Meeting Your Education Savings Goals

You may find that your child’s dreams and aspirations change like the wind. One day your bright teenager will tell you they want to be a lawyer instead of an engineer. Your oldest may decide to go to medical school after graduating from university. As a responsible parent, you’d like to be able to make your child’s career aspirations come true, even if it is more expensive than you originally planned. You also have to consider the extra costs involved with studying out of town or abroad, circumstances you may not know until a few months before it happens. We would like to help you cover for situations like these, so please read further to learn more about meeting your education savings goals.

First step: build an RESP

The Registered Education Savings Plan (RESP) should be the backbone of your education savings. The contribution limit is $50,000 per child. This plan benefits from tax-sheltered investment growth, and any withdrawals made for funding tuition costs is taxed under your child’ s name. If that wasn’t attractive enough, each year the government will deposit $500 into your plan for the first $2,500 contributed. This is called the Canada Education Savings Grant (CESG). The limit is $7,200 per child.

Second step: contribute to a TFSA

The next step is to contribute money into your or your spouse’s Tax-Free Savings Account (TFSA). This is another tax-free vehicle that you should take full advantage of. You can withdraw funds for your child whenever you need them, and you can replenish the account the year after your withdrawal.

Third step: open an in-trust account

It is also a good idea to open an in-trust investment account in your child’s name. You are able to contribute as much money as you like and you have full control in what you invest it in. Any capital gains generated from these investments are taxable to your child and not to you. Any interest or dividend income is taxable to you though, until your child turns 18. It is important to remember that putting money into an in-trust account means that the money now belongs to your child. When they reach the age of majority, you will no longer have legal control over the funds.

If you want to know if your education savings will be enough to meet your child’s education goals, you should talk to a financial advisor at The Beacon Group of Assante Financial Management Ltd. today!

Taxes and Succession Planning

You spend your whole life paying taxes, why should the last step into retirement be any different? As you prepare yourself and your company to be transitioned to the next generation of owners and operators it’s important to plan for the taxes associated with your succession plan. Be certain to discuss with your financial advisor and legal counsel to determine which succession plan is best for your tax situation. Here is a brief look into a few options available to someone who is wishing to retire or sell their business.

Selling shares held in your own name to an outside party

You are able to sell personally held shares, but they are subject to a capital gains tax. There is a lifetime exemption of $750,000.00 in qualified small business corporation shares that you may be able to apply to the sale of your business. This is a possible way to offset a portion of the capital gains tax; this should be discussed with your financial advisor.

Selling corporate assets or corporately-held shares to an outside party

Another option for selling the company is to sell the corporate assets or the shares of the business held by a corporation or a holding company. The types of assets sold and the amount of income generated by the sale will determine how the taxes are to be treated. Once the corporation has liquidated all of its assets and no longer operates, you can choose to either dissolve the corporation or keep it operating to hold some of the revenue generated from the sale as a way of deferring taxes. This income can be paid to shareholders as dividends over the course of time.

Estate Freeze

This method is best for transferring the ownership to a chosen successor, not an outside party. This is typically done by transferring the common shares into preferred shares and then issuing common shares to the beneficiaries. This essentially freezes the tax liability and allows the successor to come into the business with little investment contribution. This is a commonly used practice when it’s a family business and the next generation is taking over.

Succession planning can be an exciting time because it means the next chapter in your life is on the horizon. But be certain to plan closely with your financial advisor from The Beacon Group of Assante Financial Management Ltd. in order to achieve the most tax beneficial and best plan available to you and your company.

Adjusting Financial Plans When Your Marital Status Changes

Any change in marital status is a significant life shift, and thus it should always be accompanied by a reevaluation of your financial health. Whether you are getting married, divorced, or have been widowed, you will have to update your will and adjust the beneficiaries of your pension plan and insurance plan. Additionally, any big change in life status presents a fitting opportunity to reassess your investments, family trusts, and estate planning.

Marriage

If you are planning to get married, you should evaluate your financial options long before “I dos” are exchanged. Marriage opens up a whole new realm of financial opportunities, whether you and your spouse will be combining incomes or a non-earning spouse needs financial protection. Your financial advisor from The Beacon Group at Assante Financial Management Ltd. can help you assess your options. Additionally, marriage is an opportunity to take advantage of beneficial tax planning strategies, like income-splitting and combined or transferred tax credits.

Divorce

At the other end of the spectrum from marriage is divorce, but it’s an equally important life event in terms of the financial implication. You must cope with a reduction in financial assurances, like adjusting to a single income. Whether you are the spouse who is receiving or paying a lump sum settlement, you must make arrangements to give or receive such a large sum. Finally, it would be wise to invest in disability or critical illness insurance in case you are ever forced out of work. The team at The Beacon Group of Assante Financial Management Ltd. will assist you in developing a comprehensive financial plan that protects the future of you and your children as you navigate this stressful life circumstance.

Remarriage

If you are getting remarried and there are children involved, you will need to update insurance coverage and possibly equalize education savings. Your financial advisor can also assist you with updating your estate plans, like creating a spousal trust. A spousal trust will provide for your current spouse until death, and be dissolved as assets for the children from your first marriage thereafter.

Widowed

When your spouse passes, it may be an overwhelming and emotionally trying time. Your financial advisor can help you navigate this difficult phase by managing the proceeds from investment funds, insurance, and your spouse’s estate. You can experience a sound financial future even with this often sudden and tragic change in marital status.

In order to ensure a stable transition should you experience a change in marital status, your best practice is to prepare in advance. Your financial advisor can help prepare you for a happy and financially secure future.

Understanding the Advantages of Disability Insurance

Insurance has always been one of those bills that we pay but disregard – until something happens. Not everyone requires a pay out from their insurance companies in their lifetime, if they’re lucky. Accidents and unsuspected medical emergencies are never planned and are always difficult to deal with. Not having disability insurance in place can prove to be a detrimental misstep should something happen to any income earner in your household.

Why is disability insurance important?

Disability insurance is your coverage for when you are disabled and unable to work.  Accidents happen when and where you would least expect it, and oftentimes they are unavoidable. If in the blink of an eye your lost the ability to earn an income as a result of an accident, would you be able to afford your mortgage and car payments? Disability insurance is there to help when you are unable to earn.

What are the types of disability insurance?

Disability insurance can be offered through your mandatory work deductions, or it can be purchased through a private insurance company. The general types of disability insurance remain the same; Short-Term Disability, typically lasting 120 days, and Long-Term Disability. Each insurance provider will have their own policies as to timing of each designation. Speak with your financial advisor for specifics relevant to your unique situation.

Is it worth gambling with your financial livelihood?

Unfortunately disability insurance is not something you can easily purchase after a life- and work-altering event has already occurred. Having disability insurance in place ensures your family and household can still survive financially in the event of a disastrous unforeseen accident.

Who needs disability insurance?

Everyone with income-earning potential, especially those with dependents and regular household bills, should invest in disability insurance. This is why you often see it as an automatic built-in deduction on your pay stub as provided by group health benefits. But what about the self-employed? You should take all necessary steps to protect your greatest asset, which is yourself, against financial ruin should you ever be in an accident.

Compare it to car insurance

You wouldn’t drive your expensive new car, or any car in fact, without having car insurance in place, so why would you live your life without having disability insurance? Your life is much more valuable than any car, and so is your earning potential.

Don’t leave yourself uninsured and vulnerable to financial distress. There is little to nothing that can be done to prevent accidents, so the best thing to do is be fully prepared by having disability insurance in place. Book a consultation with your financial advisor to learn more.

How to Plan for Your Child’s Education

Sometimes it feels like no time passes between the day your child nervously steps through the kindergarten doors for the first time and when they confidently walk on stage to claim their high school diploma. If you want to provide your child with funding for a university education in Canada, it takes a proactive approach – not just idly throwing a few dollars into a Registered Education Savings Plan (RESP) and hoping the numbers add up. Here are some key steps to successfully fund your child’s education:

Step 1: Know the Numbers

Each RESP has a lifetime maximum of $50,000 per child. This number may seem sufficient, but consider that according to Statistics Canada the average yearly tuition at Canadian post-secondary institutions is just shy of $6,000. With tuition rates rising by year, an average four-year program can be expected to cost $25,000 before a penny is spent on room and board ($48,000 for four years, according to the University of British Columbia) or books, fees, transportation, and personal expenses.

As evidenced by the numbers, a $50,000 contribution to your RESP is a terrific start, but it’s only a start. Supplement this fund with savings in a Tax-Free Savings Account (TFSA) and in-trust account. Your financial advisor can help you come up with other strategies for flexibility, such as taking advantage of the maximum Canadian Education Savings Grant (CESG) with a $2,500 yearly contribution to an RESP.

Step 2: Allocate Your Asset Mix

Every investor is different, and your asset mix will vary depending on your risk tolerance, time horizon, and investment objective. Your risk tolerance depends entirely on your own investment personality. The time horizon is relatively fixed, if your child plans to attend post-secondary school immediately after high school. Your investment objective should include tuition, books, and fees. Account for living expenses in case they go to a school out of town. Share these factors with your financial advisor, and they’ll help you determine the right mix of fixed income and equities to suit your goals.

Step 3: Track Your Investments

If you have an organized education savings plan in place, it is not necessary to obsessively monitor the progress of your investments. The Beacon Group of Assante Financial Management Ltd.’s advisors will make sure your investment growth is on track to meet your savings goals. If market fluctuations affect your target allocation, your advisor can assist with rebalancing to make sure everything is on track.

With these three steps and assistance from The Beacon Group financial advisors, you can meet your education savings goals. Before you know it, your child will be walking up for convocation to accept a well-earned university degree.

The Federal Budget and Your Small Business

The recent federal election brought Canada a new Liberal government, and with that came the promise to invest in the Canadian economy. What does this mean for small business owners in Canada? The new budget has brought upon some changes that are favourable to small businesses as well as some guarantees that life will not be made more difficult for small businesses from a tax perspective. It means that things have not necessarily changed for the better or for the worse. Here’s a small breakdown of what Canadian small business owners can expect going forward.

No Changes to Capital Gains Inclusions and Stock Options

Prior to the release of the federal budget there was concern that the capital gains inclusion rate would increase from its rate of 50% and that there would be changes to stop option benefit rules. The good news is that the release of the federal budget shows no changes to either the stock option rules or the capital gains inclusion rate.

Corporate Tax Rates

The bane of all small businesses is the amount of taxes owed to the government every quarter. The federal budget shows no changes to the tax rates on small corporations which is a relief because the proposed deficit needs to be answered for somewhere and small business owners are glad it’s not at their expense.

Small Business Deduction

Various loopholes have now been closed with respect to the previously allotted small business deductions. The small business deduction is available to businesses who earn less than $500,000.00 annually; the tax rate is 15% and can provide tax savings of up to $55,000.

Transferring Life Insurance

It used to be that you were able to transfer life insurance policy to a corporation and thereby obtain tax-free corporate money. The new federal budget has done away with this loophole and no longer allows it to occur. There may also be an inquiry to examine policies that did this prior to the release of the 2016 federal budget.

Life can go on normally for small business owners in Canada with the implementation of the 2016 federal budget. Many of the changes made were not harmful or costly to small business owners and are simply just procedural updates. The Liberal Government is being true to their word on the notion of building up the Canadian economy and providing support for small businesses.

4 Estate Planning Strategies Starting Now

Most people only consider planning their estate after they have retired. They write their will early on, but consider that enough planning for the time being. The truth is that there are many estate planning opportunities and tax-saving strategies available to people who implement them earlier. Some solutions are only available if you plan them during your working years. We have provided some important estate planning strategies that you should start thinking about now:

Tax-exempt life insurance

Some people take a portion of their investments that are designated for their heirs and deposit them in a tax-exempt life insurance policy. This helps them transfer their wealth effectively while avoiding probate. Heirs receive the proceeds of these funds tax-free upon your death. The earlier you start implementing this strategy, the more tax your estate saves. This is because your deposits have more time to grow and compound in the tax-free environment.

Segregated funds

Segregated funds are an important estate planning tool because of the death benefits guarantee they offer. This means, in most cases, that your beneficiaries are guaranteed to receive the total principal that you invested, which protects your estate from large stock market declines. These funds also offer you benefits you can use during your working years, like the aforementioned principal protection and the ability to periodically lock investment gains.

Power of attorney

You should not delay giving some power of attorney, even if you are relatively young and healthy. If you suffer a sudden decline in cognitive abilities, and nobody has power of attorney over your estate, it could make it very hard for your loved ones to help you. Just remember that no matter how invincible you may feel, there is no way to predict the future and accidents do happen. You need proper mental capacity to grant power of attorney, so don’t wait until it is too late.

Estate Freeze

If you are a business owner, and you plan to one day have your children take over, you should consider an estate freeze. This enables you to “freeze” the value of your business and have any future growth accrue to your kids, which minimizes the taxes due after you pass away.

Timing makes a big difference when it comes to estate planning. The sooner you plan, the better. No matter what your age is, you should talk to an estate planning specialist at The Beacon Group of Assante Financial Management, Ltd. to help you get started today.

Greg Snider provides insurance products and services through Lifetime Financial Planning Inc. in the province of Alberta. Wayne Hill provides insurance products and services through Assante Estate and Insurance Services Inc. in the province of Alberta. Cory Gagnon provides insurance products and services through Lifetime Financial Planning Inc. in the province of Alberta, and through Assante Estate and Insurance Services Inc. in the province of British Columbia. Lifetime Financial Planning Inc. is an outside business activity that may offer non-securities-related financial planning services. Any specific investment recommendations provided by Greg, Wayne, or Cory must be done through Assante Financial Management Ltd. (“Assante”), a registered mutual fund dealer. Although Assante is not responsible for any service or product supplied through Lifetime Financial Planning Inc., Assante will monitor for conflicts of interest and investigate any client complaints related to services offered by Lifetime Financial Planning Inc. A description of the key features of the applicable individual variable annuity contract is contained in the Information Folder. Any amount that is allocated to a segregated fund is invested at the risk of the contract holder and may increase or decrease in value. Product features are subject to change.

Tax-Free Investing By the Ages

When the Tax-Free Savings Account (TFSA) was first introduced, nobody was quite sure of the best way to utilize it. Since then, different strategies have emerged depending on where you are in your life. Please read on to discover the best ways to use the TFSA at each stage of your life.

Young Adults

 When you are first starting to build your savings at a young age, using the TFSA to save for short-term goals is a good idea. It’s a tax-free way to save for a car or a down payment on a home. Basically, if you think you will need to withdraw funds in the foreseeable future, start with a TFSA. Parents can use TFSAs to their advantage to help get their children off to a good start. You can use your TFSAs to help cover the cost of university education. You can transfer your TFSA to your child’s TFSA when they turn 18, and they can use that to draw from during the school year.

Established Adults

Using a TFSA for high-return investments is a smart idea, as any returns are 100% tax-free within the account and once you withdraw from it. It’s also a great place for retirement savings, as a complement to your RRSP and work pension. You can also use the TFSA in your estate planning. You can dedicate the TFSAs belonging to you, your spouse, and your child and make maximum contributions each year. All these funds grow and are paid out tax-free, when the time comes. Your TFSA funds can be transferred to your spouse’s TFSA without affecting their own allotted contribution room. One other estate planning tip is designating your TFSA assets to help offset tax liabilities, so your beneficiaries receive more of what you planned on leaving them.

Retired Adults

 As mentioned before, withdrawing from you TFSA is not considered taxable income, so it is a great way to support your retirement. This is especially true if you are in a higher tax bracket, or if you are worried about your eligibility for Old Age Security (OAS). You can also consider putting any excess cash you have into your TFSA, so it can grow tax-free and be available to you whenever you need it.

 If you have questions regarding how to best utilize your TFSA, contact a financial advisor at The Beacon Group of Assante Financial Management, Ltd.

 

4 Advantages of Healthy Relationships

One of the greatest parts of being human is our connections with those around us. Our children, spouses, family, friends, mentors, and colleagues can bring us untold joy, love, laughter, and support on a daily basis. Let’s explore four advantages that come with nurturing healthy relationships in your life:

A Healthier You

Scientists are continuously investigating the connection between personal health and the state of meaningful personal relationships. It has been found that healthy connections with other people help to discharge damaging levels of stress. If the discharge of stress is not done through healthy human connections the stress levels can affect insulin regulation, the immune system, and can affect the coronary arteries, which can eventually lead to heart disease. What does this ultimately mean? Relationships are healthy, or rather that healthy relationships are healthy.

Happiness through Helping Others

A relationship does not have to be defined as a traditional marriage or even by having a significant other. We have relationships with our neighbours, our mentors, our hockey teammates – all the people we interact with on a regular basis. Studies have identified that offers of help or offering of advice have life-enhancing effects for the receiver as well as for the giver. The message is, it feels good to do good things. Next time you are at the coffee shop, pay for the next person in line’s coffee and start both of your days off on a happy note.

Stress Relief

Having a healthy relationship allows you to unload some of the stress of your day in a cleansing manner. If you allow stress to build up, the end effects can be an explosion on an unsuspecting innocent person that will leave both parties feeling upset and low. A healthy relationship is one that has the ability to take a dose of stress releasing venting from the other party and accept it at face value. Stress can also present itself in many other more serious, harmful ways, not just verbal outbursts. Always remember that stress relief is a two-way street, you must be able to accept a reciprocated fallout of a stressful day.

Guaranteed Dependability

It has been tested and proven that people who are happily married recover better after surgery. This could heavily weigh on the fact that a caregiver is guaranteed. By having an existing relationship based on love, care, and respect you do not need to seek out someone to nurse you back to health.

All of this is reassuring news because healthy relationships with others may be one of the easiest healthy living strategies to access. It’s inexpensive, it requires no special equipment or routine, and we can engage in basic kind human behaviour in many ways.