How to Be the Best Grandparent You Can Be Using Through Wealth Planning

How to Be the Best Grandparent You Can Be Through Wealth Planning

by Financial Planning

As a grandparent, it’s entirely natural to want to give money and gifts to your grandkids. Is this the best way to help them out financially? Here are three ways to be the best grandparent you can be by setting up a financial security net for your grandkids.

Set Up Life Insurance

Your grandchildren can benefit when you have a life insurance plan in place that names them as a beneficiary. Upon your passing, the death benefit paid from a life insurance policy is a tax-free, lump sum amount. However, if the recipient is under legal age, the death benefit (plus the interest it earns) will be held in trust by the province until they reach legal age. That is unless you set up a trust or designate a trustee or administrator to hold the proceeds of the death benefit in trust on behalf of the minor.

Fund Accounts

Contrary to popular belief, trust funds are not just for the elite; they are for everyone. If you want to start a trust fund, there are also a number of different accounts you can set up to distribute funds to your grandkids. A custodial account, for instance, gives you control over the account until your grandchild turns the legal age.

Get Your Grandchild an RESP

If you want to give your grandchild a gift that will benefit them the most, an RESP is the right choice. The gift of education is always a wise one, especially when schooling is rising in cost. Best of all, this is a tax-sheltered program that allows you to make non-deductible contributions annually or in a lump sum up to a total maximum value of $50,000 per beneficiary. When withdrawn, the funds are then paid out as an Educational Assistance payment. If your grandchild decides not to go to school, the contributions are paid back to you tax-free.

If you take advantage of an RESP, the Federal government will also contribute money into it as a grant or bond, such as the Canada Education Savings Grant (CESG). Your grandchild will qualify for the CESG until the end of the year when they turn 17. Each year, the government will match your contribution by 20% up to a maximum of $500 per child, to a lifetime limit of $7200. Therefore, the more you add each year, the better!

Trusts

Don’t forget to make sure you have enough for yourself! You don’t want to financially support your grandkids to the point that you run out of money for your retirement. If you’re considering leaving something for them, be sure to talk to a financial advisor who can help you carefully plan out your retirement plan and estate.

Remember — the greatest gift you can give to your grandkids is your love, support, and memories that will last with them for a lifetime.

5 Components of Family Trusts You Need to Know About

5 Components of Family Trusts You Need to Know About

by Financial Planning

Considering setting up a family trust to protect your assets? It may be one of the wisest decisions you ever make. A trust can give you the power to deal with future financial risks and give you full control of your assets. Additionally, a family trust can also be used to take advantage of income splitting and corporate structuring opportunities. Let us show you the five components of family trusts you need to know about to gain the most benefits.

Trusts Require Three People

In order to create a family trust, you’ll need to have three people to fill the roles of Settlor, Trustee, and Beneficiary. The trustees will control the family trust assets, the beneficiaries will reap the benefits from the assets, and a settlor will set up the trust.

Trusts Don’t Need to Be Registered

Unlike other instruments, a family trust does not need to be registered anywhere. Instead, they are created by written deeds or trusts that are valid as soon as they are signed. This provides some privacy because it is not made public upon your death. A will, on the other hand, is on record and will make all your transactions and distributions visible to the public.

Trusts Allow You to Divide Assets as You Please

If you have shares in a company that you would like to leave to your children, a trust can give you the control you desire over how the assets are divided amongst your kin. For instance, with a discretionary trust, the trustees have the power to decide which beneficiaries are entitled to receive the capital of the trust and which are only entitled to receive the income earned on the trust.

Trusts Offer Potential Tax Benefits

Although trusts are taxed at the highest federal rates, plus a provincial rate, there are some potential income tax benefits of having a family trust as part of your corporate structure. They are particularly useful when you wish to take advantage of the tax splitting. Any income, capital gains, or dividends earned by the family trust can be allocated to one of the beneficiaries at their respective marginal tax rate. If you have adult children or a spouse who is in a lower tax bracket than the trust, you can income split to save thousands of dollars each year. Trusts can also be used to multiply your eligible capital gains exemption if you decide to sell your business.

Trusts are Useful When You Own a Business

Every person gets a one-time Capital Gains Exemption (CGE) in their lifetime to shelter up to $813,600 of capital gains. This relates to the sale of Qualified Small Business Corporation shares in an active business owned in majority by Canadians. By allocating the family trust as a shareholder in your business, the capital gains related to the shares owned could be allocated to the beneficiaries if the shares were sold. Each beneficiary in return could use their CGE and shelter the capital gains from taxation.

When you’re ready to create a wealth strategy to protect your assets and ensure your family is taken care of in the future, contact us at The Beacon Group of Assante Financial Management Ltd. We’ll set you up with one of our financial advisors to provide you with all the information you need and to outline the applicable rules for each province. We’re here to help you keep more of your money and grow your wealth well into the future.

5 Things to Teach Your Kids About Taxes Early

5 Things to Teach Your Kids About Taxes Early

by FinancialFinancial Planning

There will come a time when your kids ask you how babies are made, why the sky is blue, and why they have to come home by curfew. One thing your kids probably won’t ask is about taxes — or at least not until it’s too late. It’s important to teach your kids about taxes early so they can be well prepared to file their returns and to create an efficient tax strategy. Not sure where to begin? Start with these 5 things every child should know about taxes.

Where Taxes Go

Taxes are a strange topic for children to understand because they can’t see where the money goes.  All they see is how much money is being deducted on their sales receipts or pay stubs, so they often struggle to understand the purpose of taxation. To best explain it, discuss the places and services where taxes are used for, such as for maintenance and upkeep of local parks, playgrounds, hospitals, roads, bridges, and schools. This will help them understand why taxes are essential and what they are used for without getting too technical.

The Different Types of Taxes

Children also struggle to grasp the different types of taxes that need to be paid. To help them become more familiar with the tax process, we recommend providing examples of all the various types of Canadian taxes, like the federal, provincial, and municipal government taxes on your income statement, the sales tax on a receipt, property tax on your assessment, and the tax to move goods across the border if you’ve ordered anything overseas. That way they can see exactly how tax is deducted and get a better sense of what to expect as they grow older and need to manage their taxes on their own.

The Impact on Earnings

It’s also a good idea to teach your kids about how taxes will impact their take-home pay before they receive their first pay stub. This will help prevent them from being caught off guard once they get their first paycheque and notice that it’s less than their hourly rate. Also, show them how to calculate all the deductions, so they know how to inspect their pay stubs in case of accounting errors.

All About Refunds, Payments, and Returns

When you’re working on filing taxes for your teenager, it’s also a great time to teach them about the process. Show your kids how to fill out the income tax return by using their paycheques and income report so they can get a clear view into the filing requirements. In addition, explain what happens if they underpay/overpay and what kind of tax breaks/penalties they could encounter.

Explaining taxes to your child is the easy part. Understanding all the tax implications when your child is a dependent, or when the Kiddie Tax applies, and what family tax breaks are available, can often be very confusing. Fortunately, with smart tax planning and a tax optimization strategy, you can increase your personal wealth and keep more money in your pocket. When you’re ready to improve your tax management strategy, contact us at The Beacon Group of Assante Financial Management Ltd. We know the ins and outs and how they can be applied to minimize the effects of taxation for you and your family.

What to Teach Your 18-Year old About Opening a TFSA

What to Teach Your 18-Year old About Opening a TFSA

by FinancialFinancial PlanningInvestment Planning

It’s not easy getting your teen interested in the idea of investing in their future. Most teens have a shorter attention span and are rarely focused on long-term goals — they’re thinking about the present. This can make it somewhat difficult to explain the benefits of saving, especially if most of the financial terms go straight over their head.

If your teen has turned 18, it’s time to start teaching them about TFSAs. 18 is the age when Canadians can begin opening and using TFSAs, and with compounding interest, it’s wise for them to start early and do just that.

With the right words and some guidance, you can help them grow a future nest egg as they ease into adulthood. But where to begin? Here are five things you can teach your 18-year old today about opening a TFSA.

The Art of Compounding

If you start early, the power of compounding can add up to millions of dollars over the long-term. If that won’t get your teen’s attention, nothing will. Once they are interested in what you have to say, that’s when you shock them with the long-term benefits of a TFSA. The best way to make them understand is to show them a real-life example of how much money they can expect to earn in 20, 30, 40, and even 50 years when they start making small contributions each month, starting now. When they see the power of compounding in action, it’s sure to get them excited about forming a long-term strategy that invests heavily in their future.

The Benefit of Tax Savings

It’s unlikely that your teen knows much about taxes or how they will impact their savings over time (and if they do, great for them!). That’s why now is the best time to teach them about tax-sheltered instruments, like a TFSA. They may not fully understand all the tax jargon in relation to capital gains, interest earned, or Canadian dividends. Hone in on the fact that with a TFSA, they can withdraw their money tax-free — unlike the majority of banking accounts. They’ll appreciate the idea of avoiding fees and having more money in their pockets.

How to Maximize Contributions Without Penalties

Accidentally contributing more than $5500 a year may result in penalties. It’s essential to teach your 18-year old about the maximum contributions and how they can add to their account without acquiring fees. For instance, if they were to contribute the full $5500 in one year, they could have to wait a full calendar year before putting more money into the account. Your teen can contribute to their TFSA for every year that they have been at least 18 since 2009, as illustrated here. An example of this would be if you have a son who turned 18 in 2016 and is just opening a TFSA now, he would actually be eligible to contribute $16,500 right away.

How to Be Smart With Their Money

Unlike an RRSP, money can be withdrawn from TFSA at any time without paying taxes. This could be a concern if you invest in your teen’s savings account and they withdraw the money straight away. That’s why it’s important to teach them how to be smart with their money, why a long-term goal is better than short-term gains, and that a TFSA is an investment tool more than a savings account.  You may even consider teaching them how to use their TFSA to purchase mutual funds, GICs, and other investment accounts to help grow their money, not just save it. The more they know now, the better choices they will make in the future.

If you’re not sure how to discuss TFSAs with your teen, we can help. At The Beacon Group of Assante Financial Management Ltd., we manage not only our client’s wealth plans but also their children’s investments too. We can teach them the benefits of long-term objectives and what the right choices are for investments with a particular goal in mind. To learn more about our family wealth planning, contact us today.

5 Common Investing Mistakes

5 Common Investing Mistakes

by FinancialFinancial PlanningInvestment Planning

Protecting your wealth is arguably more important than growing it. Even if you make smart investment decisions, pay yourself first, and put some money away for your retirement, there are still a number of common investing mistakes that could drain your finances dry. Don’t waste your hard-earned money on poor financial decisions — be prepared for success by avoiding these common investing mistakes.

Not Funding a Retirement Plan

As a Canadian, you have access to a number of retirement plan options, whether through your employer or through the bank. One of the biggest mistakes many people make is not setting up a plan in advance and adding the maximum amount to it every year. Why is this important? Because most retirement plans are tax-sheltered, so you can protect your money until after you retire and your tax rate declines. Besides the tax advantages, you might also be eligible for a match program with your employer. Some will match your contributions which is essentially free money (that will steadily grow over time).

Forgetting to Rebalance

One mistake most investors make is forgetting to rebalance their portfolio back to its target asset allocation annually. Without a routine check-up and rebalance, your asset classes could end up overweight or underweight, neither of which is a good thing for your performance. If this sounds familiar, contact a financial advisor to help get the proper allocation to increase your overall expected return.

Doing it All Yourself

Unless you have industry experience in trade and finance, it’s best to get a helping hand from a seasoned professional. An experienced financial advisor can help you understand all the relevant risks to you and your portfolio, including what the appropriate benchmarks are, which asset allocation will achieve your goals, and how to diversify for steady long-term gains.

Not Planning for the Long Term

Short selling and day trading can make you a lot of money, but it can also gut out your entire savings if the market takes an unexpected swing. Instead of chasing performance and focusing on short-term gains, you should create a long-term plan and stick to it. Having a sound investment plan is not as much fun as playing the market, but it’s much more profitable in the long run.

Not Creating an Investment Strategy

Investing is not just about growing your assets, it’s also about using cost-efficient structures and tax planning to keep more of your money. Without an investment strategy, you could essentially be missing out on much of your opportunity for growth. Therefore, successful investors are ones that ensure they operate under a prudent investment strategy — the best plans are not only ones that offer significant growth opportunities but also help to shelter against taxes and minimize risk along the way. Always remember that each individual will need a strategy that fits within their goals — no approach will work for every investor.

When you’re ready to move forward with an investment strategy that’s tailored to your specific needs, contact us at The Beacon Group of Assante Financial Management Ltd. We’ll create a plan and implement strategies by choosing the best-in-class products and services that will excel through the market’s ups and downs, creating long-lasting wealth for you.

5 Methods to Determine Your Retirement Savings Goals

5 Methods to Determine Your Retirement Savings Goals

by FinancialFinancial Planning

Do you know how much you need to save for retirement? Most people don’t. Fortunately, there are a few questions you can ask yourself to determine what retirement savings goals you need to implement today to have a brighter future tomorrow. Don’t worry if you’re far from ready; we’ll also explain what you can do to give your savings a well-needed boost.

What are Your Current Expenses?

One method to determine your retirement savings goals is to find out how much you’ll realistically need for retirement. As a rule of thumb, each person should have one year’s salary saved for every three years of income. To figure out this number, you’ll need to identify your individual expenses, like food, transportation, healthcare, mortgage and debt expenses, and then adjust your strategy to ensure you can afford the lifestyle you desire. Remember — it’s always better to save too much than too little!

How Long Have You Been Investing?

If you’ve been taking advantage of compounding interest for decades, it’s likely that you will have a significant nest egg brewing in the wings. However, if you only started investing a few years back, it’s unlikely that you’ll have much saved once you retire. Depending on how many years you have left, you’ll either need to invest more aggressively or rely on your pension, social security, and RRSP more heavily. Either way, talking to a financial advisor can ensure you’re on the right track no matter how many years you have to go until you retire.

Have You Been Maxing Out Your RRSP Contributions?

Not everyone can afford to max out on their RRSP contributions every year, but if you have done so, you’ll likely be well positioned for retirement. Every little bit counts, so if you can start adding more to your RRSP today, it’s wise to do so. Any money you contribute now will be tax sheltered until you withdraw it in retirement, providing you with some extra income.  

Do You Have an Employee Retirement Plan?

If your company has a retirement plan in place, you’ll have to save less on your own. This is because each month a specific dollar amount will be deducted from your account and automatically deposited into your RRSP. Even better, if your employer offers a match program, you’ll get dollar-to-dollar contributions from your company for every dollar you put in. That’s free money!

Do You Have any Other Sources of Equity?

Investing isn’t the only way to boost your retirement savings. If you have a Life Insurance plan or income property, it can easily be sold for equity when you retire. Another popular way to access money for your retirement is through a reverse mortgage. A reverse loan pays you each month by accessing some of the equity in your home. It’s only available to help retirees who have accumulated wealth in their home to cover basic monthly living expenses.

Most Canadians do not have enough money saved by the time they retire, and it’s often not because they couldn’t save enough, but rather because they didn’t have a retirement plan in place. To help prepare you and your family better for retirement, contact us at The Beacon Group of Assante Financial Management Ltd. We’ll help you get the maximum return on your investments, reduce your risk level, create a tax strategy that works for you, and ensure that you have the most amount of money possible so that you can fully enjoy your retirement.

5 Key Pieces of Effective Tax Optimization

5 Key Pieces of Effective Tax Optimization

by BusinessFinancialFinancial PlanningTax Planning

There’s one thing that you can’t avoid no matter how hard you try, and that’s taxes. Tax adherence is a responsibility of every Canadian citizen, no matter how much money you make or what type of work you do. While you can never escape taxes entirely, you can take advantage of methods made to minimize them to reduce the burden on you and your family.

If you’re looking for ways to reduce the amount of tax you pay out to the government throughout your years, review these five components of effective tax optimization and keep them in mind for the future.

Income Optimization

There are a number of income optimization methods that you can utilize to help minimize your taxes. For one, you can engage in income splitting with your spouse to transfer the tax liability from the higher-income earner to the lower one. You can’t legally “split” your income amounts per se, but there are a number of ways to utilize this strategy without penalty such as: creating a spousal loan, contributing to a spousal RRSP, or establishing a family trust.

Tax Efficient Investments

There are a number of registered accounts that you can take advantage of to defer your taxes into the future. If you’ve maxed out on your limits, you need to find other places to shelter your money. An expert financial consultant can help you maximize your tax-efficient investments most effectively by strategically distributing your income and investments across your RRSPs, RRIFs, TFSAs, and a number of other tax-sheltered options like your life insurance policy.

Business Management

One tax efficiency strategy that can help you keep as much of your income as possible is expense management. Learning how to claim expenses correctly can increase your tax efficiency and reduce both your personal and corporate tax bill. Corporate clients can also take advantage of optimizing salaries and dividends, estate freezes, and other advanced methods to minimize taxes.

Tax Deductions

Another effective way to reduce taxes is to take advantage of all the possible deductions and credits on your income tax and benefit return. Deductions, such as retirement and CPP contributions, moving expenses, child care expenses, support payments, student loan interest, and tuition expenses can all be claimed for tax credits. In fact, there are over 90 deductions and tax credits that you can claim in Canada that will put more money back into your pocket each year.

Investment Strategies

Higher net worth Canadians that have a lot of money tied up in investments will often find that the tax on the interest can become substantial if they don’t have a proper strategy in place. A professional advisor can provide you with a number of strategies that can reduce your capital gains and lower your investment taxes to optimize your returns.

A professional and experienced financial advisor can work out the most effective strategy for your personal and corporate tax optimization. Their expertise ensures that your finances will adhere to the newest regulations and follow all legal practices to avoid penalties and unlawful misconduct.

Our experts at The Beacon Group of Assante Financial Management Ltd. will enjoy crafting the best tax strategy for your particular needs to ensure that the best approach is taken to enhance your success.

Long Term Care Settle It Before the Time Comes

Long-Term Care: Settle it Before the Time Comes

by AgingFinancial PlanningTax Planning

As you enter your “golden” years, the reality is that it can often be too late to protect your family from unforeseen events as you continue to age. That’s why you need to start planning now for your financial future. If the idea of long-term care is making you lose sleep, it’s time to settle it before the time comes. Let us show you how.

Estate Planning Protects Your Wishes

No one can accurately forecast what will happen in the future. And most people think that having a will is all they need to protect their wishes – but they’re wrong. If you don’t have an estate plan created and something suddenly happens to you, your intentions may not get carried out as you had planned. Only an estate plan can provide clear direction and an accurate representation of your intentions. So take the time now to define what is most important to you and how you wish for your assets to be handled before you can no longer make the decisions for yourself.

Your Assets are Your Retirement

Your more substantial assets are a crucial factor in your overall wealth. If you plan to sell your assets (whatever they may be) or transfer some down to your children, take the time now to make a detailed succession plan. Having a professional financial planner by your side can ensure that you make all the right choices when it comes to obtaining the wealth that you and your family will need during your long-term care.

Tax Planning For Your Future

It’s especially important that you have an effective tax strategy in place that will help minimize the effects of taxation during your long-term care needs. There are a number of strategies that can optimize your tax position such as maximizing government-sponsored programs, creating tax-efficient cash flow, and legacy planning. Tactics like these can help you reduce your taxes and leave you with more money in your pocket for when you need it most.

Insurance Planning Is Your Safety Net

The requirements of long-term care can have a significant impact on your family’s financial future and health. Without a safety net in play, it may be difficult for them to manage all the financial risks associated with any illness or disability. To ensure everyone is protected, it’s crucial to have an insurance plan in place as part of your wealth management strategy. Setting up life insurance coverage will ensure everything is settled before the time comes.

The Beacon Group of Assante Financial Management Ltd., we provide a number of services to ensure that your wealth is always protected. We can help you put a meaningful plan in place that will protect you and your family now and in the future.

Why Major Life Changes Are Good for You

Why Major Life Changes are Good for You

by Financial PlanningLife Changes

Change is inevitable. Even when you try to avoid it, there will always be unforeseen challenges and less than perfect conditions thrown your way. However, you shouldn’t fear these situations; significant life changes can be beneficial for you in many ways. The life lessons you learn during these difficult times can help you to be more prepared for the future and teach you how to deal with change more effectively. To show you how this works, here we feature a few of the ways that a major life change can benefit you and what you can do to be better prepared for the bumps ahead.

Fosters Growth

When you experience a major change, you’re often faced with challenges you’ve never had to deal with before. In most cases, your belief system is tested and you’re pushed beyond your limitations – but this isn’t always a bad thing. When you go through a life-transforming event, you’re forced to step outside of your comfort zone and grow. With each step, you become more skilled, confident, and eventually more successful as you begin to see things in a new light.

Makes You More Adaptable

Some people fear the idea of change, but in reality, change is inevitable and something we need to get used to. We can’t always prepare for a significant life transition to occur, but we can learn how to cope with one. Experiencing a significant life change can be useful for you as it can push you to be more flexible in your approach. As you drive through the challenges, you learn how to change plans and adapt to circumstance. Best of all, you build confidence to take on new situations and become better equipped to deal with other obstacles that may arise.

Teaches You To Be Prepared

It’s impossible to forecast everything that will happen in your life, but you can at least be prepared financially for any unexpected circumstances. Major life changes can be costly, especially if you lose your job or undergo a divorce. Experiencing a life change can teach you why it’s essential to have a backup plan in place to make sure you protect yourself.

Changes can be jarring, no matter what area of life they affect. The best way to deal with these uprooting events is to know that in the end, you’ll always come out on top a different person. The changes you go through will shape who you become – embrace them!

Methods to Gauge Any Investments Risk Level

Methods to Gauge Any Investment’s Risk Level

by Financial PlanningInvestment Planning

Every investment has risks. If you put your money into individual securities, your risk lies solely with that company and how they perform in the market. When you purchase a mutual fund, your money is spread across a number of individual securities, and the performance will be the result of the whole. To give you an idea how to gauge any investment’s risk level before you add it to your portfolio, follow these rules.

Check The Beta

Many investors use Beta to determine how volatile a particular security or portfolio is in comparison to the entire market. Any beta number greater than 1 will indicate a higher level of risk. For instance, a beta of 1.5 means that an investment return will be 1.5 times as volatile as that of the market. On the other hand, if the beta dips below 1, it implies that the investment will be less volatile than the market and pose less risk.

Look At The Company History

It’s easy to get caught up in the idea of investing in a start-up that could be the next Amazon or Facebook, but the odds of that happening are not in your favour. Instead of throwing money into unknown start-ups and crowdfunding campaigns, pick companies that have illustrious histories of success and trends of making money. You can reduce your risk by putting your money into businesses that have spent decades navigating through the competitive marketplace and generating solid returns to their investors.

Research The Owners

Before you put your money into a security, you should know who you are investing with. Do the owners have a track record of success? Can they easily raise capital if needed? Can the team execute their vision? It doesn’t matter how great the idea is if they don’t have the right management team. If you can’t get a clear view of where the company is headed and whether they are positioned to carry through the market storms, then it’s best to avoid the risk.

Know What Risk Profile They Fall Under

It’s important to understand which investments are considered high risk and which ones are deemed safe. Options, Futures, and Collectibles are considered high-risk because they can provide significant returns as well as big losses. Mid-risk investments like equity mutual funds, large and small-cap stocks, high-income bonds, and real estate investments still carry risk, but they are relatively safe and usually provide stable returns. The safest investments you can purchase are government bonds, money market funds, and treasury bills. You won’t get the biggest returns but the likelihood of a return is very high.

Check If They Are Diversified

When investing in funds, you should only put your money in something that is diversified across a number of asset classes. Without asset allocation, you’re susceptible to risk during market swings. When you have a portfolio that is properly diversified, your investments will continue to grow no matter what the market condition.

Predicting the markets is challenging, especially if you don’t have a background in finance. At The Beacon Group of Assante Financial Management Ltd., we can help you manage your risk and create a balanced portfolio that will take advantage of the markets up and downs, maximizes your wealth, and provides you with stable returns into the future.