Understanding the Tax Implications of Family Gifts and Loans

It’s not uncommon for parents to financially support their children well into their twenties and sometimes even in their thirties and forties. With the Canadian housing market being increasingly difficult to enter for first time buyers, parents are becoming more involved with helping their children afford a down payment and more. Some even assist their kids with investment money to start businesses and to help with investment instruments. And while all this may seem harmless, difficulties can arise if parents don’t understand the tax implications of family gifts and loans. Let’s take a look at what we mean.

 

Create Clear Intentions

If you loan your child money or present it as a gift, make sure you get the correct documentation. With a loan, you will need a promissory note, loan document, or registered mortgage on the title of their home. With a gift, you should always collect a deed of gift, or make it in writing. By not having clear documentation about your intentions, your wishes won’t be clear, and you could end up with tax implications, regardless of your intentions.

 

Giving Cash Gifts

There is no tax in Canada for cash gifts that you give your child. However, if the cash is intended to help them pay for a home or for any other capital like stocks or shares, there will be tax implications for you. This is to prevent people from trying to pass on assets to their children to take advantage of the child’s tax rate as opposed to paying at the higher tax bracket.

 

Buying Your Child A Home

If you decide to give your child money for a down payment, pay their monthly mortgage bills, or buy a home outright for them, you will have certain tax implications. For one, if you buy a home for your child the law sees it as if you sold it to them at fair market value. You will be expected to pay the capital gains, not your child.

 

Loaning Money

When you loan money to your child and charge them an interest rate, you will still need to declare any interest you earn on your tax return. If your child is using that money to purchase a home, and they are taking out a Canada Mortgage and Housing Corporation Insurance, they will need to pay a surcharge since the down payment money was borrowed. So be selective on how much interest you plan to charge them.

Family loans and gifts can be very complex to navigate, so talk to us at The Beacon Group at Assante Financial Management Ltd. We can help you get over your financial hurdles and understand all the tax implications in relation to gifts and loans.

Surrounding Yourself with Positive People

Having the right kind of people in your life can make an enormous difference for influencing the quality of your life. It’s important to choose those whom you hold dear carefully, as they help foster your environment, your experiences, and even your emotions. If you find that the people in your life are holding you down with negative emotions and tendencies, then it may be time to declutter your social circle in order to make room for more positive influences.

By surrounding yourself with positive people, it can make a lasting impact on your life in some of these simple and essential ways.

 

Absorb More Positive Energy

We often absorb other people’s energy through their direct mood and attitudes. When we take in their stress, anger or negative emotions, we can easily end up emitting that energy back onto others. Wouldn’t you prefer to be attracting and sending out positive energy to the people around you? Of course you would! And you can easily achieve this by simply spending more time surrounding yourself every day with optimistic people that have happy and positive energy to share.

 

Mirror Healthy Goals

We become a lot like those who we spend the most time with – mirroring their goals and ambitions. For instance, if you surround yourself with healthy, active people or those with positive outlooks on life, you can’t help but feel influenced by their energy to engage and share a value in leading a healthier lifestyle as well. So instead of surrounding yourself with negative and self-destructive people, find others you admire and can look up to in order to help improve and enrich your life.

 

Get Rid Of Negativity

Negativity can affect every aspect of your life – from your relationships to your work, to your overall wellbeing. No-one wants to be around a person that is always complaining or putting others down. You can quickly rid your life of any negativity that exists by making the decision to no longer accept it in your life.

 

Foster Growth

When you have more renewed energy from the positive vibes around you, there is more time and energy to foster growth in your life. Those who don’t waste time complaining and instead focus on how to be productive and solve problems for the greater good, can help uplift your spirits and get you motivated to take on life in a new and improved direction.

 

Move Forward

When you are feeling negative, it’s easy to enter into a slump by dwelling on past experiences and emotions that serve no purpose in your future. By surrounding yourself with more positive people, you can begin to move forward in your life and learn to alter your thought patterns to focus on creating a positive future.  When you begin to do this, you get to enjoy a renewed sense of motivation, energy, and excitement for what’s to come.

Surrounding yourself with positive people is more important than you may realize. The people that you see and interact with the most are the people who end up influencing your thoughts, your habits, your focus and essentially, your quality of life. Remember to always choose wisely; if you have people surrounding you who are bringing you down with negativity on a constant basis, it might be time to filter them out to make room for more positive influences instead.

5 Ways you Can Better Organize Your Business’s Finances

Running a business can present many challenges – especially when it comes to organizing your business’s finances. If your numbers aren’t accurate or up-to-date, it can impact your bottom line, your growth, and in turn, your success. Fortunately, there are strategies that you can easily implement to coordinate and monitor the finances and day-to-day operations of your business. Check out these 5 ways you can get your company’s finances under control and get ahead.

 

Outline Financial Goals

To get your business’s finances in order, you first need to figure out what the financial goals are that you wish to achieve. Do you want to double your profits over three years? Would you like for your company to go public? Do you want to expand your company to another country? Spending time identifying your financial goals should be your first step. Then write down all the financial milestones for this coming year, along with the next three, five, and ten-year marks. Once you have an idea of how you want the future of your business to unfold, you can then start to figure out how your business will achieve each of the objectives.

 

Create a Budget

Once the financial goals have been set and you have an idea of how to achieve them, now is the time to set achievable targets. By creating a budget, you can better plan how your business will allocate money. This will help you get a grip on where your money should be going.

 

Set Company Standards

An important part of organizing your business’s finances is to set the standards and regulations for partners and/or employees to follow in order to stay within your budget. For example, if you have employees who will expense incidentals during business travel, make sure you outline what the business will cover, how much, and what they are expected to pay out of pocket. Having well defined best practices and company rules will help to ensure your employees don’t go over budget.

 

Organize Paper

Even though many processes have now gone digital, you will still need to work with paper and receipts for many of your dealings. And just throwing your hard copies into a box won’t cut it. You need to set up a properly organized system where you can find what you need quick and simply. Having a filing cabinet and a proper filing system that organizes each part of your business into separate sections – accounting, contracts, HR, operations, sales, etc. – and then by sub-sections, (alphabetically and then by date), will make everyone’s lives much easier.

 

Track Corporate Spending

When you run a business, you need to have finance software and technology to track all of your corporate spendings properly. All the outputs, such as printing, office supplies, leasing costs, utility bills, expense receipts, and extras like coffee and vending machine snacks, should be accurately inputted and accounted for. Neatly organizing all your expenses and income earned will help you to organize your business finances better.

Let us help you achieve the level of organization that your business needs. At The Beacon Group of Assante Financial Management Ltd., we help leaders and business owners fix their problems to gain more effective processes geared for success. Call us today!

Beyond the Will: What’s Involved in Estate Planning?

Every Canadian should have a will. We understand how uncomfortable this discussion and process can be, but it’s crucial to take care of to gain peace of mind and to know that your family and your assets are well taken care of. A Will allows you to determine how you want your possessions and estate handled, who the executor will be, and who the guardians of your children will be if something should ever happen to you.

If you’re wondering what’s involved in estate planning, here’s what you need to know when it comes to gaining that important peace of mind during the creation of your Will.

 

Create your Will

An essential part of estate planning is creating your Will. This key legal document outlines how your assets will be distributed and to which beneficiaries. It also stipulates who will be responsible for ensuring your wishes are carried out exactly as you planned.

 

Name the Executor

Naming your executor is the next important step of your Will planning process.  This person or corporation will have the responsibility for carrying out your wishes after you pass away.  This named individual will also have the responsibility to issue payment from your bank account to cover any taxes or debts that you owe.

 

Choose the Power of Attorney

Important to your estate planning is also determining a Power of Attorney. This refers to someone you designate to have the power and legal precedence to make any financial or health-related decisions on your behalf.

 

Set up your Insurance

Many people underestimate the amount of money that’s necessary to cover the funeral expenses, taxes, debts, and probate fees. Setting up a life insurance policy can help reduce these burdens on your family and can also help your heirs receive inheritance money to help them out in the future.

 

Ensure Business Continuity

Without a plan for business continuity, you may end up leaving your business partners or family members in a bind. Instead, plan out how your business will operate after you pass on.

 

Outline Personal Care and Funeral Arrangements

Without a detailed plan on personal care and funeral arrangements, your family will be left with the burden of making these painful and challenging decisions for you. An estate plan can help you pre-plan your before and aftercare, how it will be paid for, and your desired wishes for the service.

 

Designate Charitable Gifts

If part of your estate plan includes charitable gifting, ensuring this is included in your Will is vital to guaranteeing that your charitable plans will be carried out correctly.

 

Minimize your Income Tax and Probate Fees

Although you’re not charged an estate tax in Canada, there are other fees that do exist in relation to your Will. There are ways that your estate plan can help minimize your fees that will be charged by your province to process and probate your will.

 

Appoint a Guardian

A guardian will be the person you name to take legal custody of your minors in case of your death.

Talk to an advisor at The Beacon Group of Assante Financial Management Ltd. today to help guide you through the process of creating your Will and your estate plan, so you can take care of any unforeseen situations in the future. It will ensure your loved ones are looked after once you are gone, and it will help settle your affairs preventing any further stress or burdens from being placed on your family.