Key Points for Wills and Powers of Attorney’s

Key Points for Wills and Powers of Attorney’s

Families during COVID-19 have realized that they should focus on concerns such as planning the family’s future. One of the most difficult challenges a Certified Financial Planner® has is to encourage clients to update and/or review their estate plan and documents. Often families tend to put this off, as it is not seen as urgent.However, COVID-19 has brought family planning and care issues to the forefront for many families as concerns for their loved ones and their economic well being have become top of mind.  Everyone’s life has been impacted, regardless of age. As a result, families now realize they should focus more on these concerns, but are often unsure where to start. Based on my experience of helping many families over the years, the following list from my book can be a good starting point. Excerpts from the Book - Preserving Wealth - written by Jack Lumsden, MBA, CFP® It was still raining, and as we rode staunch­ly back home in the tin boat,...
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Smart Tax Strategies for Retirees: Tax Efficient Income Withdrawals

Smart Tax Strategies for Retirees: Tax Efficient Income Withdrawals

One of the most important decisions a retiree must make is how to create an income and cash-flow strategy from the financial assets they have accumulated over their lifetime. By Jack Lumdsen, MBA, CFP® This can be challenging as you may have numerous sources of potential cash flow such as: Old Age Security and Canada Pension PlanCompany pension plansRRSPs, RRIFs, Locked in RRSPsTax free savings accounts (TFSAs)Annuities and guaranteed income productsNon-registered investment accountsHOLDCOs  Each of the above cash-flow sources can have different start dates and a retired couple could easily have to decide on how and when to start the income or cash flow from 6 to 12 sources or more. Why is this important?  Your income and cashflow strategy will affect your: income and cashflow spending today the tax you pay today, and in the futureavailability of government income credits and benefits over timehow long your investment assets will lastsuccess rate of your plan our estimated estate value for the next generation Income vs Cashflow In retirement, there is a...
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Smart Tax Strategies for Retirees: Avoid the OAS Recovery Tax

Smart Tax Strategies for Retirees: Avoid the OAS Recovery Tax

Old Age Security (OAS) is an income benefit that is paid to Canadians once they reach the age of 65.   If your individual income is over $79,845 for 2021, you will have to start to pay back your OAS at a rate of 15% for each dollar over $79,845. This tax recovery is often called the clawback. It’s smart tax planning for retirees to arrange their income to avoid this clawback if possible. Some strategies to review are:  Income split with your spouse/CLP (Common Law Partner)Tax effective non-registered investmentsReview the start date of your RRIFUse the younger spouse/CLP’s age for RRIF paymentsUse TFSAsTrigger large capital gains prior to age 65Defer OAS How do you collect Old Age Security?  To collect Old Age Security (OAS), the criteria is: Age 65 or olderCitizen of CanadaResided in Canada at least 10 years since the age of 18To get the maximum OAS benefit  you must have  resided in Canada at least 40  years after the age of 18. resided in...
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Smart Tax Strategies for Retirees: Keep Track of Health & Medical Expenses

Smart Tax Strategies for Retirees: Keep Track of Health & Medical Expenses

Unfortunately, as you age, you may have increased health care and medical costs that are not paid for by the government.   A smart tax strategy during retirement is to keep track of your medical expenses and take advantage of any credits that may be available.   Common expenses that may be tax-deductible are personal health care plans, prescription drugs, hearing aids, mobility aids, and some of the costs if you live in a nursing or retirement home.  Some of the credits you may be entitled to are: Medical Expenses Tax Credit Disability Tax CreditCanadian Caregiver AmountHome Accessibility ExpensesSeniors' Home Safety Tax Credit What is a tax credit?  A tax credit is a non-refundable item that reduces the amount of tax that is owed, whereas a tax deduction reduces your taxable income. Key Tax Credits to Review Medical Expenses – Tax Credit Some of the medical expenses that you may be able to claim include: Prescription drugsPersonal health plansCare Facilities, expenses for attendant care and care in a facility such as a nursing...
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Avoid a huge $$$$ mistake. Check your beneficiary designations now!

Avoid a huge $$$$ mistake. Check your beneficiary designations now!

Excerpts from the Book - Preserving Wealth - written by Jack Lumsden, MBA, CFP® A recent article from CBC,  Halifax women calling for more protections on RRSPs after husband's sudden death by Emma Davie, reviews what can happen if you don’t have correct beneficiary designations on your registered plans. The article explained that the husband in the story had named his mother as the beneficiary of his RRSP when it was originally set up years ago, and he had not changed it.   The husband passed away suddenly at the age of 50. His RRSP with a value of $685,000 was left to his mother.  Everything else was left to his wife. The income tax on his RRSP was $369, 000 (54%) If the husband had named his spouse as beneficiary of the RRSP, the entire amount would have transferred to his spouse tax-free, which is what he had wanted. Whom you named as a beneficiary can be easily forgotten. I suggest that you review your...
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Smart Tax Strategies for Retirees: Income Splitting

Smart Tax Strategies for Retirees: Income Splitting

Photo by Mark Timberlake on Unsplash Income tax is one of the largest expenses any retiree has. The Fraser Institute Report indicated that Canadians paid 45% of income as taxes in 2019.  Your goal in retirement should be to organize your income stream to: reduce the amount of tax you may have to pay preserve any government tax creditspreserve government income plans such as Old Age Security  The result will be greater spending for you today, and potentially greater wealth for the next generation. A smart tax strategy to reduce a family’s overall tax burden is to split the income. This means to shift income from a spouse or common-law partner (CLP) who is in a higher tax bracket to one who is in a lower tax bracket. The result is lower overall income tax paid, resulting in increased spending and/or preserving your wealth. The various income splitting strategies to review are: Pension SplittingCPP SharingSpousal LoansSpousal RRIFsBase the RRIF minimum on the younger spouse’s ageTFSAs Pension Splitting  This is a...
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Registered Education Savings Plan (RESP)

Registered Education Savings Plan (RESP)

Photo by Unsplash Brooke Cagle Unsplash My kids are 18 and 20, does setting up a new Registered Education Savings Plan (RESP) still make sense? Excerpts from the Book - Preserving Wealth - written by Jack Lumsden, MBA, CFP® A new client asked if it still made sense to set up a new RESP for his kids, who were ages 18 and 20. His ex-spouse already had an RESP for the children, but he wanted to know if he could still set up a new one. This is a good question because RESP rules are confusing. The last age children can receive the grants is the year they turn 17, so in his situation, it didn’t make sense to open a new plan.   Also, only the subscriber of an RESP can claim funds back if they are not used for education. Since he is not the subscriber, he should not contribute to the existing RESP Special rules for beneficiaries who are 16 and 17. It should be noted...
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Who should you name as Executor?

Who should you name as Executor?

Excerpts from the Book - Preserving Wealth - written by Jack Lumsden, MBA, CFP® A common question I received as an advisor is whom should we name as executor in our Wills? The true answer is that it depends on your situation. It usually ends up based on how complicated your estate may be, the projected value and who in your immediate family may be able to do the job. The following excerpt from the Book - Preserving Wealth, provides a starting point for this discussion. “Wow, maybe I’ve been too tough on the government. But who would you suggest I name as executor? I don’t have a wife anymore, and my kids are just in their early twenties and not particularly knowledgeable about finances. I guess Mom knows a lot about money, but she’s getting older, and she probably wouldn’t want the job.” Uncle Wayne replied that there are several ways to go, but that the most common choices for executor include: spousechildren, if capablefriend...
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Questions to Ask When Interviewing a Financial Planner

Questions to Ask When Interviewing a Financial Planner

Excerpts from the Book - Preserving Wealth - written by Jack Lumsden, MBA, CFP® Deciding on which financial planner to hire is a particularly important decision for families to make. The following are key questions that FP Canada has designed to help in the selection process. How to Interview a Financial Planner Financial planners can help you plan for retirement, find the best way to finance a new home, save for your child's education or simply help put your finances in order. Whatever your needs, working with a professional financial planner is a crucial step in helping you meet short-term and long- term goals that will help ensure your financial well-being. Finding the right planner is extremely important because your choice will almost certainly affect the security of your financial future. The following questions will help you interview and evaluate financial planners to find a competent, qualified professional with whom you feel comfortable and whose business style suits your needs. Don't be afraid to ask these...
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Why Probate may be a good thing!

Why Probate may be a good thing!

  Excerpts from the Book - Preserving Wealth - written by Jack Lumsden, MBA, CFP® Much has been written about the various strategies to avoid probate fees or the estate administration tax.  The reason is simple, in Ontario, probate fees are 1.5% of the estate over $50,000.  This fee is applied to assets that are transferred through the will. However, probate may be valid for some uses, and with all strategies you must watch for unintended results. The following excerpt from the Book - Preserving Wealth, that reviews this: PROBATE, TRUSTS, AND ESTATE TAX MINIMIZING STRATEGIES “This is great coffee, Sandra,” said Uncle Wayne. “I wish you could talk your Aunt Jen into buying the good stuff. She always gets coffee on sale, and it’s so weak that I end up needing a whole pot just to get my heart started most mornings. Oh well, let’s get back to work. “I believe we were about to go over information about trusts and some methods you could use...
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