Estate Planning for Young Families

Having a family is a blessing and can also bring a lot of worry. A lot of this worry can stem from not being prepared for a disaster like if something were to happen to you or your spouse.

We’ve put together an infographic checklist that can help you get started on this. We know this can be a difficult conversation so we’re here to help and provide guidance.

The Children

  • What will happen to the children if both parents were to pass away?

  • Who would take care of them and until what age?

  • What would happen if only parent were to pass away?

Make sure you have a will that:

  • Assigns a guardian for your children

  • If there’s an inheritance for the children, who will take care of this? Make sure you assign a trustee for the inheritance.

  • Always choose 2 qualified people for each position and communicate your intentions with them to ensure they’re up for the responsibility.

Assets and Liabilities

  • What are your assets? Create a detailed list of your assets such as: Home, Family Business Interest, Investments- Non registered, TFSA, RRSP, RDSP, RESP, Company Pension Plan, Insurance Policy, Property, Additional revenue sources, etc…

  • What are your liabilities? Create a detailed list of your liabilities such as: Mortgage, Loans (personal, student, car), Line of Credit, Credit card, Other loans (payday, store credit card, utility etc.)

  • Understand your assets-the ownership type (joint, tenants in common, sole etc.), list who are the beneficiaries are for your assets

  • Understand your liabilities- who’s on the hook for paying back the loan?

Make sure you have a will that:

  • Assigns an executor

  • Provide specific instructions for distribution of assets

  • Always choose 2 qualified people for each position and communicate your intentions with them to ensure they’re up for the responsibility. 

Ongoing Needs

What are your family’s ongoing needs?

  • List out the living expenses

  • List out income needs

  • Do you still need to pay for school?

  • Determine if you have enough (assets minus liabilities) to take care of the family.

Make sure you review your insurance.

  • Once you determine how much need there is, review your life insurance coverage to see if it meets your needs or if there’s a shortfall.

Execution: It’s good to go through this but you need to do this. Besides doing it yourself, here’s a list of the individuals that can help:

  • Financial Planner/Advisor (CFP)

  • Estate Planning Specialist

  • Insurance Specialist

  • Lawyer

  • Accountant/Tax Specialist

  • Chartered Life Underwriter (CLU)

  • Certified Executor Advisor (CEA)

There are definitely unique situations in many families and things can get complicated so please use this when you feel it’s applicable.

Next steps…

  • Contact us about helping you get your estate planning in order so you can gain peace of mind that your family is taken care of.

Federal Budget 2021 Highlights

On April 19, 2021, the Federal Government released their 2021 budget. We have broken down the highlights of the financial measures in this budget into three different sections:

  • Business Owners

  • Personal Tax Changes

  • Supplementary Highlights

Business Owners

Extending Covid -19 Emergency Business Supports

All of the following COVID-19 Emergency Business Supports will be extended from June 5, 2021, to September 25, 2021, with the subsidy rates gradually decreasing:

  • Canada Emergency Wage Subsidy (CEWS) – The maximum wage subsidy is currently 75%. It will decrease down to 60% for July, 40% for August, and 20% for September.

  • Canada Emergency Rent Subsidy (CERS) – The maximum rent subsidy is currently 65%. It will decrease down to 60% for July, 40% for August, and 20% for September.

  • Lockdown Support Program – The Lockdown Support Program rate of 25% will be extended from June 4, 2021, to September 25, 2021.

Only organizations with a decline in revenues of more than 10% will be eligible for these programs as of July 4, 2021. The budget also includes legislation to give the federal government authority to extend these programs to November 20, 2021, should either the economy or the public health situation make it necessary.

Canada Recovery Hiring Program

The federal budget introduced a new program called the Canada Recovery Hiring Program. The goal of this program is to help qualifying employers offset costs taken on as they reopen. An eligible employer can claim either the CEWS or the new subsidy, but not both.

The proposed subsidy will be available from June 6, 2021, to November 20, 2021, with a subsidy of 50% available from June to August. The Canada Recovery Hiring Program subsidy will decrease down to 40% for September, 30% for October, and 20% for November.

Interest Deductibility Limits

The federal budget for 2021 introduces new interest deductibility limits. This rule limits the amount of net interest expense that a corporation can deduct when determining its taxable income. The amount will be limited to a fixed ratio of its earnings before interest, taxes, depreciation, and amortization (sometimes referred to as EBITDA).

The fixed ratio will apply to both existing and new borrowings and will be phased in at 40% as of January 1, 2023, and 30% for January 1, 2024.

Support for small and medium-size business innovation

The federal budget also includes 4 billion dollars to help small and medium-sized businesses innovate by digitizing and taking advantage of e-commerce opportunities. Also, the budget provides additional funding for venture capital start-ups via the Venture Capital Catalyst Program and research that will support up to 2,500 innovative small and medium-sized firms.

Personal Tax Changes

Tax treatment and Repayment of Covid-19 Benefit Amounts

The federal budget includes information on both the tax treatment and repayment of the following COVID-19 benefits:

  • Canada Emergency Response Benefits or Employment Insurance Emergency Response Benefits

  • Canada Emergency Student Benefits

  • Canada Recovery Benefits, Canada Recovery Sickness Benefits, and Canada Recovery Caregiving Benefits

Individuals who must repay a COVID-19 benefit amount can claim a deduction for that repayment in the year they received the benefit (by requesting an adjustment to their tax return), not the year they repaid it. Anyone considered a non-resident for income tax purposes will have their COVID-19 benefits included in their taxable income.

Disability Tax Credit

Eligibility changes have been made to the Disability Tax Credit. The criteria have been modified to increase the list of mental functions considered necessary for everyday life, expand the list of what can be considered when calculating time spent on therapy, and reduce the requirement that therapy is administered at least three times each week to two times a week (with the 14 hours per week requirement remaining the same).

Old Age Security

The budget enhances Old Age Security (OAS) benefits for recipients who will be 75 or older as of June 2022. A one-time, lump-sum payment of $500 will be sent out to qualifying pensioners in August 2021, with a 10% increase to ongoing OAS payments starting on July 1, 2022.

Waiving Canada Student Loan Interest

The budget also notes that the government plans to introduce legislation that will extend waiving of any interest accrued on either Canada Student Loans or Canada Apprentice Loans until March 31, 2023.

Support for Workforce Transition

Support to help Canadians transition to growing industries was also included in the budget. The support is as follows:

  • $250 million over three years to Innovation, Science and Economic Development Canada to help workers upskill and redeploy to growing industries.

  • $298 million over three years for the Skills for Success Program to provide training in skills for the knowledge economy.

  • $960 million over three years for the Sectoral Workforce Solutions Program to help design and deliver training relevant to the needs of small and medium businesses.

Supplementary Highlights

Federal Minimum Wage

The federal budget also introduces a proposed federal minimum wage of $15 per hour that would rise with inflation.

New Housing Rebate

The GST New Housing Rebate conditions will be changed. Previously, if two or more individuals were buying a house together, all of them must be acquiring the home as their primary residence (or that of a relation) to qualify for the GST New Housing Rebate. Now, the GST New Housing Rebate will be available as long as one of the purchasers (or a relation of theirs) acquires the home as their primary place of residence. This will apply to all agreements of purchase and sale entered into after April 19, 2021.

Unproductive use of Canadian Housing by Foreign Non-Resident Owners

A new tax was introduced in the budget on unproductive use of Canadian housing by non-resident foreign owners. This tax will be a 1% tax on the value of non-resident, non-Canadian owned residential real estate considered vacant or underused. This tax will be levied annually starting in 2022.

All residential property owners in Canada (other than Canadian citizens or permanent residents of Canada) must also file an annual declaration for the prior calendar year with the CRA for each Canadian residential property they own, starting in 2023. Filing the annual declaration may qualify owners to claim an exemption from the tax on their property if they can prove the property is leased to qualified tenants for a minimum period in a calendar year.

Excise Duty on Vaping and Tobacco

The budget also includes a new proposal on excise duties on vaping products and tobacco. The proposed framework would consist of:

  • A single flat rate duty on every 10 millilitres of vaping liquid as of 2022

  • An increase in tobacco excise duties by $4 per carton of 200 cigarettes and increases to the excise duty rates for other tobacco products such as tobacco sticks and cigars as of April 20, 2021.

Luxury Goods Tax

Finally, the federal budget proposed introducing a tax on certain luxury goods for personal use as of January 1, 2022.

  • For luxury cars and personal aircraft, the new tax is equal to the lesser of 10% of the vehicle’s total value or the aircraft, or 20% of the value above $100,000.

  • For boats over $250,000, the new tax is equal to the lesser of 10% of the full value of the boat or 20% of the value above $250,000.

If you have any questions or concerns about how the new federal budget may impact you, call us – we’d be happy to help you!

The Best Way to Buy Mortgage Insurance

Before buying insurance from your bank to cover your mortgage, understand the difference between self owned mortgage life insurance and bank owned life insurance. The key differences are ownership, premium, coverage, beneficiaries and portability.

Ownership:

  • Self: You own and control the policy.

  • Bank: The bank owns and controls the policy.

Premium:

  • Self: Your premiums are guaranteed at policy issue and discounts are available based on your health.

  • Bank: Premiums are not guaranteed and there are no discounts available based on your health.

Coverage:

  • Self: The coverage that you apply for remains the same.

  • Bank: The coverage is tied to your mortgage balance therefore it decreases as you pay down your mortgage but the premium stays the same.

Beneficiary:

  • Self: You choose who your beneficiary is and they can choose how they want to use the insurance benefit.

  • Bank: The bank is beneficiary and only pays off your mortgage.

Portability:

  • Self: Your policy stays with you regardless of your lender.

  • Bank: Your policy is tied to your lender and if you change, you may need to reapply for insurance.

We’ve created an infographic about the difference between personally owned life insurance vs. bank owned life insurance.

Talk to us, we can help.

Financial Planning

A financial plan looks at where you are today and where you want to go. It determines your short, medium and long term financial goals and how you can reach them.

Why do you need a Financial Plan?

  • Worry less about money and gain control.

  • Organize your finances.

  • Prioritize your goals.

  • Focus on the big picture.

  • Save money to reach your goals.

What does a Financial Plan include?

There are 2 main sides your financial plan should address: Accumulation and Protection

Accumulation:

  • Cash Management – Savings and Debt

  • Tax Planning

  • Investments

Protection:

  • Insurance Planning

  • Health Insurance

  • Estate Planning

What’s the Financial Planning Process?

  • Establish and define the financial planner-client relationship.

  • Gather information about current financial situation and goals including lifestyle goals.

  • Analyze and evaluate current financial status.

  • Develop and present strategies and solutions to achieve goals.

  • Implement recommendations.

  • Monitor and review recommendations. Adjust if necessary.

Next steps…

  • Talk to us about helping you get your finances in order so you can achieve your lifestyle and financial goals.

  • Feel confident in knowing you have a plan to get to your goals.

Insurance Planning for Young Families

For young families, making sure your family is financially protected can be overwhelming, especially since there’s so much information floating online. This infographic addresses the importance of insurance- personal insurance.

The 4 areas of personal insurance a young family should take care of are:

  • Health

  • Disability

  • Critical Illness

  • Life

Health: We are so fortunate to live in Canada, where the healthcare system pays for basic healthcare services for Canadian citizens and permanent residents. However, not everything healthcare related is covered, in reality, 30% of our health costs* are paid for out of pocket or through private insurance such as prescription medication, dental, prescription glasses, physiotherapy, etc.. Moreover, if you travel outside of Canada, medical emergencies can be extremely expensive.

Disability: Most people spend money on protecting their home and car, but many overlook protecting their greatest asset: their ability to earn income. Unfortunately one in three people on average will be disabled for 90 days or more at least once before age 65. Disability insurance can provide you with a portion of your income if you were to become disabled and unable to earn an income.

Critical Illness: For a lot of us, the idea of experiencing a critical illness such as a heart attack, stroke or cancer can seem unlikely, but almost 3 in 4 (73%) working Canadians know someone who experience a serious illness. Sadly, this can have serious consequences on you and your family, with Critical Illness insurance, it provides a lump sum payment so you can focus on your recovery.

Life: For young families, if your loved ones depend on you for financial support, then life insurance is absolutely necessary, because it replaces your income, pay off your debts and provides peace of mind.

Talk to us about helping making sure you and your family are protected.

Guide to Covid-19: Government Relief Programs in Canada

The intention for our “Guide to Covid-19: Government Relief Programs in Canada” is to help businesses and individuals to cut through the noise and make sure they’re getting all the help they can receive from the federal and provincial programs.

Federal programs include:

  • Small Business Wage Subsidy

  • Canada Emergency Wage Subsidy

  • Canada Emergency Business Account

  • Canada Emergency Response Benefit

  • Student Loan Programs

Individual provincial programs include:

  • Utilities

  • Housing

  • Student Loan Programs

Succession Planning for Business Owners

Succession Planning for Business Owners

Business owners deal with a unique set of challenges. One of these challenges includes succession planning. A succession plan is the process of the transfer of ownership, management and interest of a business. When should a business owner have a succession plan? A succession plan is required through the survival, growth and maturity stage of a business. All business owners, partners and shareholders should have a plan in place during these business stages.

We created this infographic checklist to be used as a guideline highlighting main points to be addressed when starting to succession plan.

Needs:

  • Determine your objectives- what do you want? For you, your family and your business. (Business’ financial needs)

  • What are your shares of the business worth? (Business value)

  • What are your personal financial needs- ongoing income needs, need for capital (ex. pay off debts, capital gains, equitable estate etc.)

There are 2 sets of events that can trigger a succession plan: controllable and uncontrollable.

Controllable events

Sale: Who do you sell the business to?

  • Family member

  • Manager/Employees

  • Outside Party

  • There are advantages and disadvantages for each- it’s important to examine all channels.

Retirement: When do you want to retire?

  • What are the financial and psychological needs of the business owner?

  • Is there enough? Is there a need for capital to provide for retirement income, redeem or freeze shares?

  • Does this fit into personal/retirement plan? Check tax, timing, corporate structures, finances and family dynamics. (if applicable)

Uncontrollable Events

Divorce: A disgruntled spouse can obtain a significant interest in the business.

  • What portion of business shares are held by the spouse?

  • Will the divorced spouse consider selling their shares?

  • What if the divorced spouse continues to hold interest in the business without understanding or contributing to the business?

  • If you have other partners/shareholders- would they consider working with your divorced spouse?

Illness/Disability: If you were disabled or critically ill, would your business survive?

  • Determine your ongoing income needs for you, your spouse and family. Is there enough? If there is a shortfall, is there an insurance or savings program in place to make up for the shortfall amount?

  • Will the ownership interest be retained, liquidated or sold?

  • How will the business be affected? Does the business need capital to continue operating or hire a consultant or executive? Will debts be recalled? Does the business have a savings or insurance program in place to address this?

Death: In the case of your premature death, what would happen to your business?

  • Determine your ongoing income needs for your dependents. Is there enough? If there is a shortfall, is there an insurance or savings program in place to make up for the shortfall amount?

  • Will the ownership interest be retained, liquidated or sold by your estate? Does your will address this? Is your will consistent with your wishes? What about taxes?

  • How will the business be affected? Does the business need capital to continue operating or hire a consultant or executive? Will debts be recalled? How will this affect your employees? Does the business have a savings or insurance program in place to address this?

Execution: It’s good to go through this with but you need to get a succession plan done.  Besides having a succession plan, make sure you have an estate plan and buy-sell/shareholders’ agreement.

Because a succession plan is complex, we suggest that a business owner has a professional team to help. The team should include:

  • Financial Planner/Advisor (CFP)

  • Succession Planning Specialist

  • Insurance Specialist

  • Lawyer

  • Accountant/Tax Specialist

  • Chartered Life Underwriter (CLU)

Next steps…

  • Contact us about helping you get your succession planning in order so you can gain peace of mind that your business is taken care of.