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The Estate Bond

Growing your estate without undue market risk and taxes

Often we see older investors shift gears near retirement and beyond.  Many become risk-averse and move their assets into fixed income type investments.  Unfortunately, this often results in the assets being exposed to higher rates of income tax and lower rates of return – never a good combination.

Or maybe the older investor cannot fully enjoy their retirement years for fear of spending their children’s inheritance.

The Estate Bond financial planning strategy presents a solution to both of these problems.

How does it work?

  • Surplus funds are moved out of the income tax stream and into a tax-exempt life insurance policy.
  • Each year a specified amount is transferred from tax exposed savings to the life insurance policy.

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Protecting Investments for Your Heirs

Many investors over the age of 60 find themselves in a quandary regarding investments that they intend to leave to their heirs.  The primary concern involves the desire to conserve the investments they are bequeathing while at the same time earning a reasonable rate of return.  As we all know, the volatility of the equity markets can be cruel and this can be most detrimental when investments do not have time to recover after a downturn.  As a result, many mature investors choose to accept low rates of return in order to avoid loss in the funds they wish to leave to family members.

If you share these concerns, then Segregated Funds (also known as Guaranteed Investment Funds) may be the solution.  Segregated Funds are similar in performance and cost to Mutual Funds but come with some very attractive advantages.  Since Segregated Funds are offered by life insurance companies, they contain guarantees both at maturity and at death.  Read more

TFSA or RRSP? 2020

One of the most common investment questions Canadians ask themselves today is, “Which is better, TFSA or RRSP”?

Here’s the good news – it doesn’t have to be an either or choice.  Why not do both? Below are the features of both plans to help you understand the differences.

Tax-Free Savings Account (TFSA)

 Any Canadian resident age 18 or over may open a TFSA. Contribution is not based on earned income.  There is no maximum age for contribution.

  • For 2019 and 2020, the maximum contribution is $6,000.
  • There is carry forward room for each year in which the maximum contribution was not made. For those who have not yet contributed to a TFSA, the cumulative total contribution room for 2019 is $63,500.  This will increase in 2020 to $69,500.
  •  The deposit is not tax-deductible, but the funds accumulate with no income tax payable on growth.
  •  Withdrawals may be made at any time on an income tax-free basis.  Withdrawals create additional deposit room commencing in the year after withdrawal.

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Protecting Your Family

Let’s face it, raising a family today can be financially challenging.  The cost of living continues to increase, housing costs are rising along with education and extra-curricular activities for our children.  It is tough to make ends meet and still have something left over at the end of each month.

Most families today require both parents to work to afford the lifestyle they enjoy.  Losing one of those incomes through premature death, illness or a disability is a real risk that many families would have a difficult time facing emotionally and financially.

How do you protect your family?

  • Life insurance is designed to protect your family by providing the resource to replace income, pay off debt, and fund future education costs in the event that one of the parents dies.
  • Disability, or income replacement insurance, is designed to replace lost income if an individual is not able to work due to accident or sickness.
  • Critical Illness insurance will pay a lump sum benefit in the event of a diagnosis of many major illnesses.

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What is Key Person Insurance?

Most business owners understand that assets vital to the success of the enterprise should be insured.  Premises are routinely covered for fire and/or theft; vehicles used to make deliveries, insured; machinery needed for manufacturing, also insured. Given that these tangible assets are instrumental in the success of the business, it makes good business sense that the business is protected in the event of a loss.   But what about key employees? Many business owners overlook the impact on their business should a key employee die unexpectedly.

If you own or manage a company whose continued success is dependent on key people (it might even be you), it would be prudent to insure all key personnel whose death or incapacity would negatively affect profitability.  Key persons are those who contribute to the continuing success and profitability of the enterprise.

What happens when an owner or key person dies or becomes disabled? Read more

ARTICLES OF INTEREST

27
Jan

Six Important Reasons to have a Will

It has been said that a Will is the last message you will leave your family.  Having a Will can provide clear direction as to what your wishes are and who will get what.  Die without a Will (known as dying intestate) and chaos will likely be the result.  Having a Will allows you to provide for certainty instead of chaos.

Most of the reasons to have a Will have to do with what happens if you don’t have one and that often will depend on what province you reside in.  Each provincial government has its own Wills and Estate legislation which also provides for the rules regarding intestacy.  The following are some of the reasons to have a Will and what could result without one.

  1. Informs your family how and when your property is to be distributed

Your Will affords you the opportunity to give clear instructions as to whom will receive your wealth.  It also allows you to make bequests of certain items such as family heirlooms which you may wish to leave to a specific individual. For those who wish to leave funds to a charity, the Will allows you to do this.  Without a Will, this opportunity may be lost. The bottom line is that you make the call.  Dying without a Will means that the provincial government will make the determinationon how your estate is to be distributed depending on the intestacy laws. Read more »