDS, R.F.P., to discuss your particular circumstances or suggest a topic for future articles at 613-798-2421 or E-mail rick@invested-interest.ca. Mutual Funds provided through FundEX Investments Inc.

Posted in saving, Taxes | Comments Off

Death and Taxes

You’ve heard it before. There are only two certainties in life: death and taxes. Both are unavoidable. But did you know that the biggest tax bill you may ever have to pay is actually on your tax return filed after you die?

Upon death, you are deemed to have sold all capital property immediately before death. This deemed disposition rule could cost you tens, maybe hundreds of thousands of dollars in taxes. Common types of capital property include cottages, stocks, mutual funds, rental properties and business interests, to name a few.

It is up to your executor to file your final tax return after your death. This person must calculate all gains and losses on the property that is deemed sold and then pay the taxes on behalf of the deceased estate.

Let’s assume the deceased person owned a cottage that was purchased many years ago for $5,000. On the date of death the fair market value of the cottage was deemed to be $255,000. The executor is responsible to report the $250,000 capital gain, 50% of which is taxable, on the final return of the deceased. The tax is owing even though the wishes of the deceased were to pass on the family cottage to the children.

Registered investments including RRSPs and Registered Retirement Income Funds will be included, dollar for dollar, in the deceased income on the final tax return. It is not uncommon to see registered accounts worth hundreds of thousands of dollars. Just imagine the tax bill if a $500,000 RRSP was added to the income tax return all at once. The only exception is that registered investments can be transferred tax free to a surviving spouse or common-law partner or a dependent child or grandchild. If no exception exists then every dollar is included in income on the deceased final tax return.

You do have some options to mitigate the taxes your estate will pay upon your death. You can transfer some of your property into joint names with your children. This is called “Joint With Rights of Survivorship.” There are many caveats to consider. For example, the property may be subject to the claims of creditors of the child. The transfer could trigger a deemed disposition and taxes would become payable. The transfer could disinherit other beneficiaries. Consult with your legal and accounting professional before implementing a strategy of joint ownership.

Another option to ease the tax burden at death is through donations to your favourite charity. The limit on donations in the year of death and the year immediately preceding death is 100% of net income. Donations can significantly reduce the taxes owing in the year of death.

We can’t stop death. Eventually it will happen to all of us. With proper advanced planning you can reduce the tax bill to your estate and enhance the value of your estate and the amount you bequeath to your loved ones and favourite charities. Speak to your trusted advisor to learn more about the different strategies available to reduce or eliminate your tax bill at death.

The foregoing is for general information purposes and is the opinion of the writer. This information is not intended to provide personal advice including, without limitation, investment, financial, legal, accounting or tax advice. Please call or write to Rick Sutherland CLU, CFP, FDS, R.F.P., to discuss your particular circumstances or suggest a topic for future articles at 613-798-2421 or E-mail rick@invested-interest.ca. Mutual Funds provided through FundEX Investments Inc.

Posted in financial planning, Taxes | Comments Off