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Estate Planning
10-10-10-10-60
No, this is not a John Lithgow long-distance plan commercial. Remember these numbers, however, when allocating your paycheque.
All too often, people experience financial stress when something happens and they haven’t done a proper job of allocating their income. Ideally, an allocation plan will become a habit that leaves you prepared for just about any eventuality. Here’s how:
10% for Lifestyle Protection – Disasters happen and most rarely make the news. You have likely experienced at least one already. Very few people are in the financial position where they can cover the cost of an event without the help of insurance. Use life insurance to cover debts, last expenses and income replacement on death; vehicle insurance to cover the costs of damages or injuries; property insurance to replace lost or damaged property; critical illness insurance to help recover from a serious illness; disability insurance to replace a portion of your income if you can’t work because of illness or injury; travel insurance if you become ill while travelling outside your province or country.
10% for Savings – There will come a time when you will need funds for a certain event in your future. Put aside these funds regularly for things like education, home down-payments and, perhaps most importantly, an emergency fund. Eventually your savings should be at a level that will allow you to allocate some of these funds to other things.
10% for Investing – An investment is something that will generate an income, either right away or sometime in the future. This includes retirement savings, a business, income generating real estate, or funds that generate a regular income.
10% for Giving – There are financial benefits to you for giving to charity. The first $200 generates a non-refundable tax credit or 15%. Everything above that, within limits, gets a credit at the top tax rate no matter what tax bracket you are in. In Alberta, for example, the maximum credit is actually 50% which is 11% higher than the maximum tax bracket of 39%.
60% for Lifestyle – This is where everything else comes from – your home, your vehicle(s), your food and clothing, your vacations, your entertainment and hobbies. All too often, this portion gets too much income allocated to it and is the first to suffer when something goes wrong.
Your income is what makes your lifestyle possible. However, if your income stops due to illness, injury or death, will there be adequate funds for you and your family to maintain your lifestyle? Will your resources be adequate if you experience a short period of unemployment, when a child is ready for post-secondary education, or if you need legal help with an unforeseen problem? Will you have enough independent income in the future or will you have to keep working at a time when you would have preferred retiring?
If you don’t have a problem tipping a server 15% to 20%, why not pay yourself a little better than that? – M Dumond
CH.F.C., CLU
President
Certified Financial Planner
How to benefit from using a financial advisor
In This Issue
- Lifestyle Protection
- Estate Planning
- Retirement Planning
- Tax Efficiency
- Team Leader
The results of a recent poll reported by Fidelity Investments stated that 71% of retirees who worked with a financial advisor have the retirement they were hoping for. Of those retirees who did not use did not use an advisor, only 53% have the retirement they had hoped for. Additionally, 52% of pre-retirees expect to continue working in retirement, and 48% of working retirees do so for financial reasons.
If you are serious about achieving your financial objectives, chances are you need a financial advisor. He/she will help you identify your unique problems and define your goals in specific, measurable terms. Then your advisor will provide detailed recommendations that can help you reach your goals.
Some advisors work for fees only. Since fees can run into thousands of 
dollars, fee only advisors are usually employed by the more affluent. Some advisors are compensated entirely by commissions earned on the financial products acquired through them. Others use a combination of fees and commissions to provide a more affordable service.
No advisor, no matter how much they are paid or how good they are, will magically solve all your financial problems. The aim is to help you define your goals, establish their order of importance, and show you how to achieve them.
What can a financial advisor do for you? Here are some key benefits:
Lifestyle Protection – We all face the same risks in life that can disrupt our lifestyles,
namely death, disability, old age, and employment interruption. Your advisor can help you measure these needs and put in place appropriate plans to minimize their effect on you and your loved ones.
Estate Planning – Just as you wouldn’t expect your home to be built by someone who didn’t use blue prints, don’t expect your family to take care of your affairs without clear written plans for the event of your death or illness. Your advisor can also work with other professionals who will help you with important estate documents and strategies.
Retirement Planning – After determining your risk tolerance and calculating your retirement income needs, your financial advisor can recommend appropriate savings plans to help you reach your goals. He will also regularly review your plans to make sure you are still on track.
Tax Efficiency – Every Canadian has the right, perhaps even the duty, to pay as little income tax as legally possible. Your advisor can help you arrange your finances in as tax efficient manner as possible, and make recommendations of various alternative methods to pay any income taxes that do become payable as inexpensively as possible.
Team Leader – A proper financial plan can often require the services of several professionals, including lawyers accountants and bankers. Your financial advisor can act as the leader of this team to make sure all the different parts of your overall financial plan get implemented in a timely, cost efficient manner. – M Dumond
How to handle a large lump sum
Karyn won three million dollars in the lottery, a dream come true. She remembers reading about previous lottery winners and the fact that most had little to nothing to show for their luck after two years. Karyn was determined to not let that happen to her.
When his mother died, Randy was left with a substantial amount of cash from her estate. While his parents had lived frugally all their lives, Randy is better at spending money. However, he doesn’t want to fritter away his inheritance.
Jayne, a new widow, received over a million dollars in life insurance proceeds when her husband, Mike, died. Its purpose was to maintain her lifestyle in just such an event. With two young children, money matters should be the least of her worries.
Most people who suddenly receive a substantial amount of money are not prepared to handle it. We have all heard about the lottery winners who vowed they would not let the money change their lives, but soon became the best customer at the local auto dealer, travel agency and electronics store.
It can be hard to resist going on a little spending spree. But all too often it is virtually impossible to stop buying until the money is all gone. It is vital to enlist the help of a professional financial advisor.
When someone “comes into some money” like in the examples above, it is important to take some time before making any big financial decisions. This may be a few weeks or several months.
It is critical to set some realistic financial goals. They should include:
Pay off non tax deductible debt
Pay off debt – The debt with the highest interest rate first. With interest charges on credit card balances as high as 20% or more, these should be paid off right away.
Max out RRSP and TFSA deposits
Catch up on RRSP and tax free savings account deposits – In Jayne’s case, she can even maximize her husband’s RRSPs too. This will reduce or eliminate the taxes on his final tax return. She can roll his RRSPs, tax-free, into her name and keep postponing taxes until she retires.
Review life insurance
Review life Insurance – It can be tempting to let policies go if there is lots of cash on hand. Some types of insurance products can be used to build up investments and save taxes at death. Imagine making premium payments with pretax dollars as opposed to after tax. Your estate will need liquidity when you die and the taxman will need to be paid. Life insurance is the best way to do this.
Invest most of the money for income 
Invest most of the money for income – Think of a large amount of money as a “cash cow” that gives you milk in the form of income. If you slaughter the cow, it can’t produce milk. So, if you spend all the money, it can’t generate income.
There are investment products that can guarantee income for your life and that of your spouse.
Karyn can still get herself some nice things, but she can use the income from her cash cow to pay for them. By leaving the cow alone, she still has a steady income. Part of the planning that Mike and Jayne did included a home free and clear. She can use the income to continue making mortgage payments and she will still have the income when it’s paid off. Randy can top up his RRSPs and buy a nice home, paid for with his new income. -M Dumond
Your Financial Future
Much of what we do today is to improve our financial position in the future. As with anything, we can get better results by following a plan. This is why both Estate Planning and Financial Planning are important for those who want to ensure better tomorrows for ourselves and our families.
Financial Planning focuses on what we want to happen while we’re still alive. Estate Planning is concerned with what we want to happen here on earth after our death. It’s best to start with the Estate Plan because no one knows how soon it will be needed. Also, a well thought out Estate Plan provides direction for the development of your Financial Plan. 
The first step in planning your estate is to decide what you want to happen to the people you care for after your death. For example, how much income do you want your widow to have? If you want your family to have a debt-free state, how much is needed to pay off your 
debts? Some income taxes are triggered by death. How much tax will your estate have to pay before your heirs can inherit? If you have a business interest, do you want it to be sold or retained? If it’s to be sold, who will buy it? What will be needed to guarantee the sale? If you want it to be kept in the family, who will run it? What will they need to keep it going? 
After you decide on the things you’d like to see happen, you can begin figuring out how to improve their chances. Some of your decisions can be written in your Will as directions to your successors. Others may need special written Agreements with other people to make sure that they will happen. Some assets will be in the wrong form to do what you want. You may want to make arrangements to convert them to another form at your death. For example, an interest in a private business could be converted to cash by means of an Insurance-Funded Buy-Sell Agreement. 
Some of your assets may be of the right type for your heirs and you want to preserve them from the tax collector and other creditors. What you need is a method of creating instant, adequate cash at death to satisfy the vultures. Some of us may discover that we don’t have enough to leave our family in the position we’d like them to be. We then need instant cash at death to create our estate. A sad fact is that many people will spend more time planning a vacation or dinner party than their financial future. Your trip to your financial future deserves at least equal conce
rn about the risks ahead. Then you can try to avoid them or offset their adverse consequences. Is your financial vehicle in good condition? Will there be enough cash or income to offset such common risks as death, disability or serious illness? Have you reviewed your financial trip insurance lately? – M Dumond Give us a call and we can take a closer look and see how we can help you plan for your financial future.
Toll free: 888-722-3604
How to prepare a personal estate checklist
No one likes to think about dying. Imagine for a moment, the affect on those that will be called upon to settle your estate if they have to figure out what you’ve got and where it all is. Not a very pretty picture? It doesn’t have to be. Thats why a “personal estate checklist” is important. The following Information should be included in your checklist:
Vital Statistics – This includes Social Insurance Numbers, Birth Certificates, Marriage Certificates, etc., for you, your partner and offspring.
Will and Other Estate Documents – Your will has instructions for what needs to be done with your affairs when you die. Your Enduring Power of Attorney and Personal Directive cover these decisions for you if you don’t die and can’t manage your affairs.
Bank Accounts and Safe Deposit Boxes – Millions of dollars are turned over to the Bank of Canada because bank account holders can’t be located. While you are a live always keep your adress current. That way statements will still be mailed to yourresidence.
Creditors – One of the lines in the first paragraph of most wills states that all creditors must be paid before the rest of the estate can be distributed.
Life and Accident & Sickness Insurance – Record your insurance advisors’ name and contact information. This will aid in the claims process. Also record names of companies, policy numbers, type of insurance and location of policies to make sure none are missed.
Funeral Arrangements – Is it becoming more common to pre-arrange and even pre-pay for your funeral. Record the information of the funeral service you have used and the location of paperwork. If you want to donate organs make sure your organ donnor card is signed and tell some one of your wishes.
Investments – You’ve worked hard for your money and your life savings are likely in several plans. Record the type of investment, the account number and location of statements and how to contact your investment advisor.
Property and Casualty Insurance – You have insurance on your home, vehicl
es, recreation property or RVs, and the other important things in your life.Keep a record of this information.
Real Estate Holdings – This includes your home, cottage, investment properties and foreign retirement property. A record of this also helps in settling income taxes quickly and efficiently.
Business Interests – If you have ownership in a business, proper disposition or management will need to be dealt with if you are unable to due to illness or death. Make a record of all your business documents and agreements that deal with its disposition. Such as buy sell agreements upon death or disabilty or marriage breakdown.
Professional Advisors – Make a list of all your advisors including insurance and investment advisor, lawyer, accountant, banker, doctors, specialists, dentist, and any other professionals you work with.
Okay, now that you have your checklist done, what do you do with it? Update it regularly, especially when there are changes in your life. Keep it in a safe place , but not in your safe deposit box. Make a copy and give it to your trusted advisor. And let the person who will be in charge know where it is. – M Dumond
Please click on the link below to see a sample:
CH.F.C., CLU
President
Certified Financial Planner
Toll free: 888-722-3604
2014 to-do list, how you doing
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
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
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 
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.
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Barrie ON L4N 5T3
705-798-2105
Using a Trust to avoid Probate
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 –
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