Susan Creasy Financial Inc.Susan Creasy Financial Inc.
613.384.1880

Power of Attorney – A Financial Planning Component

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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!

Suggestions for Sharing the Family Cottage

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Often the decision to give ownership of the family cottage to one child over the other or others is not an option for many parents.

For many families, the cottage is a place where the emotional value attached to the cottage is significant.  Barbara Benoliel, a professional mediator, who spoke about cottage succession on CBC radio in May; said “What we are really challenging is the family identity when we say this actual memory or this thing we all share is going to now belong to one person.  Would you give your family history to anyone?”

If your children want to be co-owners of the family cottage, it is critical that a cottage agreement be prepared with their involvement.  A lawyer is often a helpful advisor in preparing this document.  A cottage agreement should seek to address some or all of the following!

  •         Use of the property
  •         Having guest visit
  •         The sharing and payment of expenses
  •         Maintaining, opening and closing the cottage
  •         Making improvements to the cottage
  •         Selling or transferring the cottage
  •         Using the cottage as collateral for loans
  •         How to settle disputes or dealing with situations when a co-owner does not pay their fair share

The cottage agreement should deal with splitting up the time spent at the cottage.  Maintenance during the visits…i.e. grass cutting, watering and gardening should also be included during the time allocated to co-owners/family.  Issues around co-owners children using the cottage and smoking (or not) should also be addressed in the agreement.

Maintenance and cleaning of the cottage is also an issue to include in an agreement.  You will need to set a budget which will include all annual maintenance costs, road costs, property taxes, opening and closing of hot tubs, removal of boats and winterizing/storage/shrink wrap, emergency repairs, replacement of items…i.e. BBQ’s, renovations, lawn mowing and garden maintenance and replacing consumables such as cleaning supplies, paper towel, toilet paper, laundry soap, dishwasher soap and cleaning of the cottage at the end of the stay.

Life insurance can often be used to create a cottage maintenance fund which can be invested to provide an annual income to cover the cottage expenses each year.  If $500,000.00 were invested at 3-4%, the annual income would be $15,000.00 to $20,000.00/year.  If the cottage is sold at a later date, the money in the cottage maintenance account can be divided among the co-owners.

Have the conversation with your family and have the children involved in establishing an agreement of co-ownership.  Get advice from your lawyer, financial planner and/or a life insurance professional.

Charitable donations make a huge difference

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Canadian non-profit organizations are broadening their horizons to support essential local community needs during exceptional and unprecedented times. The Limestone Learning Foundation, the charitable arm of the Limestone District School Board is one of those organizations. For over 20 years, the LLF has funded inspiring excellence in “education” projects for students in the Limestone District School Board.  Its mandate provides funding that is not provided by the Ontario Ministry of Education in the fields of Literacy, Numeracy, Science and the Environment, Visual Arts, Music and Health, Wellness and Technology. To date, over $1.8M has been given to over 645 unique projects such as musical instruments, robotics, drone mapping, videography, grow gardens and Indigenous Culture – Honouring the Land.

Most recently, the LLF turned its efforts to the importance of student readiness through good nutrition, by donating $100,000 to the Food Sharing Project. Recognizing the impact of the Pandemic on family income, the foundation realized there was an immediate role to play in keeping students fed and learning. The FSP provides nutritious snacks and meals both at school and for those learning at home. This essential service fits into the LLF mandate and the foundation is privileged to contribute.

Building a strong community through giving to educational foundations such as the LLF allows donors to ensure the health and wellness of our students.

Individuals can make tax-deductible donations to local charities that are near and dear to them.  If the donation of stocks, cash or Life Insurance are made before the end of 2020 an appropriate tax-deductible receipt is provided by the charity.

If you are in a position to pay income tax in 2020, why not give a donation to a local charity, make a difference in these times of the Covid 19 pandemic, and reduce your tax burden in April 2021.  Speak to your Financial Advisor to obtain further advice.  Don’t delay as the year-end is fast approaching.

7 Ways To Help Your Finances Now

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These are uncertain times, as businesses have closed their doors, people have been laid off, and every business has to adapt to the current situation. People and business alike are struggling to make ends meet without further negative financial impacts. Even though things look grim, it is not a bad time to review your finances and make some positive improvements. Here are seven things you can do today to help improve your financial situation.

Pay down debt

Paying down your debt, and most importantly your high interest debt such as credit cards, can help provide some breathing room in your budget. Even if you are currently tight on money, paying down this type of debt will enable you to focus on saving more for the future. Having these burdens off of your back will help alleviate stress and allow you to free up cash that you can put towards emergency savings. Set deadlines by when you wish to pay each credit card off and don’t just assume that paying the minimum amount is enough.

Emergency Savings

This is a pool of cash that is specifically reserved for financial hardships, such as being able to afford the necessities of life or large expenses. Even when focusing on paying down debt, it is important to still focus on savings. If you are focusing solely on paying down debt and an emergency arises, you will have no choice but to take out additional loans or use credit cards. Emergency funds should be stored within a high-interest savings account, where the money is safe and still maintains some growth to keep up with inflation but is easily accessible without penalty if you need to dip into it.

Cut back and live within your means

By looking at your monthly expenses, you can identify where your money is going, as well as which items or services are an absolute necessity and which are ones are really a ‘want,’ meaning you do not need them to survive. Your spending money should account for no more than 30 percent of your net income. A monthly budget can help identify how much you are currently spending. Items, such as rent or mortgage, utilities, car insurance and groceries are necessities of life; items such as new furniture, electronics, subscriptions, or cable are not. Take a look at your spending month to month, for example, February’s spending in comparison to March, and the numbers might shock you. Use that money now to pay down debt or funnel it into your emergency fund.

Time is your friend

Do not make changes to your portfolio due to a negative impact in the market. Market timing, or trying to pull money out at the peak and invest at the valley, never works out. Missing out just on a few days in the market can decrease your average rate of return by half or more. Having a financial plan that is suited to your needs and investing regularly, especially during a downturn, is crucial for financial success. Do not jeopardize your long term financial security based on short term events.

Risk tolerance

With the downturn in the market, this is an advantageous time to review your risk tolerance, or how much risk you can withstand. This market downturn has highlighted how much risk or loss you are personally willing to handle without concerns. Working with a financial advisor, you can gain a better understanding of your real risk tolerance. Your time horizon and your personal feelings will determine if you should be looking at GIC and bonds, or stocks and equities.

Education and build skills

You are currently at home with a large amount of free time; this would be the best time to further your education or build a new skill that will help further your career and can have huge financial benefits for yourself. Not only are you improving, but you are giving yourself a leg up on the competition for promotions or new job offers. Set yourself apart from your competition with a few new skills to add to your resume or current abilities.

Re-evaluate your priorities.

When times are tough, it is a great time to re-assess what your goals and priorities are. When faced with difficult decisions, you will have a true understanding of what is important to you and what you want to achieve. Use this time to focus on what you have been doing, whether or not it has been working for you, and what you could be doing better to achieve the goals that are important to you.

There is no crystal ball that says when a market downturn is going to happen or when an emergency will occur; neither can we use past data to predict what the future will hold. We have not seen markets react like this since the market crash in 2008, and we are in unprecedented times with how long this downturn will last. It is never a bad time to review your finances and ensure you are on track. If you feel nervous or uncertain about things, seek guidance and help from professionals.

I want to help the best way I know

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In these uncertain times, I want to help the best way I know-how

All of our worlds came screeching to a halt overnight.

We are all dealing with minimizing the impact COVID-19 not only in our life but also in our community. At Susan Creasy Financial Inc., we are doing our part to minimize the spread by limiting our physical interactions with clients.

Like many of you, I am working from home while trying to entertain a child and working very different hours outside of the traditional 9-to-5. I am finding that I have to work later into the evenings or take time off in the mornings to play with my child. Things have changed in our lives, and I am sure that you are also feeling the same pinch and change to your schedule.

Rest assured, I am still working to provide assistance to clients and the community. As a seasoned financial planner with a large number of resources at my fingertips, I want to do my best to answer any questions you might have related to your finances. It could be about budgeting, paying down debt, minimizing spending, investing, or even how to plan for retirement when there is financial strain.

Here is my proposition to the community

I am opening my hours up from 9 am to 9 pm, 7 days a week. Yes, I will work weekends and late into the evening to meet when it is most convenient for you during this stressful time. All meetings will be over the phone or through gotomeeting video conferencing.  Follow the link provided to schedule your meeting or email me directly to set up a time.

I wish you the best and look forward to helping each and every one of you.

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Estate Planning: How Prepared Are You?

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Just as any well-organized vacation requires thought, planning and attention to detail so too does an estate plan. At the time of your passing, you want to have confidence that your final wishes will be followed and your family is taken care of. Depending on your situation, you may have specific goals or tasks that you want to be accomplished after you pass, such as preserving family wealth, providing income for your spouse and children, funding education, the transfer of a cottage, or donations to charity.

Wills

Dying without a will cancels your ability to do any of the above. In the absence of a will, the provincial courts determine who will distribute your assets, who will be the guardians for your children, and what assets are sold. Also, there can be legal costs, delays, loss of control and provincial probate fees that have to come out of your estate. Having an up-to-date will drafted by a professional can ensure that your estate is handled properly and in your best interest. Your will covers many of these items so that your assets are divided amongst your named beneficiaries, any trusts for children and grandchildren are set up, and that you have some control over your estate.

 Debt

If you pass away with any personal debt, including credit cards, mortgage, or car loans, your estate will need to pay them off first. Any assets will be used by the estate to pay off creditors, leaving less to be passed onto your beneficiaries. If your liquid assets, such as bank accounts and investments, are not enough to cover the debts, other assets such as jewellery, houses, cottages, or other items that form your estate may have to be sold. Life insurance can help protect your assets, by providing money to your estate to help pay off these debts; any remaining money in the estate can then be divided out to your beneficiaries as you wish.

Taxes

In the year of your death, a final tax return must be filed that includes all income earned up to the time of death. Your investment accounts and capital property are deemed to have been sold on the date of death and all capital gains are included as income. There are some tax-deferring methods when naming a spouse on registered accounts, which allows the assets to roll over tax-free. The executor of your estate will also have to file for probate and pay probate taxes, which is based on the total value of the assets that flow through your estate. Having investments through a life insurance company can be passed onto the beneficiaries and not your estate and help reduce probate taxes.

Estate planning and wills can be quite simple and are not always expensive or complex. Every situation is unique and requires its own experts.  Use the services of a lawyer and financial advisor to ensure that your wills and final wishes are taken into consideration. Make sure that your professional team, which may include an investment advisor, accountant, and a lawyer, clearly understand your objectives.

Charitable Giving

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What if the old adage is wrong, and you can take it with you? After 39 years as a Financial Advisor, I’ve wondered about this assumption, as have many of my clients. Knowledge and experience have taught me that we may not be able to take our money and our possessions with us into the next life, but what we can take is peace of mind, which is a pretty valuable commodity. At the very least, our final steps of this earthly journey can include feeling reassured that we have taken care of our loved ones, and our community, to the fullest extent possible.

Of course, this doesn’t happen by accident. It takes planning. We must put smart strategies in place that allow us to grow a legacy of generosity while simultaneously reducing the tax burden on our loved ones. There are many ways to lessen the tax burden of an estate and one of the simplest and soundest is charitable giving. A particularly tax-smart gift is designating a registered charity-in whole or in part-as the beneficiary of a Registered Savings Plan, an RRSP, RRIF or TFSA. Among the most significant benefits to the donor is the ability to retain ownership of the Registered Account until the time of death, and then giving a much larger gift than might be possible from current assets. Additionally, the resulting tax credit to the estate can be used to offset the deceased’s tax.

Charitable giving is a deeply personal choice-you know the causes that are most meaningful to you. I have served many not-for-profit organizations in Kingston, as a volunteer, and believe the biggest impacts are made locally. Do your research, and then ask your financial advisor for guidance in developing a strategy that brings all the pieces together.  As I have said before, unless you like paying more taxes, you should seek advice on how you can make a tax-smart gift now, from your current assets, or down the road, within your estate or will.

Dual Wills Can Reduce Probate Fees

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While it is not uncommon for the executor of an estate to apply for a certificate of appointment of estate trustee of a will, all cases don’t warrant probate. Certain assets such as personal property including jewellery, cars, paintings, furniture and privately held shares can be transferred to beneficiaries without the necessity of probate. Named beneficiaries on investments or life insurance with a life insurance company do not usually require probate. Other types of property including land, mineral rights and real estate, often do not require probate for the title to be transferred to another person. Probate is also required in situations where the estate is engaged in litigation or third parties such as banks or other financial institutions refuse to transfer title of an asset to a beneficiary.

When engaging in estate planning, the goal is to use strategies that will reduce the value of the deceased’s estate which in turn will reduce the estate administration tax or probate fee. A few common strategies for minimizing probate fees include:

  1. joint ownership of assets with right of survivorship
  2. naming beneficiaries for RRSP/RRIF, life insurance and investments held with a life insurance company.

More recently since 1998, the use of dual wills has been approved as a tool to reduce probate fees in Ontario. Other provinces have not approved this practice. Dual will strategy has been approved in the Province of Ontario to reduce probate fees and allow a testator desiring to transfer certain kinds of assets to minimize the delay in processing the estate and to reduce the estate fees at death. Probate fees in Ontario are 1.5% of the estate value in excess of $50,000.00. The probate fee is payable to the Province of Ontario at the time of application for probate. Legal and accounting fees required to document the probate process are in addition to the probate fee and can often cost another 2-3% of the estate. An estate in Ontario with a value of $1 million would have Estate Administration Tax of approximately $14,500.00. Seeking quality advice from legal, accounting and investment professionals is critical. A team approach to your financial planning is the best way to solve your will and estate planning needs.

Grandparents Gifting Money to RRSP

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Many young people spend their hard-earned money on the usual things that young adults enjoy, not giving much thought to a retirement 45-50 years away. Canadian income tax rules allow for an indefinite carry-forward of unused RRSP deductions. Gifting money to make a contribution to your grandchild’s RRSP is a gift that keeps on giving. The combination of compound growth or accumulation of money over time can create substantial savings inside an RRSP.

To make an RRSP worthwhile, a minor RRSP holder should have earned money enough to allow for an RRSP contribution, based on 18% of income earned in the previous year and must have filed a tax return with Canada Revenue Agency (CCRA). An RRSP can be opened for a minor at any age, provided the minor has a social insurance number. Many financial institutions require a parent or legal guardian to the sign the RRSP account documents as the signature of a child is not legally binding. The minor can postpone claiming the tax deduction until a later date as there is no time limit and it may be prudent to wait until the grandchild is in a higher income tax bracket before using the deduction.

There are many ways children can earn income- any amount under the basic personal amount will not attract income tax. Income must be legitimately earned and not an allowance. If the grandparent or parent owns a business, the grandchild can earn a salary/income from the business. The salary or wages paid must be equivalent to what a stranger would be paid for doing the same work. There are many jobs a child or grandchild can perform.

It is important to help children or grandchildren understand that a contribution to an RRSP builds money for retirement, the children or grandchildren are building funds for their own future use. RRSP contributions can be withdrawn without income tax if the proceeds are going to towards the purchase of a first home or their education. Contributing to your child or grandchild’s RRSP is a great way to transfer wealth from one generation to the next. This is as an efficient estate planning tool which creates a win-win scenario of all concerned. If you are in a position to help your child or grandchild save for their future, consider a contribution to the child’s Registered Retirement Savings Plan (RRSP).

Benefits of an Estate Freeze

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With good planning with your accountant, lawyer and financial advisor, an estate freeze can help reduce taxes on your assets, while maintaining control and access. Many business owners have seen substantial growth in their corporate assets and are approaching retirement age. As their assets continue to grow in value, the income tax bill that will be owed continues to grow as well. Currently, the amount of annual income tax paid is significant.

What is an Estate Freeze

An estate freeze is a process which takes certain assets that you own today and freezing them at today’s value. Any future growth in the value of those assets will be attributed to other persons i.e. your heirs (children, family, trust, etc.) The assets are transferred to a new company under section 85 of the Income Tax Act which allows them to transfer these assets in exchange for preferred shares of the company that will be frozen in value. The transfer will take place on a tax-deferred basis thus there will be no tax paid at the time of transfer. Common (growth) shares in the company to which all the future growth in value will be credited to will be issued to your heirs or possibly a family trust. 

There is the option to trigger the capital gain on private company shares when making the transfer to the new (holding) company. By using the lifetime capital gains exemption each shareholder is entitled to an exemption of $824,176.00 in 2016. This process will reduce taxes later when the shareholders sell the shares, transfer them to another owner or pass away. There are numerous advantages to considering an estate freeze. In most cases, the fees spent on legal and accounting advice now are much less than the income tax consequences of poor planning.

The benefits
  1. Reduces taxes at death – future growth of the shares in the company accrue to the common shareholder or family trust.
  2. Using the Lifetime Capital Gains Exemption which is available on certain private company shares and qualified farm and fishing property.
  3. Splitting income with family through the use of a family trust.
  4. Protecting assets when the future growth of a company will be held in the trust and will be protected from creditors.
  5. Reducing probate fees as a result of freezing the value of the shares, any future growth will not be part of the shareholders’ estate and thus not subject to probate fees.
  6. Maintaining control while holding preferred shares which were exchanged for the common (growth) shares. The senior shareholders will continue to have control and access to the assets in the private corporation.

Life insurance owned by the corporation is often a less expensive way of funding after implementing an estate freeze. The income tax rules are changing effective January 1, 2017, a discussion of how life insurance can be incorporated is recommended. New life insurance policies issued, in force prior to January 1, 2017, will be grandfathered under the current income tax rules. Life insurance policies issued, changed or converted after January 1, 2017, will have less tax sheltering room for investments, reduced tax-free flow of proceeds through the capital dividend account and possibly higher cost for actual life insurance. Consult your financial advisers to see if either the estate freeze or the positioning of additional corporate-owned life insurance plan makes sense.

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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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