Should you downsize?

Should you downsize?

by Financial PlanningLife Changes

Once your children go off to college or move out to start their own adult lives, even a modest house can feel like a sprawling estate. If you find yourself in the situation where you have an empty nest and are wondering what your next steps should be, talk to an advisor at The Beacon Group of Assante Financial Management Ltd. and assess if it’s time to turn your empty nest into your retirement fund.

Emotional Attachment & Nostalgia

There are many driving factors involved in the sale of a house. One leading factor is emotion. For some, the house may have more sentimental value than monetary value. Perhaps it was always the house where Christmas was held every year, or maybe even a family property passed down through the generations. Emotional attachment is possibly one of the most difficult hurdles to jump when it comes to the sale of a house.

Financial Considerations

There are also financial considerations to be made. Ask yourself: why are you selling? Is it to generate a large lump sum of money for your future estate beneficiaries to inherit? If this is your thinking, a financial advisor at The Beacon Group of Assante Financial Management Ltd. will be able to tell you if it’s the right time to sell or if the house is better left unsold to become part of your future estate as a sizable asset. This is a great way to pass tax-free money to your children, but you need to be mindful of probate tax. A financial advisor at The Beacon Group of Assante Financial Management Ltd. can help you decide what is best.

Maintenance

Another motivating factor that may influence your decision to sell is the upkeep. Having a large family home for only two adults is not always the most logical. An attractive option for many is to downsize to a low-maintenance, luxury condo that is more compatible with a more mature lifestyle.

Travel

If your retirement plans include plenty of world travel, then having an empty house may not be the best option for you. Selling your house and downsizing to either a smaller house or a condo will make leaving for long and frequent vacations much easier as there is less concern that something will go wrong while you are away. Travel may also be easier to accomplish with a large lump sum of money from the sale of your house.

Retirement looks different for each person. Don’t hesitate to contact the Beacon Group of Assante Financial Management Ltd. and begin discussions about the future of your family home.

Life Insurance & Business Succession

Life Insurance & Business Succession

by BusinessFinancialFinancial PlanningRisk ManagementUncategorised

Having a life insurance policy in place is one of the best ways to ensure your family’s financial well-being after you pass. However, it may not be only family members that require financial support in your absence. If you are a small business owner, you should strongly consider taking a policy out on yourself that will act as part of your succession plan. Below are two examples of how having a life insurance policy specifically designated to the succession of your business can be used to benefit those you leave behind.

Estate Taxes

Much thought is put into estate planning on a personal level, but if you are a small business owner, it’s important to predict the business estate taxes to be paid upon your death. Discussions with a financial advisor will help you through this process as there are many factors involved in determining how much of the business will be taxable when the business owner dies. If the business was financially successful, there could be a large tax bill requiring payment as part of the estate settlement. This is when a specifically designated life insurance policy can really save your successor. Designate in your Will what each insurance policy you hold is to be applied against to ensure no confusion if you happen to meet an untimely death.

Replacement of Talent

In a small business situation, the business owner often plays a vital role in the day-to-day operations of the company. If the owner was there at the inception of the business and has spent years mastering the business, it will not be an easy feat to replace that person if they should die unexpectedly. People can pass away without notice, and if the survival of their company depends on their specific job being done, then existing staff may need to seek outside help. Having a life insurance policy on the business owner who carries the business is a useful tool for hiring a replacement. Likely someone with the expertise to successfully run a company will come at a higher salary, and having the financial means accessible to fund that salary could mean the difference between the company sinking or the company continuing to thrive.

Life insurance policies are important to have to ensure your family is cared for after your death. However it’s imperative that you also remember to protect your company against financial ruin after your death. Be certain to have enough life insurance in place to cover any expenses associated with your passing. We would be happy to provide you with further information about securing your legacy.

resp withdrawal strategy

What is Your RESP Withdrawal Strategy?

by EducationFinancial Planning

As an entrepreneur, you are accustomed to saving money for various expenses, including your children’s post-secondary education. After years of wise investing through your children’s Registered Education Savings Plan (RESP), the time has come to contemplate a withdrawal. This may come as a bitter-sweet moment as you are proud to watch your children grow and realize their potential, but in the same breath; where has the time gone?

Beyond the sentiment of approaching university, there are logistical matters to attend to. Withdrawing money from an RESP involves more strategic thought that maybe initially perceived. Here are some key points to remember when preparing to withdraw from an RESP.

Always Think About Taxes

As with most things in life, there are tax consequences to using an RESP, but there are ways to manage the tax implications. Each RESP is made up of two pools of money. One pool is made up of your original contributions, while the other contains any government grants or RESP additional earnings referred to as Education Assistance Payments (EAP). The original contributions belong to the contributor and can be withdrawn tax-free, whereas any EAPs are taxable upon withdrawal and become the tax responsibility of the RESP beneficiary.

Deciding Which Pool to Take From

It is beneficial to take from the EAP portion of your RESP when you are a low-income earning student because even with the money from the EAP the student is likely going to be under the taxable threshold and no taxes will be charged. This is why many people choose to empty the EAP portion of their RESP prior to the original contributions. It is also useful to use this money first because any unused EAPs need to be returned to the government upon completion of or the leaving of school.

There are of course situations where it would be more beneficial to take from the original contributions portion of the RESP. This would be when the child has a particularly high-income year due to working throughout the school year or a high-paying summer job. Adding any EAP funds will only heighten the annual income of the student and lead to further tax owings. In this case, it’s best to take from the original contributions as they are tax-free and will not count towards the income of the student.

As with most investments, an RESP comes with many complexities. Your education planning advisor at The Beacon Group of Assante Financial Management Ltd. can assess your child’s situation and help choose the best withdrawal strategy.

Understanding the Financial Repercussions of Life Events

Understanding the Financial Repercussions of Life Events

by FinancialFinancial PlanningLife Changes

Whether you are facing a job loss or going through a lengthy divorce, these huge changes don’t just affect you personally, they also have a major impact on your finances. If you are lucky, you will have enough time to discuss and prepare for these life-changing events by putting together a financial plan. Unfortunately, these types of life changes tend to happen right out of the blue. Either way, it is important to be certain you are prepared to deal with any potential scenario. We have provided a few tips on how to keep your personal finances intact through a number of trying life events:

Job Termination

In the unfortunate event where your company deems your position expendable, what should you do? You will have a decent severance package to get you through the next few months, but you’ll need to find gainful employment quickly. If you happen to land a new job quickly, you can invest the money from your severance or use it to pay down debt. You could even use it to help kick-start a business venture you’ve been thinking about. You’ll land on your feet quick enough, but sitting at home with a few weeks’ worth of severance on your hands can help you re-evaluate your career and your life aspirations.

Separation and Divorce

Divorce not only involves personal consequences, but financial ones as well, especially if you have children together. You will need to update your will and your beneficiaries on any savings plans or life insurance you may have. If you need to start providing child support, you could need term life and disability insurance to protect those future payments. If you eventually re-marry, you may need to create a spousal trust so that your new spouse will have income while still leaving some inheritance for all of your children.

Taking care of a special-needs child

Caring for a child with special needs will require a lot of time and attention. Parents need to be devoted to their child’s development and health every step of the way. This situation also has financial repercussions. You might want to open a Registered Disability Savings Plan (RDSP) to ensure your child’s financial security. You may also establish a trust fund in their name.

When you experience a life change, contact The Beacon Group of Assante Financial Management Ltd. and they will help adapt your financial plans to fit the changes in your life.

Naming Beneficiaries for Your Financial Assets

Naming Beneficiaries for Your Financial Assets

by Estate PlanningFinancialFinancial PlanningInheritance

When naming a beneficiary for each of your financial assets, the obvious choice may not always be the best choice. You should consider tax and estate planning implications, among other things. We have listed important items you should consider when naming beneficiaries for major financial assets:

Tax-Free Savings Accounts

With a Tax-Free Savings Account (TFSA), you can name a beneficiary, a successor holder, or both. Only your spouse can be named as the successor holder. This means your surviving spouse can take ownership of the assets in your TFSA without affecting their own contribution room. A beneficiary can get your TFSA assets tax-free and can apply them to their contribution room if they have enough space. It’s important to note that any increase in the value of the TFSA between your death and the date of the transfer will, unfortunately, be taxable to the beneficiary

Registered Retirement Plans (RRSPs and RRIFs)

When you name your dependent child or your spouse as the beneficiary of your RRSP or RRIF, the plan assets roll over on a tax-deferred basis. The same is not true if you name an adult child or anyone else as the beneficiary. When transferring your retirement funds to someone other than a dependent child or spouse, the tax liability for the transfer will go to your estate. This will reduce the amount of money you have to give through your other non-registered assets.

Segregated Funds and Life Insurance Policies

In some situations, you may want to consider using a testamentary trust instead of naming a spouse or child as a beneficiary of life insurance or segregated funds. When you name a minor as a beneficiary, the proceeds of the policy or investments must be paid into a trust in their name. If you name your own testamentary trust, you can control where your trust will be held and who will be managing your funds. This is especially a good idea in blended families. You can guarantee each child and spouse gets exactly what you desire, even if they are a minor.

The implications and rules of naming a beneficiary are complex and can very daunting to work out on your own. An estate planning expert at The Beacon Group of Assante Financial Management Ltd. can help you review your personal estate planning goals in order to name an appropriate beneficiary or successor holder for your registered and non-registered accounts.

Minimizing Financial Conflict with Siblings

Minimizing Financial Conflict with Siblings

by Estate PlanningFinancial PlanningInheritance

It’s the sad reality of the world we live in, but conflict surrounding money within families is all too common. There are no set rules or guidelines when it comes to siblings and money. We have listed three typical situations that you may find yourself in that involve your family and money, and some strategies to help get through them while keeping everyone happy.

Inheritance

It is common practice for a parent to name one of their children as executor or estate trustee of a will. Unfortunately, this may cause some discord between siblings. A sibling that is not the executor may feel that key decisions should be made together, which could cause some conflict. The money involved in inheritance can also be a point of contention. One sibling might feel like the assets are being split up unevenly. These matters aren’t usually resolved overnight and can lead to delays and family conflicts lasting years. The best way to prevent this problem is by making your will as fair as possible. You should consider naming someone other than one of your children as executor as well. Speak with your financial advisor at The Beacon Group of Assante Financial Management Ltd. about your estate planning options.

Lending money

What do you do if one of your siblings comes to you and asks for a loan? It’s easy enough to give a loved one some help in their time of need, but you need to consider what the money is going to be used for. If your sibling is living a troubled life, giving them more money will enable them to continue. You aren’t likely to get this money back in this scenario either. If your sibling is looking for help to send their child to university, you will be helping them immensely and you are likely to get your money paid back. It is okay to put the loan and the repayment terms in writing. This will help legitimize the lending and help protect your relationship. You are allowed to say “no” to your family too. Either way, you should only loan money out if you can afford to lose it if it’s not repaid. There are so many choices when it comes to lending cash to siblings, but at the end of the day, you need to do what feels right to you.

Caring for a disabled sibling

If you have a sibling with special needs that requires lifetime support, what happens to them when your parents pass away? Is another sibling going to pick up the slack? Caring for your sibling could require bringing them in to live with you or organizing and handling the finances involved in caring for them. This is something you need to discuss with your parents long before they have reached the end of their life.

The financial advisors at The Beacon Group of Assante Financial Management Ltd. can help you with any financial matters concerning your family.

Are You Prepared for the Unpredictable?

Are You Prepared for the Unpredictable?

by Financial PlanningLife Changes

Try as you may, you are not able to control everything life sends your way. A major life-altering event like sudden job loss or serious illness can throw you and your family for a loop. You can’t prevent these types of things, but the one thing you can do is prepare financially so you are ready for any possible scenario. We have outlined the steps you should take when a life-changing event suddenly crops up:

Sudden Job Loss

The first step you need to take when receiving the news that you will be let go is to seek legal counsel. Contact your lawyer to confirm that the terms of your termination and your severance package are acceptable. You should speak to a financial advisor to see if any portion of your severance is eligible to roll over to your Registered Retirement Savings Plan. You should also consider the possibility that the taxable amount can be split between two years instead of one. If you are lucky enough to find a new job in a timely manner, your severance package becomes a windfall. If you are still seeking employment after a month or two, your severance could run out and you may need to start using your emergency fund along with your Employment Insurance benefits.

Disability

To protect yourself from the financial repercussions of a debilitating injury, disability insurance can help. This type of insurance replaces a portion of your regular income if an illness or injury prevents you from going to work. You may have disability insurance under your employer’s group benefits plan, but you will want to check the level of coverage. If their definition of disability is restrictive, or if the income provided wouldn’t be enough, you want to consider personal coverage to supplement it. If you are self-employed, you should consider purchasing insurance that will replace a percentage of your income.

Critical Illness

Similar to disability insurance, there is also coverage for critical illness. Disability insurance replaces your income, but critical illness insurance covers the expenses associated with your illness. Heart attacks, strokes, and cancer are the most common conditions that are covered by critical illness policies.

If you want to make sure you’re prepared for any life-altering events, you should contact a financial advisor at The Beacon Group of Assante Financial Management Ltd. Having the peace of mind that you and your family are protected from the unpredictable is invaluable.

How to Cope With the Sandwich Generation Squeeze

How to Cope With the Sandwich Generation Squeeze

by AgingEducationFinancial PlanningInheritanceInvestment PlanningTax Planning

 

Picture a sandwich. The top slice of bread is the responsibility of taking care of your elderly parents. The bottom slice is your young adult children who have boomeranged back home or are involved in post-secondary education. You are the meat stuck in the middle, trying to take care of both while working towards your retirement. This, in a nutshell, is the crisis the “sandwich generation” faces today. If you find yourself in this situation, take heart that you aren’t alone and you have people fighting for your best interests. The following are steps you can take to manage being stuck in the middle of caring for two generations:

Eldercare

The health insurance provided by the government leaves many elements of care uncovered or only partially covered, including nursing care at home. If one parent is still independent of you, you may wish to ask this parent to sell their home in order to downsize for extra monthly cash flow. If you are personally assisting your parent with their care, there is community care available in most regions and there is always private caregiving assistance.

Kids’ Education

The cost of post-secondary education is rising every year. Parents with two children that are close in age really feel the squeeze when both kids are enrolled at college or university.

The first step is to plan ahead and start investing early in Registered Education Savings Plan (RESP). You should consider supplementing the RESP with Tax-Free Savings Account (TFSA) investments, family trusts, in-trust accounts, or a combination of these. The Beacon Group of Assante Financial Management Ltd. can help you reach your education savings goals.

Boomerang Kids

25.9%[1] of young adults in Canada between the ages of 25 to 29 live at home with their parents. This boomerang generation can burden their parents with extra cost or prevent them from a planned downsize of their home. The key to handling this situation is communication. Talk openly with your adult children about their plans, responsibilities, and expectations to help maintain a healthy relationship with them.

Contingency fund

Nobody can predict the future. You should consider setting money aside during your prime working years to cover the potential costs of supporting your parents or adult children. The Beacon Group of Assante Financial Management Ltd. can develop a plan to help alleviate the pressures of being in the sandwich generation while setting your family up for future care as well.

 

[1] Statistics Canada, Living Arrangements of Young Adults Aged 20 to 29 (2011 Census)

Why Naming a Power of Attorney is Important

Why Naming a Power of Attorney is Important

by Estate PlanningFinancial Planning

It’s hard to ever envision anything bad happening to us, but it’s important to look beyond our own fears so that we can look out for ourselves in the future. Whether it’s renewing insurance, dealing with your investments or any other important decision, it’s imperative that we all take some time to consider the possibility of not being able to make our own decisions. This is where planning ahead and naming a power of attorney is so important. Here are the two main reasons why.

Your Finances

You’ve worked your whole life to achieve what you have – whether it’s your home, a company, investments or anything of financial matter. It’s important that if you ever suffer from some unforeseen health or medical condition, and are unable to make the decisions yourself, someone you know and trust can make them for you. This is why planning for the future is so important.

Power of attorney means you get to select someone who may act on your behalf. This not only ensures that your needs and desires are properly taken care of, but also that they are done promptly and accurately. Without this, it would require an individual to apply to become your representative, which may not be someone you desire to oversee your decisions in the first place.

Your Healthcare

There’s nothing more important than health and the people who can makes those tough decisions for you when you no longer can. Whether it’s treatment, or even housing, the person you select to be your appointed representative can offer you the comfort of knowing how you wish to be treated. This also incudes any preferences for life support or resuscitation. Additionally, you can also select what restrictions your power of attorney has.

Having a person appointed to deal with your desires and needs at a time when you may be suffering can offer you that sense of comfort and peace knowing that things will be taken care of.

When it comes to long-term planning, we must never exclude the possibility that we may not always be able to make our own decisions. It’s imperative to see beyond our fear and look towards the peace and comfort of having someone we can trust to make those hard decisions for us. We can’t predict how life may change. We can only do our best to plan for it, which is why naming a power of attorney is so important.

Consult The Beacon Group of Assante Financial Management Ltd. for expert advice on estate planning, tax planning, retirement planning, or investment advice.

3 Common Reactions to the Market Cycle

3 Common Reactions to the Market Cycle

by FinancialFinancial PlanningInvestment Planning

Sometimes in life you find out the hard way that reality doesn’t always meet your expectations. This can be especially true when dealing with investments. You might think that you are comfortable with a temporary drop in your investment value, but when it actually happens, you may not be very comfortable with it. There are three common reactions investors have when dealing with the market cycle.

You become anxious and lose sleep

Your shiny new investment takes a dip in the first week, and dealing with it is way more difficult than you expected. Risky investments aren’t worth it if they cause you enough stress that you can no longer sleep at night. In this case, we recommend that you move your money into more conservative investments. You can talk with your financial advisor about adjusting your portfolio to be better aligned with your actual risk tolerance.

You don’t like it at first, but you get used to it

Your investment takes a dive and you start to worry. You talk to your advisor and they assure you that if you wait it out, you won’t regret it. You just have to be patient while seeing your investments through the market cycle. Once your investment rebounds, you experience the market cycle for yourself. This makes you more comfortable with accepting risk. You may even want to target more aggressive investments, or you may be happy with what you are doing. Talk to your financial advisor either way.

You don’t think twice about it

You keep an eye on your portfolio from time to time, but in general you realize that it’s not a good strategy to time the market and micromanage your investments. You and your financial advisor came up with an investment plan and you are going to stick with it. You don’t need to change your portfolio and you can sleep easy knowing your investments are in good hands.

No matter what your reaction is, every investor needs a good financial advisor to help them with their investments. This is true for investment veterans and for rookies. You should contact a financial advisor at The Beacon Group of Assante Financial Management Ltd. They will help your investment portfolio match your unique needs and personality so you can sleep easy if the market makes you nervous, or you can take some risks if you are more aggressive.