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2014 to-do list, how you doing

September 17, 2014 in Estate Planning, Uncategorized

In This Post
Review your Will
Review your beneficiary designations
Review your life insurance needs
Protect yourself from fraud and identity theft
Control lifestyle expenses
Get critical illness insurance
Review your Will and Power of Attorney

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Only about 40% of Canadians have prepared their Wills and power of attorney and many of them are not up to date. Situations and families change and your Will and power of attorney should be updated to cover those changes. If you don’t have a Will, get one.
Have a lawyer prepare your Will for you. The lawyer will also insist on the power of attorney and substitute decision appointment be done at the same time. Not sure what that is or whom you should choose, then you should avoid do-it-yourself Will kits, your lawyer will explain and help you make a wise choice. They may state they are legal (which just means they don’t break any laws), but they also contain a disclaimer that states they are not liable for the validity of the Will you prepare yourself. An invalid or poorly prepared Will can cause delays and may cost your family thousands of dollars in avoidable fees and expenses.

Review your beneficiary designations

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You named a beneficiary on your life insurance policies, RRSP,TFSA and pension plans. Has anything changed? Keep in mind tax implication of naming a non spouse as beneficiary.
If you have named a beneficiary who has trouble handling money, you can stipulate that any proceeds be used to set up a spend thrift trust to provide an income only for that person. If all your children are adults, consider naming them as secondary beneficiaries to your spouse. If you are on a second marriage consider a spousal trust to ensure assets stay with your blood line.

Review your life insurance needs

As we age and our life insurance debt load hopefully reduces while our assets increase our needs for insurance change from income replacement and debt repayment to retirement income and estate preservation. Your plans should be updated to make sure your income and estate objectives can be met. As your needs change so also does the type and amounts of insurance.
The basics for determining life insurance needs are Immediate Cash Needs plus Capitalized Income Needs minus Assets to be Liquidated at Death plus Life Insurance proceeds. Your needs should be reviewed regularly and adjusted as your situation or health changes.

Protect yourself from fraud and identity theft

Fraud and identity theft are the fastest growing crimes today. According to the Canadian Anti-Fraud Centre, 12,891 victims lost over $53.7 million in 2012. To protect yourself:
Cover the keypad while entering the PIN when using your debit or credit card.
Be aware of anyone around you using a cellular phone when you are using your debit or credit card. They may be photographing your transaction.
Shred old credit card and bank statements. Just ripping them up is not enough to prevent a fraudster from piecing them back together.
NEVER give personal or account information to anyone who contacts you, even if it appears to be from a company or bank you deal with. These companies will never ask you for your personal information, they should have this information already.

Control lifestyle expenses

According to Calgary bankruptcy trustee Barry Nykyforuk, the most common cause of personal bankruptcy is letting consumer debt get out of control. Credit is so easy to get and some lenders even target those who have had debt problems in the past.
When you use credit cards, pay off the balance each month. If you carry a balance, be aware that any new purchases are charged full interest from the time they are made. Don’t fall into the trap of buying things you don’t really need with money you don’t even have to impress people you don’t even like.

Consider critical illness insurance

If you survive a critical illness like cancer, heart attack or stroke, your finances will be affected. Even if you have disability insurance, it may not be enough to cover additional expenses that arise. Critical illness insurance pays a benefit that can help you get on with your life and maintain the lifestyle you had before you got sick. – M Dumond

We are here to help. As always we are accepting referrals, please feel free to share us with your friends.

Strategic Investment Planning 74 Cedar Point Dr Unit 1008 Barrie ON L4N 5T3 705-798-2105 — Strategic Investment Planning
74 Cedar Point Dr Unit 1008
Barrie ON L4N 5T3
705-798-2105

How to prepare for the expensive adolescent years

September 16, 2014 in RESP, Uncategorized

At this time of year families are planning for the return to school and the costs associated with that. If your family has kids in highschool you already know all too well what I am talking about.

Are you financially prepared for the teenage years? Plans should be made if you have children approaching their adolescent years. This can be a turbulent time, not just the emotion and drama it can bring, but also the associated expenses that get added to the family budget. When you think of your family financial planning, it is wise to consider each and every phase of life. Many families don’t consider just how expensive the adolescent years can be and that can be their downfall.

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New Situations Mean New Expenses

When you consider all of the obvious alone, the adolescent years can be quite costly. You may think that the baby and toddler years drain the bank account, but consider “normal” expenses that adolescents can bring.

Consider starting a savings program now for future expenses like extracurricular activities, summer camps, school trips, sports teams, clothes, increased food costs, and lessons and tutors that may be required for school. Don’t overlook the car and driving lessons that can be a huge financial drain, even though necessary. Remember, many of your regular expenses can expand just because you are adding a teen to your list. Insurance, fuel, maintenance, these things and many others can quickly strain a budget.

Those are the standard expenses assuming that your child doesn’t require any additional help in the way of counseling, summer school, or even more extreme measures depending on their ability to adjust to changing and turbulent times. There really is no telling what the teen years bring. Just beyond them is setting your child up for life beyond your walls. Suddenly the list is growing indeed.

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Let’s face it, adolescence can be a tough time! It’s not just tough for kids going through it but often for the parents as well. Many parents think about their monthly expenses and consider the one thing they have to save up for in their childrens’ future is post-secondary education. Setting up an RESP in your children’s early years will go a long way toward reducing the debt they come out of university with. While this is true and is a great thing to consider in advance, you could be in big trouble when all of the expenses need to be met. As you consider all your financial planning needs and look at the years ahead, giving special attention to the adolescent years can be greatly important.

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Planning Ahead Can Mean Peace of Mind

Financial planning, should incorporate all the important phases of life, particularly those that will be full of additional expenses and unforeseen circumstances. The adolescent years are a time of uncertainty in every sense of the word. When you look at your family and consider all the financial needs that lie ahead, include adolescent years in your overall plan. Teach your kids about money. Get them to start saving when they get that first job. If you could somehow make the adolescent years a little bit easier for them, you would do anything.

Thinking through the financial needs of this turbulent time of life can be a great start toward making things much smoother. – M Dumond

Planning For Life Phases – because it’s the right thing to do. Call today! 705-798-2105

Credit card tips and tricks

July 7, 2014 in Tax Strategies, Uncategorized

Statistics Canada recently announced that the Canadian debt-to-income ratio hit a record 148.1%. This means that for every $10,000 of earnings, we average $14,810 of debt. Yes, that also means that many actually carry far, far more than that.

With interest rates at record lows and the very easy availability of credit, it can be easy to slip into the bottomless pit of consumer debt. At most professional sports venues, we get offered a “free” item, like a shirt, blanket or toque, simply for applying for another credit card, usually with our favorite team’s logo on it. But what can we do? Consider the following credit card tactics:

Avoid the minimum payment – Credit card issuers are now required to disclose more to their cardholders regarding time to pay. For example, Greg received his statement for $5,075.23 of purchases. The statement clearly indicates that the interest rate charged if he doesn’t pay the full amount by the due date will be 19.99%. It also states, “If you make only the Minimum Payment each month, we estimate it will take 42 years and 4 months to fully repay the outstanding balance.”

Choose a card with benefits for you – To encourage us to use the credit cards offered to us, lenders offer a number of incentives. If you are going to use a credit card, there might as well be something in it for you. Choose a card that gives you “points” or “cash back”, or one with a fixed, low interest rate. Use the latter if you are carrying a balance from month to month and don’t have better borrowing options.

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Avoid carrying a balance – It can be so easy to fall into the trap of keeping up with the neighbors buying things we don’t really need with money we don’t really have to impress people we don’t really like. It is very important to know that if you do not pay the full balance by the due date, any new purchases on the card start getting charged interest (remember the 19.99%) from the date purchase.

Avoid cards with annual fees – Some credit cards come with a yearly charge just for the privilege of using it. The issuer charges each merchant a small percentage of every credit card purchase, so there really isn’t a need to charge this annual fee. However, some credit cards that offer certain bonus points may still be a good value if the volume of purchases and points earned far outweigh the yearly extra charge. For example, Leanne runs a small business and charges all her business expenses on a credit card that earns her travel points. She pays the balance every month, on time, and earns enough points to cover the cost of her family winter getaway every year.

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Time larger purchases – This means being aware of each credit card’s closing date. Let’s say you are going to buy some new furniture. The statement period for the credit card you will use (and earn points with) ends on the 7th of the month, but payment isn’t due until the 29th. Making the purchase on or shortly after the 8th of the month will actually give you free use of the lender’s money for up to 51 days, as long as you pay the full balance on the due date. Consider arranging a future payment for the day before the due date as soon as you get your bill. – M Dumond

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Cost of Critical Illnesses in Canada

July 7, 2014 in Insurance, Uncategorized

According to a 2011 Health Survey, Published by Desjardins Financial Security (DFS)

As Canadians we are taking better care of our health, 70 per cent of those surveyed responded that they are making significant personal changes to lifestyle in order to be healthier. Unfortunately, even with significant changes in life style it is still impossible to prevent all critical illnesses. Statistics indicate that Canadians are more likely to experience a critical illness than they are to die before the age of 75. On a positive note, Canadians are confident of recovering from a critical illness; however we are not as positive when it comes to our financial stability in the event of a serious illness.

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When we look at the numbers concerning Canadians financial health the percentage is flipped, 75 per cent have taken no steps to protect themselves in the event of a serious illness. Some employers do provide group coverage, in many cases these plans provide very basic coverage and may not be adequate to meet your needs. With increasing demands on our public health care system and with many service costs relating to the treatment and recovery from critical illness not being covered at all, personal critical illness insurance is vital. As an aging boomer myself approaching retirement, we need to ask our selves; If a Critical Illness should occur how financially vulnerable would I be? How would this financial burden affect my family’s life style? Do I have a plan? If the answer to any of these questions is no, we need to talk. With access to the best products and resources available in today’s market place, working together we will find a solution. – M Dumond

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We have the tools and experience to answer your questions and look after your needs. Please call us at Strategic Investment Planning today, so we can start helping you tomorrow.

What is Insurance?

June 20, 2014 in Insurance, Uncategorized

Insurance surrounds each of us every day: When you get in your car, when you come home to your residence, and while you work. Insurance is always in the background discreetly doing its job. Most of us, however, do not think about it much or realize the very important function that all types of insurance provide. In fact, the role of insurance is so important that it is the focal point of a prudent financial strategy.

Risk Transfer

So what is insurance? Technically, it is the process of “risk transfer”. When someone wants to be protected from a certain risk, they buy an insurance policy to reimburse them in the event the risk occurs.

On the insurer’s side, they calculate a fee (the premium) to coincide with the likelihood of the event occurring. Auto accidents are more likely than earthquakes and so the premiums are much greater. Work accidents with short term loss are more likely than total disability so those premiums are higher for employers. Life insurance transfers the risk of a guaranteed event (death) and is priced based on the probability of you passing away at a given age, based on sex, smoking habits and health risk. Therefore, premiums may vary greatly from person to person.

Insurance and Financial Planning

How is insurance used in financial planning? Financial planning is the process of formalizing your goals over time and creating a path to accomplish them. One of the biggest setbacks to achieving these goals is an unforeseen event which cripples your plans. Insurance is one way of protecting your goals in case such an event occur.

For example, let’s say you plan on living in your home for many years to come. How do you account for an unexpected death while you still have a mortgage? You might transfer the risk of premature death to an insurance company with a policy that could pay off the remaining mortgage if one of the household earners dies prematurely. It can also create liquidity which gives choices but only if you own the policy and not the bank. The insurance company then absorbs the risk, not the surviving family.

Not only does insurance do its job of assuming risk, it also defines its costs. We can obtain quotes for insurance by either picking up the phone or surfing the Internet. This is valuable information when setting up financial plans. For example, if you pass away, and one of your goals is to insure your spouse can travel while still residing in your house, you might purchase life insurance to replace your pension income.

It is important to obtain the right type and amount of insurance for whatever goals you have. In the end, insurance provides you with two important functions

Insurance allows you to accurately price each of your financial goals.
Insurance allows you to transfer the “risks of failure” to an insurer to protect your financial plans against disruptions from unexpected events. – M Dumond

Insurance – because it’s the right thing to do. Call today!

74 Cedar Pointe Dr Unit 1008 Barrie ON L4N 5T3 Tel 705-798-2105 Fax 705-719-3091

Using a Trust to avoid Probate

June 20, 2014 in Estate Planning, Uncategorized

Estate planning is a complex and often over looked topic that most people do not want to think about, because it talks about death, theirs. There are many different facets that have to be considered. One overriding concern many people have is doing something with their assets so they reduce the amount of income tax that may be owed. This is an obvious area for expert advice. However, it is important to realize there are several other factors equally as important which have to be taken into account when organizing your estate. Sometimes an unexpected event can reveal an inherent weakness in a specific type of estate planning strategy.

Concerned about his wealth and the expected complications and delays in settling his estate, Simon sought legal expertise to include his assets in a revocable “living trust”. This form of trust frequently used to enable inheritance of family assets without the complicated process of probate. Simon thought he had protected his family’s inheritance as well as he could – he consulted with his lawyer and he agreed that it would make probate much easier.
Unfortunately, Simon was not the first to die. The tenant in a duplex, owned by Simon, was fatally injured when the wooden deck collapsed. His liability insurance only covered part of the settlement, so when Simon was sued by the family, he lost most of his assets.
Simon had mistakenly thought that a trust would provide enough protection, but found out the hard way that a “revocable” living trust is weak in this respect. Because it was setup as a “revocable trust”, it meant that he was able to dissolve it at any time, and therefore the court could force him to dissolve it to satisfy a judgment. In today’s litigious society, there are ways to title assets so that you are not subject to surrender in a lawsuit. Asset protection is an evolving art that basically involves separating control of the assets from your personal wishes. That which you cannot give, the law does not require you to give, and this is the principle behind many of these strategies, often involving offshore companies and irrevocable trusts.
The disposition of the assets of a trust is dependent on a trustee, and if worded correctly , you cannot personally be forced to hand over those assets to the court. Similarly, you may be deemed not to have overriding control over the operation of a suitability established company, so cannot be required to deliver those assets in response to a court’s judgment.

Depending on the amount of wealth at risk, there are increasing levels of complexity and strategies with interconnected trusts, companies and partnerships. Financial advisors who specialize in these issues general display the T.E.P. designation and keep up with current case law, as each year new judgments result in new interpretations of the law.
Dealing with these issues requires special knowledge. If someone is looking for the optimal solution, this isn’t a situation that can be properly handled without expert advice. Every case is different. Always consult with a lawyer who specializes in trusts. People who try to sell a packaged way of organizing an estate, particularly at informational seminars, will frequently do a disservice as generic solutions cannot fully accommodate individual circumstances.

Hiring professionals to organize your estate from all angles will more than pay for itself. – M Dumond

Estate Planning –
because it’s the right thing to do. Call today!

75 Cedar Pointe Dr Unit 1008 Barrie ON L4N 5R7 Tel: 705-798-2105

Income Tax Strategies

June 20, 2014 in Tax Strategies, Uncategorized

The Team

Susan McArter, CFP

Financial Planner

sm@strategicinvestment.ca

Michael J. Dumond

Ch.F.C CLU TEP

President

md@strategicinvestment.ca

Quick Links

Strategic Investment Planning

Monarch Wealth Corporation

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Income Tax Strategies – Every Canadian tax payer has the right to pay as little income tax as legally possible, known as tax avoidance. The Canada Revenue Agency (CRA) has a very long and detailed list of rules, known as the Income Tax Act, which specifies what you can do to accomplish this. Straying outside these rules is called tax evasion and has severe consequences.It is up to each individual tax payer to claim all their tax deductions and credits. If you miss any, CRA may not advise you. However, if you miss claiming any of your income, they will certainly let you know and then collect the taxes. Remember, you have the right to arrange your financial affairs in the most tax-efficient manner possible.

Pension Income Tax Credit – Daphne has continued working after age 65 and postponed her pension and RRSP income until she retires. To take advantage of thePension Credit, she converted just enough of her RRSP into a RRIF to generate $2,000 per year of income.This federal tax credit makes the income tax-free, so she deposits the money to her Tax Free Savings account(TFSA). This helps Daphne reduce her taxable income a little more when she does retire.Make Monthly RRSP Deposits – Many Canadians find it difficult to come up with a lump-sum to deposit to their RRSP each year. Ben decided to make regular monthly deposits directly from his bank account. He also submitted a Form T1213 to CRA for approval to have his employer deduct his RRSP contributions from his income before calculating his taxes. This gives Ben an instant, ongoing tax break.

Children’s Fitness Amount – You may be able to claim up to $500 per child for fees paid that relate to the cost of registering a child in a prescribed program of physical activity. The child must have been under 16 years of age (under 18 if eligible for the disability amount) at the beginning of the year in which an eligible fitness expense was paid.

Public Transit Amount – You can claim the total amount paid for public transit passes, or for the cost of the passes for multiple transit systems. This includes the cost of monthly passes or longer duration such as an annual pass for travel on public transit. There is specific criteria required to support your claim.

Canada Employment Amount – If you reported employment income, you can claim the lesser of $1,051 and the total of the employment income you reported. The Canada employment amount provides recognition for work-related expenses such as home computers, uniforms and supplies. Sorry, self-employed individuals are not eligible for this amount.

Home Buyers’ Amount – You can claim $5,000 for the Home Buyers’ Tax Credit (HBTC) if:

you or your spouse or common-law partner acquired a qualifying home; and
you did not live in another home owned by you or your spouse or common-law partner in the year of acquisition, or in any of the four preceding years (first-time home buyer).

Tradesperson’s Tools Deduction – You may be able to deduct the cost of eligible tools you bought to earn employment income as a tradesperson (including apprentice mechanics). This cost includes any GST and provincial sales tax, or HST, you paid. You may be able to get a rebate of the GST/HST you paid. Certain conditions apply.

Individual Tax return filing and tax due- Returns and tax payments for individuals are due by April 30 of the year following the tax year. Self-employed ( and their spouses) may file their returns by June 15th, but any tax due must be paid by April 30. – M Dumond

Minimize The Taxes You Pay – because it’s the right thing to do. Call today!

For further information please call Susan MCarter or myself

Not intended as specific income tax advise. Rules may change please consult with your tax advisor

RRSP are not just for retirment

June 20, 2014 in RRSP, Uncategorized

Since 1957, when RRSP were first introduced to encourage Canadians to save for their retirement, there have been many changes that effect how money can go into and come out of them. Two programs that allow funds to be withdrawn for RRSP for purposes other than retirement income are the Lifelong Learning Plan (LLP) and the Home Buyers Plan (HBP). Here’s how they work.

Longlife Learning Plan (LLP)

Sam and Linda have raised their children to school age with Linda as a stay at home mom. She wants to re-enter the work force, but needs to upgrade her education so she can get back into her previous profession. Linda will be a full-time student. While raising their children. Sam and Linda contributed to RRSPs both in Sam’s name and in a spousal RRSP in Linda’s name. They can withdraw up to $10,000.00 each per year from their RRSPs, to a maximum of $20,000.00 total, to help pay for Linda’s education.They cannot however make withdrawals from Linda’s locked in- RRSP. Sam and Linda will be able to withdraw funds from their RRSP’s without having to pay taxes on them as long as Linda participates in a qualifying educational program at a designated educational institution. They will have to pay back the funds within 10 years ( sooner if the person who made the withdrawals dies, becomes non-resident or reaches age 71) Sam and Linda will be required to repay a portion of the original withdrawal each year. If all or part of a repayment is not made then the unpaid amount will be fully taxable.

Home Buyer’s Plan (HBP)

Glenn and Jane started RRSPs as soon as they entered the workforce. They are now ready to buy a home and may withdraw up to $25000.00 each from their RRSPs toward the purchase. They cannot make withdrawals from Locked-in RRSP plans. The home must be in Canada and they must intend to occupy it as their principle residence within one year of buying or building it. Glen and Jane must also qualify as first time home buyer in order to withdraw funds from their RRSP and not pay taxes on them. This means that neither of them could have owned a home and occupied it as a principle residence “at any time during the period beginning Jan.1 of the fourth year before the year of the withdrawal and ending 31 days before the withdrawal. If Glen and Jane make an RRSP contribution 89 days prior to making a withdrawal for HBP purposes, they will not get the tax deduction. Glen and Jane will have 15 years to repay their withdrawals ( sooner if the person who made the withdrawal dies, becomes a non-resident or reaches age 71) A minimum payment must be made each year. If all or a part of the required annual repayment is not made, then the unpaid amount must be included as income for tax purposes. – M Dumond

This article is intended to provide a brief overview of the life long Learning Plan and the Home Buyers Plan for Canadian residents and is not intended to provide specific advice. For a free copy of the Canada Revenue Agency (CRA) guide for either plan, or help in these areas please contact our office and speak with Susan or Michael.

Strategies to enhance your RRSP

June 20, 2014 in RRSP, Uncategorized

Since their introduction in 1957 as an incentive to save for retirement, Register Retirement Savings Plans (RRSP) have evolved into the most popular savings vehicles in Canada. All too often though, RRSP decisions are made in a panic to meet a deadline, with little or no planning or understanding of the effects of our actions. Here are a few top strategies to help you get the most from your RSP and retirement plans.

RSP nest egg

Make Systematic RRSP deposits

Most of us plan and budget on a monthly basis. You can do the same with monthly pre-authorized deposits to an RRSP. It is also possible to get an instant tax break by contributing this way. With approval from CCRA ( Canada Customs and Revenue Agency), your RRSP deposits can be subtracted from income before deductions are calculated. This reduces the amount that needs to be sent to Ottawa each pay period but also reduces any tax refund that may be coming to you.

Use RRSPs to save for or make a down payment on a home

Income tax legislation allows qualified home buyers to withdraw up to $25000.00 per person of existing RRSP funds for the purchase of a new home. Income tax will not be withheld on this withdrawal. Payments are required to be repaid to an RRSP over the next 15-year period. If a repayment is missed in any year, it will be considered a taxable RRSP withdrawal.

Borrow to make your RRSP deposit

You may want to consider borrowing to maximize your RRSP deposit if you don’t have the cash or have waited until the deadline. Although RRSP- loan interest is no longer tax-deductible, the immediate tax savings and long-term tax-deferred growth usually more than makes up for any loan interest cost. Due to the interest not being deductible we recommend that in most cases the loan be no more than you pay off in one year.

Reinvest your tax refund

A few weeks after filing your tax return, a refund check arrives in the mail. It’s only natural to want to spend it. A 30-year old depositing $5000.00 per year to their RRSP at 8% compounded annually will have about $861,584.00 at age 65. Assuming 40% tax savings, the RRSP will grow by an additional $330,680.00 by depositing the tax savings as well. So don’t blow your tax refund. CCRA makes it easy for us to maximize contributions. After we have filed our tax returns, they tell us what our RRSP deposit limit is for the next year. This amount appears on your most recent tax notice of chessmen. While the mechanics of RRSPs are relatively simple, the ongoing retirement financial planning associated with them can be more complex. It is highly recommended that you work with some one experienced in the are of RRSPs and retirement planning to help set up and monitor your program. Your financial comfort in retirement may just depend on it. – M Dumond

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