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Archives for February 2024

Power of Attorney – A Financial Planning Component

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Power of Attorney – A Financial Planning Component

 

A power of attorney is an essential part of a financial plan.  If something happens to you, for example an accident or illness that impacts your ability to make financial or health care decisions for yourself, you will need someone to make those decisions for you.  Everyone over the age of 18 should have a power of attorney for personal care and property in place!

 

A power of attorney is a legal document that gives someone you trust the right to make financial or health care decisions for you.  There are two types of power of attorney: property and personal care.

 

A power of attorney for personal care can make decisions about your health care, housing, and other aspects of your personal life such as health care, meals and clothing.  Without a power of attorney, a family member may be able to make some decisions, but not all!

 

A power of attorney for property can enable your trusted family or friend to make decisions about your financial affairs.  Some of these decisions could include the payment of bills, bank transactions, maintaining or selling you home, managing your investments and continuing the operation of your business.  Without a power of attorney for property, family, your spouse or trusted friend cannot automatically step into make financial decisions for you.

The provincial court in Ontario would appoint a guardian in the event that an individual does not have a power of attorney.  Appointing a guardian through the court process is more costly and often takes time to complete.  Having a current power of attorney enables your appointed individual or individuals toto start making decisions about your financial affairs immediately unless you state otherwise.

 

Individuals should consult a lawyer when creating a power of attorney.  Obtaining  quality advice is worth its weight in gold!  You want the opportunity to create a power of attorney that meets your personal needs and if you run a business then the needs of the business must also be considered in the power of attorney.

 

Seek quality legal advice in creating a power of attorney that meets your needs both financially and personally!

Segregated Funds Provide Flexibility, Growth Potential and Unique Benefits

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Segregated Funds Provide Flexibility, Growth Potential and Unique Benefits

 

With the financial markets looking more promising, many individuals are reviewing their investments with an eye towards capturing future growth. Diversification, a broad range of investment options and the services of professional money managers for a reasonable fee are all components of a good retirement portfolio. Segregated funds, sometimes called Guaranteed Investment funds offer the above features and more at a very competitive price.

 

A segregated fund contract is issued by a life insurance company. There are numerous investment options inside a segregated fund policy which are managed by many different fund managers in a wide range of investment classes. For example a segregated fund issued by an insurance company would offer investment options such as GIC’s , bond funds, money market funds, balanced or asset allocation funds, dividend funds, Canadian equity funds, International funds and specialty funds such as resources or real estate. Advisors can build a diversified portfolio for their clients using numerous professional fund managers all in one policy contract. Clients can switch between one fund and another within the segregated fund contract at no expense.

 

Segregated funds may also offer income protection from market downturns, maturity guarantees and guaranteed death benefits which can be reset and increased as the portfolio grows at no expense to the client.

 

There are numerous estate planning benefits of segregated funds. The death benefit guarantee insures that your beneficiaries are guaranteed 100% of all deposits made (minus any redemptions) even during a market downturn.

 

The proceeds of a segregated fund at death bypass the estate, estate fees, probate fees and long delays if there is a named beneficiary or beneficiaries. The proceeds of the investment pass privately and directly to your designated beneficiaries without the expense associated with settling an estate.

 

Segregated funds both registered in an RRSP, RRIF or Locked in RRSP fund or Non- registered investments are protected from creditors if the client runs into financial or business difficulties. This opportunity is ideal for professionals, such as doctors, lawyers, accountants, dentists and small business owners looking to help shield their personal assets from professional liability.

 

Additional advantages provided by insurance company segregated funds include strict monitoring and selection of outside fund managers who offer investment portfolios inside the segregated fund. These monitoring processes use stringent criteria to make sure the investment funds available represent the highest quality investment managers.

 

If you are interested in capturing the growth potential of the financial markets, wanting to diversify the risk in your portfolio or repositioning your retirement plan to provide income and security of your capital during market fluctuations, consider the benefits of a segregated fund. Speak to a qualified financial advisor about the opportunities a segregated fund provides for you and your family.

How Grandparents can do more financially to help their Grandchildren

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How Grandparents can do more financially to help their Grandchildren

 

Many grandparents are assisting with some of the big expenses and sometimes bypassing adult children to leave inherited assets to grandchildren instead.

Helping grandchildren may start by contributing to their Registered Education Savings Plans.  The maximum contribution is $2,500.00/year.  The government grant matches 20% of the annual $2,500.00 contribution.

Another option is to start contributing annually to a TFSA once your grandchildren are age 18.  If your grandchild is age 18, grandparents could contribute to the FHSA First Home Saving Account and can have contributions up to $40,000.00 with an annual contribution of $8,000.00 per year.  Similar to the TFSA, any gains on the investment grow tax free as long as they are eventually used to buy a qualifying home.  The FHSA will help our grandchildren break into the housing market.

Purchasing life insurance on grandchildren provides them with a financial asset to build upon and a baseline of insurability for the future.  Life insurance cash values grow tax sheltered and many provide another opportunity to create wealth in a tax sheltered and efficient manner and provide your grandchild with a life insurance policy to build upon over time without the need to provide evidence of insurability in the future.

These are just a few of the financial tools available to help our grandchildren achieve future financial stability.

Your RRIF should have a Cash Wedge

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Your RRIF should have a Cash Wedge.

 

If you turn 71 in 2023 you will need to change your Registered Retirement Savings Plan (RRSP) or Spousal RRSP to a Registered Retirement Income Fund (RRIF) or Spousal RRIF before December 31st 2023. There is also the option to purchase a payment annuity with up to a 15-year guarantee period. The annuity pays the income for your lifetime. The guarantee period is relevant to your beneficiary or beneficiaries as it guarantees them at your death a number of years of payments from the issue date of the annuity up to a maximum of 15 years. For example a life annuity 15 years guaranteed would provide lifetime income to the annuitant (RRSP owner) and payments at death for the balance of time until 15 years is up ie. 2038 or the commuted value.

 

A RRIF or Spousal RRIF is invested and generates an income in accordance with Canada Revenue Agency guidelines which is paid out monthly, quarterly or annually. The individual can elect the amount of the payment which must at least be equal to the required annual minimum payment. At death the RRIF may be paid to a named beneficiary. If the beneficiary is a spouse the lump sum value of the RRIF on the date of death may be transferred tax deferred to the spouses RRIF or be used to purchase a life annuity. No beneficiary other than a spouse can receive the proceeds tax deferred. If the beneficiary is your estate, children, other individuals or a charity, income tax on the value at the date of death is taxable in the year of death. 

 

When setting up a RRIF, the investment mix should include a cash wedge! A cash wedge is a portion of the investment in cash, money market or short-term savings / daily interest fund to use for income payments in the near future. We recommend a series of laddered guaranteed investments / gic’s for 1, 2 and 3-year terms balanced by investments in equity/ balance funds in a portfolio. The percentage mix of each cash/gics/fixed income (Bonds) and Equity is determined by your tolerance to risk. Your financial advisor should be able to determine the allocation of investments for you.

 

Some helpful tips when setting up a RRIF is to ask questions, have your advisor shop the interest rates to find the best option for you, review the deposit insurance or Assuris plans, (for life insurance companies only) and understand the investment mix versus your individual needs for income and their risk tolerance to stock market fluctuations. Life insurance companies RRIF and Spousal RRIF’s allow for two levels of name beneficiary; a primary beneficiary and then a secondary or contingent beneficiary or beneficiaries. The option to have two layers of beneficiaries may be helpful in your estate planning! 

 

Seek quality advice to ensure your RRIF is designed to fit your personal needs!

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Location

621 Norris Court, Unit 5
Kingston, Ontario, Canada
K7P 2R9

Phone

Tel. 613.384.1880
Fax. 613.384.4679

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Fri : 9 a.m. - 4:30 p.m.

Evenings and weekend
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