(306) 931-7625 | 1 (866) 841-1272 jamesd@4cornerfinancial.ca

Family

Managing your finances raises a number of topics but none as tricky and potentially unpleasant as planning for your family and finances in the event that you pass away or become incapacitated. Understandably, these questions are often ignored by many—but don’t fall into the trap of avoiding these difficult matters. Good estate planning will help to make sure that your wishes are carried out, and your family and assets are well protected.

Managing your finances raises a number of topics but none as tricky and potentially unpleasant as planning for your family and finances in the event that you pass away or become incapacitated. Understandably, these questions are often ignored by many—but don’t fall into the trap of avoiding these difficult matters. Good estate planning will help to make sure that your wishes are carried out, and your family and assets are well protected.

With this in mind, let’s take a look at the key areas that you should consider when designing your estate plan:

  • Choosing a guardian – One of the most important considerations is who you select to become the legal guardian of your children. This is a very personal and complex decision, and you will consider several unique factors depending on your circumstances, but your principal concerns might be how physically able the person is to look after your children, as well as such practical matters as how close they live to you and their personal and financial situation and stability.

  • Life insurance and trusts – Life insurance gives your family the financial security to continue their standard of living and fulfil their dreams in the event that you are unable to provide for them yourself. Life insurance payouts can be used in various ways, including paying off debts, paying for college education, or simply helping with general living costs.

 

A trust is a way of specifying how and when you wish to pass money and other resources to your children. It can be an excellent way of ensuring that their inheritance reaches them before the age of eighteen or twenty-one, unlike a court-controlled process, as you will stipulate who manages and distributes the funds.

·      Choosing someone to make decisions on your behalf

It is crucial to make sure that somebody trustworthy is nominated to manage and distribute your various assets according to your wishes. This executor can be anybody, though spouses, older children, or close friends are often common choices. Similarly, if you become too sick to make your own decisions about your finances or your family’s care, a health care directive and a power of attorney will give you peace of mind and go a long way towards protecting your assets.

Now that we understand the key areas that should be considered in estate planning, here are some of the important components or documents involved in the process:

·      Will, trusts, and beneficiary forms

Both a will and a trust should detail your assets and how you wish them to be distributed when you die, as well as assigning the guardians of your children. However, one benefit that a trust has over a will is that a trust does not have to go through probate prior to being executed, as well as the option of coming into effect before you pass away; it remains under your control and transfers the role of trustee to someone else when you decease.

 

Beneficiary forms are slightly different. They assign designated beneficiaries to specific financial accounts such as mortgages and bank accounts. As this information holds more legal weight than a will itself, it is crucial to regularly ensure that your beneficiaries are up to date.

 

·      Durable powers of attorney

The term power of attorney refers to the person, or persons, that you nominate to act on your behalf in the event that you are too ill to state or carry out your own wishes. There are various ways to implement this; you can choose specific individuals for particular roles, such as one person to look after your finances and another to make your healthcare decisions, or you can designate one person full power of attorney to manage all of your affairs.

 

·      A living will

Not to be confused with a last will and testament, a living will details the type of medical treatment that you wish if you were ever incapacitated. Along with a general or healthcare power of attorney (see above), this document is known as your advance health care directive, and it not only provides you with peace of mind that your medical wishes will be respected, but it also gives direction and support to your family when faced with difficult decisions about your care.

 

·      Letter of intent

This document is not legally binding and can offer a more personal touch alongside an official will or trust. As the letter is less formal and binding than other documents, many people use it to express their wishes about more personal aspects such as their requests for funeral arrangements, or even preferences and desires for how their family should be brought up.

As with any financial arrangement, changes over time, not only in process and legislation but in your own personal situation, mean that it is imperative to keep your estate planning strategy under review and regularly updated to ensure it’s fit for its purpose and accurately reflects your wishes. 

Continue Reading

An outline of the key lines to look out for in the 2018 Income Tax Year.

Tax Lines to Look Out for:

2018 Income Tax Year

It’s that time of year again, when many of us sit down to complete our income tax return and hope that we have done enough preparation to ensure a smooth tax return. We’ve outlined the key lines to look out for in the 2018 Income Tax Year:

Expenses relating to medical expenses have been expanded to include service animals and can be claimed for non-refundable tax credit. You should also be aware that you can claim for yourself, your spouse or common law partner and any dependent children under the age of 18.

Tax on Split Income (TOSI) (Line 424)

As of January 1, 2018, in addition to applying to certain types of income of a child born in 2001 or later, TOSI may now also apply to amounts received by adult individuals from a related business.

Interest Expense & Carrying Charges (Line 221)

Any fees paid for specific advice about your investments or for tracking your income from investments.

Any fees paid for management of your investments, except administration fees paid for your registered retirement savings plan or registered retirement income fund.

Interest you paid to borrow when borrowing to invest for investment income only except if investment income is considered capital gains.

Insurance policy loan interest you paid in 2018 to make income. To claim this amount, the insurance company must complete Form T2210 before your tax return deadline.

Carry forward information (Line 208 and 253)

If you are not deducting all your RRSP contributions you made in 2018 and the beginning of 2019, your unused contributions can be carried forward.

Generally, if you had an allowable capital loss in a year, you have to apply it against your taxable capital gains for that year. If you still have a loss, it becomes part of the computation of your current year net capital loss. You can use a current year net capital loss to reduce your taxable capital gains in any of the 3 preceding years or in any future year. Capital losses can be carried forward indefinitely and are only deductible against capital gains.

Charitable Donations

As of January 1, 2018, the first-time donor’s super credit has been eliminated.

If you owe money when your income tax return is complete, the only way to delay payment is to delay the filing until the April 30th deadline. Alternatively, if CRA owes you money, then file as early as possible.

This article and infographic are for illustrative purposes only. You should always seek independent legal, tax, financial and accounting advice with regard to your situation.

Continue Reading

If you want to see how much tax you can save contributing to your RRSP for the 2018 tax filing year, enter your details!

RRSP Deadline: March 1, 2019

This is the deadline for contributing to your Registered Retirement Savings Plan (RRSP) for the 2018 tax filing year. You generally have 60 days within the new calendar year to make RRSP contributions that can be applied to lowering your taxes for the previous year.

If you want to see how much tax you can save, enter your details below!

Continue Reading

Now that we are nearing year end, it’s a good time to review your finances. 2018 saw a number of major changes to tax legislation come in force and more will apply in 2019, therefore you should consider available opportunities and planning strategies prior to year-end.

Now that we are nearing year end, it’s a good time to review your finances. 2018 saw a number of major changes to tax legislation come in force and more will apply in 2019, therefore you should consider available opportunities and planning strategies prior to year-end.

Below, we have listed some of the key areas to consider and provided you with some useful tips to make sure that you cover all of the essentials.

Key Tax Deadlines for 2018 Savings

December 31, 2018:

  • Medical expenses

  • Fees for union and professional memberships

  • Charitable gifts

  • Investment counsel fees, interest and other expenses relating to investments

  • Student loan interest payments

  • Political contributions

  • Deductible legal fees

  • Some payments for child and spousal support

  • If you reached the age of 71 in 2018, contributions to your RRSP

January 30, 2019

  • Interest on intra-family loans

  • Interest you must pay on employer loans, to reduce your taxable benefit

February 14, 2019

  • Expenses relating to personal car reimbursement to your employer

March 1, 2019

  • Contributions to provincial labour-sponsored venture capital corporations

  • Deductible contributions to a personal or spousal RRSP

Family Tax Issues
  • Check your eligibility to the Canada Child Benefit
    In order to receive the Canada Child Benefit in 2019/20, you need to file your tax returns for 2018 because the benefit is calculated using the family income from the previous year. Eligibility depends on set criteria such as your family’s income and the number and age of your children and you may qualify for full or partial amount.

  • Consider family income splitting
    The CRA offers a low interest rate on loans and it therefore makes sense to consider setting up an income splitting loan arrangements with members of your family, whereby you can potentially lock in the family loan at a low interest rate of 2% and subsequently invest the borrowed monies into a higher return investment and benefit from the lower tax status of your family member. Don’t forget to adhere to the new Tax on Split Income rules.

  • Have you sold your main residence this year?
    If so, your 2018 personal tax return must include information regarding the sale or you may lose any “principal residence” exemptions on the capital gains from the sale and thus make the sale taxable.

  • If you’re moving, think carefully about your moving date
    If you are moving to a new province, it’s worth noting that your residence at December 31, 2018 is likely to be the one that your taxes are due to for the whole of the 2018 year. Therefore, if your move is to a province with higher taxes, putting your move off until 2019 may therefore make sense, and vice versa if you are moving to a lower tax province.

Managing Your Investments
  • Use up your TFSA contribution room
    If you are able, it’s worth contributing the full $5,500 to your TFSA for 2018. You can also contribute more (up to $57,500) if you are 27 or older and haven’t made any previous TFSA contributions.

  • Check if you have investments in a corporation
    The new passive investment income rules apply to tax years from 2018 and you therefore need to plan ahead if the rules affect you. They state that the small business deduction is reduced for companies which are affected with between $50,000 and $150,000 of investment income, therefore the small business deduction has been stopped completely for corporations which earn passive investment income of more than $150,000.

  • Think about selling any investments with unrealized capital losses
    It might be worth doing this before year-end in order to apply the loss against any net capital gains achieved during the last three years. Any late trades should ideally be completed on or prior to December 21, 2018 and subsequently confirmed with your broker. Conversely, if you have investments with unrealized capital gains which are not able to be offset with capital losses, it may be worth selling them after 2018 in order to be taxed on the income the following year.

Estate and Retirement Planning
  • Make the most of your RRSP
    – The deadline for making contributions to your RRSP for the year 2018 is March 1, 2019. There are three things that affect how much you may contribution towards your RRSP, as follows:

    • 18% of your previous year’s earned income

    • Up to a maximum of $26,230 for 2018 and $26,500 for 2019

    • Your pension adjustment

Remember that deducting your RRSP contribution reduces your after-tax cost of making said contribution.

  • Check when your RRSP is due to end
    You should wind-up your RRSP if you reached the age of 71 during 2018 and your final contributions should be made by December 31, 2018.

Other Considerations
  • Make your personal tax instalments
    If you pay your final 2018 personal tax instalment by December 15, 2018, you won’t pay interest or penalty charges. Similarly, if you are behind on these instalments, you should try to make “catch-up” payments by that date. You can also offset part or all of the non-deductible interest that you would have been assessed if you make early or additional instalment payments.

  • Remember the deadline for making a taxpayer-relief request
    The deadline is December 31, 2018 for making a tax-payer relief request related to the 2008 tax year.

  • Consider how to minimize the taxable benefit for your company car
    The taxable benefit applied to company cars is comprised of two parts – a stand-by charge and an operating-cost benefit. If you drive a company car, it’s worth considering how to potentially minimize both of these elements. The taxable benefit for operating costs is $0.26 per km of personal use, therefore you should make sure that you reimburse your employer where relevant, by the deadline of February 14, 2019.

Contact us if you have any questions, we can help.

Continue Reading