Paying for Education

Post-secondary education can be expensive, however having the opportunity to plan for it helps with making sure that you’re capable to meet the costs of education. In addition, when you have a plan, it’s easer to make financial decisions that align with your goals and provide peace of mind. In the infographic, we outline 7 sources of funds for paying for post-secondary education:

  • Registered Education Savings Plan
  • Tax Free Savings Account
  • Life Insurance
  • Scholarships, grants, bursaries
  • Personal Loans, Lines of Credit
  • Government Student Loan
  • Personal Savings

Revisiting Your Estate Plan

 These 4 reasons will compel you to revisit your estate planning 

For most of the people, a watertight estate planning means finding the best ways to equip themselves for contingencies, reduce the tax liability for their estate, and signing up for investment plans to ensure that their money continues to earn money for them. Undeniably, the components mentioned above underlie at the core of estate planning. However, there are a couple of crucial aspects at the periphery; which, when addressed effectively will provide a layer of protection to your estate planning. Unfortunately, most of the times they either get ignored or else are dealt rather inefficiently.  
 

Here are the four key components that will fortify your estate planning: 

Make a Will 

You never know what tomorrow has in store for you. Therefore, irrespective of your age get a will done first thing first. A survey done by CIBC last year revealed that almost 50% of Canadians do not have a will. It’s a fact that shouts out widespread ignorance prevailing in the arena of estate planning concerning the significance of making a will. Another prominent rationale behind creating a will is that if the deceased one leaves no will behind him/her, the government becomes the ultimate authority to decide how the execution of the estate will take place. In such a scenario, the chances are that your assets never reaches your loved ones for whom you had created it and may go to the wrong people indeed. Creating a will is one of the most emotional decisions of your life. However, they come out best when approached pragmatically. Take some time out of your busy schedule to safeguard the interest of your people. 

Reassess your estate plan when encountered with a sudden life event 

Life is a zigzag graph and never a straight line. Major occurrences might just come across you path in the most unexpected ways and at the most unanticipated times. It could be marriage or divorce. It could be the second marriage. Or else, it could be a sudden financial upheaval or abrupt gains. In such a situation, never forget to reassess your estate plan and make the necessary adjustments that suit your existing situation best. Otherwise also, doing a periodic reassessment of your estate plan keeps you future-ready.

Share your estate plan 

Talk about your estate plan to your loved ones. Share the details of your estate planning with your family. Agreed that managing expectations of one and all and gratifying every member’s desire is a task, which is so hard to accomplish that it never happens. Still, let your kin sneak a peek into your estate planning. You can always reason with your family about your decision and your motive behind it. Besides, they also get a chance to present their opinion to you about your verdict when you are still alive and eating dinner with them.

While planning your estate rather choose your heart than the brains 

However, in your quest to create a mastermind estate plan, do not lose your focus. So many times just to save on paying taxes; you may end up taking decisions that may make you regret later. Let your heart rule when it comes to matters of succession and transfer of your estate. 

Please don’t hesitate to contact us for a review of your estate plan.
 

The Difference between Interest, Dividends and Capital Gains

Usually our concept of income is derived from labor which leads to a fixed or variable wage for a certain time duration. Another type of income is investment income which results from investing in various financial assets. Investment income can take the form of dividends, interest payments, rent, royalties and capital gains. Investment income is basically money or an asset creating more money without any physical effort, per se, by the investor. The nature of such an income makes it attractive but not risk free. The investment portfolio can consist of savings in physical assets like real estate and commodities or in financial assets like stocks, bonds, and segregated funds etc.

Overview of Income

Investment income can be divided into three areas: dividend income, capital gains and interest income. The accrual of these incomes differs by the virtue of their source. By having a diverse investment portfolio the risk of investment can be spread out and an investor can accumulate sizeable profits from these various sources over the course of a defined time period.

Interest Income

The economy functions on the principle of borrowing and lending to perform certain functions. According to the principle a decrease in the value of money over time, the people who lend should be compensated in some way for making their funds available to the borrower. The lenders or investors into different pools such as bonds or GICs will receive an interest income. The interest income is the compensation to the lender. The borrowing company or institution is liable to pay the interest on the defined time to the lender. Interest income is taxable and can accumulate to a sizeable amount overtime depending on one’s initial investment. The individual taxpayer will use the annual accrual method of reporting interest income, in this case the taxpayer has to report the income as it is earned even if it hasn’t been received. The inclusion rate for interest is 100%.

Dividend Income

Companies with shareholders have to pay a certain amount to these investors for putting their money into the business. The shareholders have the option of participating in the company’s affairs or remaining passive, depending on their status. For instance, in private limited companies, shareholders are more involved while in public limited companies there is a divorce between ownership and control and shareholders are more passive. 

Nevertheless, the company as a separate legal entity makes profits or losses on an annual basis. Out of these profits it pays the shareholders their share according to their investment, this payment is known as dividend. Thus the money a shareholder’s capital garners over the course of the year is known as dividend income. The corporation is obligated to pay these dividends to the shareholders and the exact time when these dividends are paid can differ according to the type of shares the shareholder has. 

Dividends are subject to taxation but in order to avoid double taxation investors can get a dividend tax credit. Adjusting income avoids double taxation of dividend income. Therefore dividends receive preferential tax treatment through the dividend tax credit. Dividends from public corporations qualify as ‘eligible dividends’ and have an inclusion rate of 138% where as non-eligible dividends are included at 125%.

Capital Gains

This type of income refers to the earnings from an increase in the value of an asset. It is basically the difference between the purchase price and the selling price of an asset. Capital gains are only realized at the time of sale; it is therefore not classified as property income because it requires certain amount of effort to sell the asset to earn profits.

Contact us to learn how we can help.

Paying for Medical Expenses

Although we enjoy health care benefits in Canada, there are still some benefits that are not covered by the government. There are a number of ways to pay for these benefits such as directly paying out of pocket, using a health insurance plan or private health services plan or a combination of these structures.

As always, please consult us prior to implementing any of these strategies.

Easy Exit: Business Succession in a Nutshell

Getting into the world of business is a meticulous task, but so is getting out of it

Whether you’ve just hit the ground running on your business or if you’ve been at it for a long time, there is no better time to plan your exit strategy than now.

Although the process may seem taxing, we’ve answered a few questions you may have about planning your business succession strategy.

1. Who do I talk to about this?

Deciding on how to go about the transition requires careful planning, and you need to consult no less than people who are well equipped to help you out. First, talk to your key advisors such as bankers and financial partners. You could also use some advice from your accountant and lawyers. If your company has an advisory board, better consult them as well. You may also hire a specialist or a consultant, depending on how you choose to go about your business succession plan.

2. Who should I choose as a successor?

There are several ways to go about this, and your decision will ultimately be your personal choice. You may pass on your business to a family member or to your top executives or managers. You may also choose to sell it to an outsider. Whichever path you choose, you can also decide on how much you want to be involved in the business after you pass it on. That is, if you want to be involved at all.

3. When should I inform my successor about my plans?

While a surprise inheritance may be heartwarming, it’s not the same with inheriting a business. Getting a successor ready—whether it’s a family member or someone from your company—requires careful planning and training. As soon as you’ve chosen a successor, better get started on getting them ready for the big shoes they’re about to fill. This includes helping them equip themselves with the necessary skills, knowledge, and qualifications necessary to run your business.

4. How do I plan the transition itself?

The transition will be twofold—transferring ownership and handing over the business itself. As far as transferring ownership is concerned, you need to consider legal and financial details. These include valuation, financing, and taxation. You also need to consider if you wish to keep your current legal structure (corporation, sole prop, partnership, etc.) or if you (or your successor) would like to change it.

You also need to plan how to prepare various stakeholders in the business for the transition. How will you prepare your customers, clients, and employees? What would be their level of involvement? Make sure that you put different strategies in place in order to ensure transparency and consistency in communicating changes in your business, especially something as drastic as succession.

5. Now that I have a business succession plan ready, can I go back to business as usual?

Not really. Your business and your customers’ needs may change over time. This means that you need to keep reviewing and adjusting your plan as your business also evolves.

 

The Importance of a Financial Plan

The importance of a financial plan. Working with us to create your financial plan helps you identify your long and short term life goals. When you have a plan, it’s easier to make decisions that align with your goals. We outline 8 key areas of financial planning:

Read more

Federal Budget 2017: Business

Finance Minister Bill Morneau delivered the government’s 2017 federal budget on March 22, 2017. The budget expects a deficit of $23 billion for fiscal 2016-2017 and forecasts a deficit of $28.5 billion for 2017-2018. Find out what this means for businesses.

Read more

Federal Budget 2017 Families

Finance Minister Bill Morneau delivered the government’s 2017 federal budget on March 22, 2017. The budget expects a deficit of $23 billion for fiscal 2016-2017 and forecasts a deficit of $28.5 billion for 2017-2018. Find out what this means for families.

Read more

Alberta Budget 2017

Alberta Finance Minister Joe Ceci delivered the province’s 2017 budget on March 16, 2017. The budget anticipates a deficit of $10.3 billion for the 2017-2018 fiscal year, $9.7 billion for 2018-2019 and $7.2 billion for 2019-2020.

Read more

The Importance of a Buy Sell Agreement

Having a buy sell agreement is important business partners. A buy-sell agreement should outline the contingencies for different outcomes, trigger events and be put in place to protect you. Often Buy-sell arrangements are also insured.