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A Sound Investment Management Philosophy creates enduring Wealth
Hunt and Associates are committed to our investors goals. We are constantly striving to preserve your capital and generate strong returns while minimizing the taxes you pay. We are able to do this only after an investment plan have been carefully designed by taking into account your risk profile, time horizon, and age. Additionally, Hunt and Associates recommends that you regularly review your investment strategy to make timely adjustments when necessary.
Keeping focused and committed to your investment plan, We are convinced that you will be able to enjoy strong returns during periods when the stock markets are buoyant and preserve capital when stock markets are depressed. When the stock market falls, as it will from time to time, please do not be concerned or anxious to switch or move in and out of your investments. This can be very difficult, however, but resisting the urge to redeem is critical during a temporary decline in the stock market.
In other words, treat your mutual funds investments the same way you invest in your house. That is, you would not sell and move to an apartment if the real estate market is bad.
We believe that every investor should adhere to these six common investment principles followed by renowned investment wizards like Sir John Templeton, Warren Buffett and Peter Lynch:
Don't chase the latest fad which sounds to good to be true, very often they are.
Additionally, Hunt and Associates does not speculate or gamble with their client's money even if the client wants us to. Therefore, our policy is to avoid investors who believe that successful investing depends on predicting the stock market's ups and downs. Investors who buy and sell frequently, by trying to time the highs and lows of stock prices is actually gambling with their money. The odds of beating the market consistently over the long term are slim. Investors on the other hand are different from gamblers because they buy and hold their investments for the long term.
Finally, life generally comes with very few guarantees. However, by following our philosophy above…
Contact us today and we will help you invest with confidence!
During our working lives, we all get used to budgeting, or at least planning how to spend and save our income. The period prior to retirement may be the first time we have to plan our income to meet our expenses. With Canadians living longer and more active lives, retirement has become a longer and more expensive proposition than ever before. Planning retirement income is likely the single most important step in a successful retirement program. The rules are complex, but with the help of a qualified Financial Advisor, determining your retirement needs, goals and options can be an easier process.
FIRST THINGS FIRST - DETERMINING YOUR INCOME NEEDS
Before you begin thinking about the financial details, ask yourself "How do I want to live in retirement?” Your retirement lifestyle will be a key determinant in the options that you choose. If you plan to travel the world or leave Canada for a warmer climate every winter, your income requirements will be higher than if you wish to enjoy the quiet cottage life here at home.
YOU DO HAVE OPTIONS
The maturity options you choose at age 69 or sooner, provide you with retirement income in varying amounts over different periods of time, with tax being deferred until you actually receive the income from these options. Selecting the right combinations of these options is a key step to building the right package for your retirement needs.
Registered Retirement Income Funds (RRIFs)
Most Canadians will select a RRIF as their retirement income option because its similarity to an RRSP makes the transition a comfortable one. In fact, a RRIF is often viewed as an RRSP in reverse. Rather than making annual contributions, you are required to make minimum annual withdrawals related to a percentage of the previous year’s plan asset value.
RRIFs have become an attractive maturity option because they provide income flexibility - you can withdraw as much or as little from your RRIF as desired (subject to a specified minimum based on age), and you are taxed only on the money that is withdrawn.
A RRIF also allows for investment flexibility - a large range of investments qualify as investments for a self-directed RRIF. These may include shares in Canadian companies, mutual funds, government and corporate bonds, money market instruments, mortgages or a combination of any of these.
RRIFs are also a popular retirement income option because of the level of control the plan holder maintains over their assets - Much like a self-directed RRSP, a self-directed RRIF allows you make the investment decisions, with a trustee looking after the administrative details of the plan. Investing within a self-directed RRIF, does however, require some knowledge of the various capital markets, as well as knowledge of which investments qualify and which do not. Your financial advisor can assist you by ensuring that the proper asset mix is selected to suit your individual needs and circumstances.
Unlike an annuity, RRIFs treat men and women equally, as payments depend on the amount of money invested, the investments chosen, and the payment schedule, not on your gender. In addition, RRIFs are Estate friendly - assets can be passed to your surviving spouse without exposure to tax, if your spouse is designated as the beneficiary.
Life Income Funds (LIFs)
LIFs can be viewed as hybrid RRIFs for funds from locked-in RRSPs. Unlike a regular RRSP, a locked-in RRSP (a plan into which vested company pension benefits are transferred), is subject to provincial Pension Acts and pension legislation in each province, so rules governing them vary by province.
Despite these provincial differences, LIFs generally allow for tax deferral and provide, much like a RRIF, the flexibility of choosing investment. Also like a RRIF, the LIF has a minimum payment each year, but these yearly withdrawals can be any amount up to a maximum, giving the plan holder the flexibility to meet future income needs as they occur.
The maximum annual payment is enforced to retain assets of the LIF because a LIF must be converted into an annuity by the year of your 80th birthday, thereby providing lifetime income. There is no income flexibility after this occurs.
Annuities
The security and peace of mind that comes from receiving permanent income during retirement may be what is most important to you. Annuities allow the retiree to make a decision today that guarantees an income stream for a specified period or for life.
It is, however, important to understand that you give up future control of your capital when you decide to purchase an annuity, since annuities provide you with a stream of regular income payments in exchange for your capital.
When you use the proceeds from your RRSP to purchase and annuity, tax is deferred until income payments from the annuity are received. All annuities provide you with a guaranteed stream of income. What is variable is the time period over which you receive the payments.
RRIFS VS. ANNUITIES
All retirement income options are not created equal. The two most popular options, RRIFs and annuities, should be carefully evaluated against each other and against your goals before any decisions are made.
When deciding what combination of maturity options best suits your personal situation, consider whether the combination will provide you with the flexibility needed in your retirement years, and the ability to change you mind should your situation change. In many cases, there is an opportunity to change from one maturity option to another, if your retirement options are properly structured.
Contact us today for assistance in choosing the right maturity options for your registered assets.
Retirement Funding & RRSP's
It is very clear that in the near future, most Canadians will not be able to rely on company or government pension plans to provide them with adequate retirement income. Company sponsored pension plans are enjoyed by less than half of all Canadians and the viability of the Canada Pension Plan is debatable. This combined with longer life expectancies and the dream of early retirement means that many Canadians now fear running out of money before they run out of retirement. Individuals are left with only one solution — Maximize private pension plans and other investments.
RRSPs
Established by the federal government in 1957 to encourage Canadians to save for retirement, a Registered Retirement Savings Plan (RRSP) is simply an account which is registered with Revenue Canada. In addition to being the vehicle through which you can establish your own "private pension" plan for security in retirement years, the RRSP is by far the most popular tax shelter available today. RRSPs have the ability to provide immediate tax savings to anyone with taxable earned income - The higher your income, the greater your tax savings. There are basically three ways you benefit from making an RRSP contribution:
Tax Deferral
Any returns generated within an RRSP are tax-free as long as they remain inside the RRSP. As money is withdrawn, it becomes taxable income for that taxation year. An RRSP allows you to save tax dollars when you are paying high rates of tax in your earning years or during years of high income. You can benefit from the investment and potential growth of those dollars, and receive them back during low income years or during retirement when your income tax rate is likely to be much lower.
Immediate Tax Savings
All money that is invested, up to an annual limit, is deductible from earned income for tax purposes. For every $1,000 contributed to your RRSP, there is approximate a $270 to $530 tax saving, depending on your marginal tax bracket.
Tax-Free Compounding Of Returns Within Your RRSP
Investors have the benefit of compounding on their contributions to an RRSP. No taxes at all are paid to contributions to the fund, on its reinvested income, or its capital gains. Thus, over a period of years, compounding can be a major factor in the growth of a plan.
TAKING CHARGE OF YOUR RRSP AND YOUR FUTURE
Millions of dollars are spent each year to remind Canadians to make their RRSP deposit before the annual contribution deadline. Unfortunately, many individuals stop their planning at that point and simply leave their investments at whatever institution is most handy - usually their bank.
Consulting with your Financial Advisor is the first step in taking control of your RRSP and your future. He or she can assist you in determining where and how to invest. Whatever your choice - mutual funds, bonds, or other vehicles - the important thing is that you can choose those investments that are convenient. maximize your potential for investment return, and meet your individual requirements for safety, liquidity and diversification.
WE'RE HERE TO HELP YOU
Discuss your retirement planning strategy with your Financial Advisor. He or she will be able to suggest strategies for maximizing the value of your retirement nest egg while minimizing your tax burden.
The offering of severance and early retirement packages in both the public and private sectors appears to continue its upward trend. Every day, hundreds of Canadians are offered packages, with and without warning. What if it happens to you or someone you know?
Depending on the circumstances, the receipt of a severance package or early retirement offer can be a blessing or a curse. It’s even more difficult when the individual is faced with the difficult decisions that need to be made to ensure financial security for themselves and their family both short and long-term.
If you’ve decided to accept the package, you will likely want to place the maximum allowable amount within a locked-in RRSP, where it will be sheltered from tax and does not count towards your personal RRSP room.
In the case of company pension plans, your Financial Advisor can advise you if it is prudent to take the commuted lump sum value of your pension package, rather than monthly pension income, and the impact that these decisions will have on your retirement nest egg and estate.
In the short-term, your Advisor can assist you in developing an income plan to ensure you and your family can meet your living expenses until you are comfortably back in the workforce. Alternatively, if you decide that it’s time for you to start your retirement life, he or she can help you in converting pension and severance monies as well as existing RRSP and non-RRSP assets into retirement income assets.
Your Financial Advisor has the knowledge and experience to guide individuals or employee groups through this difficult and sometimes confusing major life change. He or she can discuss with you. in simple terms, exactly what your options are and how to minimize the tax and maximize the benefit the severance or early retirement package brings.
Today, sixty five percent of all jobs available in Canada require a post secondary education. If you’re like most Canadians, the task of planning for a child’s education can be a challenging one. As government funding and grants decrease while post secondary enrolment increases, so too does the cost of a post secondary education in Canada.
Estimating the Cost of a Post Secondary Education
Canada has the third highest tuition cost in the world, second only to Japan and the United States. Today, the average four year education at a Canadian post secondary institution costs between $40,000 and $60,000, and the average growth rate of these costs is 9%. This means that if you or your children are just starting a family, in 18 years time, the cost will between $110,000 and $150,000.
Apart from scholarships, bursaries and grants, which are becoming increasingly scarce, there are other ways to fund your child's education.
REGISTERED EDUCATION SAVINGS PLANS (RESPS)
Much like RRSPs are the cornerstone of a retirement savings strategy, RESPs form the cornerstone of an education savings strategy. An RESP lets you, the subscriber, contribute up to $4,000 per year toward a child’s education, to a maximum of $42,000 per child, or beneficiary. While there is no tax deduction for these contributions, money inside the RESP does grow tax-free over time. As money is withdrawn for education purposes by the beneficiary, the amount withdrawn is taxed in the hands of the beneficiary, with lower or no tax consequence because of the lower income status of the student.
If the beneficiary does not pursue a post secondary education and the plan is more 10 years old, the plan may be rolled into the subscriber's RRSP, or the accumulated plan value may be paid out to the subscriber subject to tax and a 20 percent penalty.
Group Plans vs. Self Directed Plans
RESPs may be group plans or self directed plans. Group plans, or "pooled trust plans", are administered through scholarship trust organizations and will typically pool assets for investment on your behalf in government backed securities only, including T-Bills, GICs, etc. By contrast, self directed plans generally offer more flexibility, allowing you yourself to select from a range of investments, including mutual funds, GICs, and more, thereby increasing the growth potential for assets in the plan.
In addition to offering greater investment selection, self directed plans are generally more flexible in varying the amount and timing of withdrawals for education purposes. In addition, the subscriber has the ability to change, at any time, the name of the beneficiary if a one child decides not to pursue a post secondary education. Group plans will often limit this ability to change beneficiaries.
Finally, self directed RESPs typically apply to a wider range of education programs, whereas most group plans apply only to qualifying programs which are a minimum of two years in duration.
Individual Plans vs. Family Plans
Both self directed and group plans can be broken down into individual plans and family plans, the key differences being that individual plans cannot have more than one beneficiary, whereas family plans can while also allowing for the allocation of accumulated income in proportions according the needs of each named child.
Individual plans do allow for greater flexibility in naming the beneficiary, though. In an individual plan, the beneficiary named does not have to be related to you and can be of any age, whereas in the case of family plans, named beneficiaries must be under age 21 and must be related by blood or adoption.
CANADIAN EDUCATION SAVINGS GRANTS (CESG)
Established by the federal government to encourage early contributions to an RESP, the CESG is paid into the plans of beneficiaries who are resident in Canada. The grant totals 20% of the contribution amount to a maximum of $400 in grants per year, up until the year the beneficiary turns age 17. Similar to RRSP contribution room, grant room not used may be carried forward.
IN - TRUST ACCOUNTS
An in-trust account, or "bare" trust, is an investment or bank account. There are no limits to how much you can invest in an in-trust account, making it a good supplement to RESPs for those who may be getting a later start in the funding of a child's education.
In-trust accounts also offer the opportunity for income-splitting, since capital gains on withdrawals will be taxed in the hands of the child, often with little or no tax consequence, since the student will typically be at a lower marginal tax rate than you.
In addition to education funding, your child can use the assets from an in-trust account for any purpose once the age of majority is reached. Care must therefore be taken in ensuring assets in the in-trust account are used for their intended purpose.
HOW WE CAN HELP YOU
Planning the funding of your child’s or grandchild’s education has never been more important than it is today. Fortunately, there are several options available to you and your Financial Advisor can help you determine which options may be right for you, providing you with the peace of mind in knowing that the funding of that education is taken care of. Call your Financial Advisor today for a complimentary Education Planning consultation.
One key objective in a well thought out financial plan is the reduction of risk. Various strategies exist to help minimize investment risk, but how do you protect yourself and your family against the type of risk over which you have little or no control, such as personal injury, loss of health or life?
Various types of insurance exist to transfer part or all of the cost of this risk to an insurance company, and We provide individuals and businesses with a full range of insurance solutions to meet their risk management needs.
In Canada, there are 1.8 million disabled individuals between ages 18 and 64, and more than half of those individuals have annual incomes of less than $10,000. If it happened to you, who would pay the bills? Would your family be exposed to financial hardship? Disability insurance protects against this type of risk.
Things to be considered when choosing disability coverage include what defines a disability, when benefits will be paid out, for how long they will be paid out, and whether benefits are taxable or not. Your Financial Advisor can assist you in selecting the disability coverage that makes most sense for you and will ultimately mean peace of mind for you and your family.
It’s a sad thought, but according to recent statistics Heart Diseases, Cancer, Multiple Sclerosis, and Strokes will affect more and more Canadians.
Here are the Facts:
Heart Diseases
Cancer
Multiple Sclerosis
Stroke
Sources: Canadian Cancer Society, Heart & Stroke Foundation of Canada, National MS Society
Advances in medical technology have resulted in decreases in death rates which means more people survive longer, but the bottom line is, we are still getting ill. If you survived a critical illness, would you have enough money to pay for private nurses and home care, special medical treatments, career retraining or daily living expenses?
Your Financial Advisor can help you select coverage to protect yourself from the financial impact of survivable critical illness and long-term healthcare.
It's a sad thought, but according to recent statistics Heart Diseases, Cancer, Multiple Sclerosis, and Strokes will affect more and more Canadians.
Heart Diseases
Cancer
Multiple Sclerosis
Stroke
Sources: Canadian Cancer Society, Heart & Stroke Foundation of Canada, National MS Society
Advances in medical technology have resulted in decreases in death rates which means more people survive longer, but the bottom line is, we are still getting ill. If you survived a critical illness, would you have enough money to pay for private nurses and home care, special medical treatments, career retraining or daily living expenses?
Your Financial Advisor can help you select coverage to protect yourself from the financial impact of survivable critical illness and long-term healthcare.
Travel Insurance, Individual Health and Dental and more...
Let Hunt and Associates be your source for all your individual insurance needs. We offer a range of individual risk management products and services including Travel Health Insurance, Supplementary Health Plans, Mortgage Protection Plans, Individual Health, Dental and Prescription Plans, and Rated Programs.
We can help you to design a plan catered to your specific needs.
Estate planning involves the accumulation, preservation and eventual distribution of an individual’s wealth. The main purposes of Estate planning are preserving the integrity of your portfolio in the event that you become disabled or mentally incapacitated, developing a plan for passing on your wealth to your intended beneficiaries, and planning ahead for potential tax liability so your Estate is not unnecessarily impoverished by the tax bill payable as a result of your death.
THE COST OF SETTLING YOUR ESTATE
We all know of the two certainties in life - death and taxes. What many Canadians fail to realize, however, is that the biggest tax burden comes after death. That’s when you are deemed by Revenue Canada to have sold all of your assets at fair market value, thereby realizing a capital gain if the deemed "sale price" is greater than the purchase price of the asset. In this case, 50% of the capital gain is taxable at regular marginal rates, with some exceptions for principal residence.
These taxes can seriously impact Estate size and, if not properly planned for, may impoverish one’s Estate, leaving financial hardship for one’s beneficiaries. With the help of your Financial Advisor, you can succeed in sheltering assets from taxation, as well as deferring capital gains taxes until the death of your spouse to avoid the immediate tax consequences.
In addition to taxes, consideration must be given to the impact of probate fees on the security left for your heirs. The probate of your Will certifies that it is acceptable to the courts and confirms the authority of the executor named in the Will. Probate fees, which can be significant, are payable at your death and possibly again at the time of your spouse’s death, and can create a significant burden on your Estate.
THE ESTATE PLANNING PROCESS
Estate planning today requires a team approach. Depending on the situation, the team may include an accountant, a life insurance broker, a real estate professional and/or a social worker. Always on the team is a lawyer and your Financial Advisor who coordinates the entire process.
The process involves taking a detailed inventory of your assets and liabilities; preparation of a fact-finding personal profile; defining your goals and objectives; and the planning for distribution of property, preservation of accumulated capital, retirement and disability needs, and the provision of income for beneficiaries in the event of your death.
EFFECTIVE ESTATE PLANNING STRATEGIES
From a legal perspective, the cornerstones of any solid Estate plan are a Power of Attorney and a properly drawn Will or, in some cases, multiple wills. In addition, a number of other simple and cost-effective tools may be used to realize your Estate planning objectives, in particular the need to defer taxes and fees payable by your Estate upon your death.
These tools may include joint ownership, designation of beneficiaries, spousal rollovers, living trusts, life insurance and other Estate-friendly life company products.
Other strategies may further help you in achieving your Estate planning objectives. To reduce probate fees and defer taxes, you may wish to include the gifting of assets prior to death (which is more likely to be an option for the elderly), the conversion of personal debt into corporate debt, and for larger Estates, the transfer of assets to a private holding company in a low probate province such as Alberta.
HOW WE CAN HELP YOU
All of the above mentioned strategies vary in complexity so you should always seek professional advice to ensure that any action does not give rise to adverse income tax consequences and that the cost of the implementation and administration of these strategies does not exceed the probate fees you are seeking to avoid.
Your Financial Advisor can assist you with this and may be able to recommend other products and strategies that may meet your individual investment and Estate planning objectives. In addition, he or she can help you organize your affairs, identify your objectives, assist you in developing an Estate plan, and arrange for its implementation. Call for a complimentary Estate plan review today.
Contact Us today for a complimentary Estate plan review.
The planning is a basic building block of any successful financial plan. Without it, despite significant returns gained on investments over your lifetime, your financial and personal goals can be delayed or even denied. Thus, individuals must carefully assess investments with respect to their own tax position, because it is certainly net income after taxes that is important to all Canadians.
There are several effective strategies to reduce the amount of tax Canadians must pay. Many of these strategies can be explained by your Financial Advisor. He or she is uniquely qualified to determine which of these strategies may apply to you and determine the most direct path to helping you achieve your objective of tax minimization.
CONTRIBUTE TO YOUR RRSP AND MAXIMIZE CONTRIBUTIONS
The single most important way for you to reduce your tax burden is by contributing to your RRSP. For every $1,000 contributed to your RRSP, there is a $270 to $530 tax saving, depending on your marginal tax bracket. In addition, your RRSP is the vehicle that allows your retirement savings to grow tax-free until you retire and withdraw these savings.
CATCH UP ON UNUSED RRSP CONTRIBUTIONS TO MINIMIZE TAXES
One strategy you may want to consider is catching up on previous years’ unused RRSP contribution room. The government allows Canadians to carry forward unused RRSP contribution room for seven years.
If you find yourself in a particularly high income year, this may be the opportunity you are looking for to maximize the value of your RRSP, to shelter your income from taxes, and to receive a larger tax refund than you ever thought possible.
If you don’t have the money to invest, you may wish to capitalize on this unused room by borrowing the money to top up your RRSP. This may make more sense now than ever, since tax savings far outweigh borrowing costs in today’s low interest rate environment. Your Financial Advisor will be happy to help you determine if this strategy is for you, since it should only be undertaken after careful consideration of your investment risk tolerance levels.
SPLIT YOUR INCOME THROUGH SPOUSAL RRSP CONTRIBUTIONS
By splitting income between a higher income earner and a lower income earning spouse, the overall tax paid may be reduced. The spouse with the higher income can contribute to an RRSP that belongs to the lower income spouse (within a specified yearly limit). The lower income spouse’s RRSP contribution limit is unaffected by the funds placed in the spousal plan, so he or she can still contribute up to the yearly maximum. When the RRSP funds are eventually withdrawn as income, they are taxed in the hands of the lower income spouse (as long as the minimum holding requirement is met).
Income splitting can also be used to extend RRSP contributions past the age of 69. While you can’t contribute to your own RRSP after age 69, you can contribute to a spousal RRSP until your spouse reaches age 69. You can still claim the tax deduction on the amounts you contribute.
BORROW "CORRECTLY" TO REDUCE TAXES
There are distinct and significant advantages to borrowing for investments held outside of your RRSP. Because you can deduct interest costs on loans taken for the purpose of making an investment in a business, mutual funds, stocks, bonds and other investments, you are better off from a tax perspective to borrow for the purpose of investment than for personal reasons (e.g. to purchase a car), where interest costs are non-deductible.
So, if you have some cash on hand and need to make a personal purchase or pay down your mortgage, as well as make an investment outside of your RRSP, use the cash for the personal purchase or to pay down your non-deductible mortgage. Then, borrow for the purpose of making the investment to take advantage of the deductible nature of the interest paid on the investment loan.
KNOW YOUR TAX RATES WHEN INVESTING OUTSIDE OF YOUR RRSP
The treatment of investment income varies depending on the source of that income. Each type of investment income - interest, dividends and capital gains - results in varying levels of taxation.
Interest income, whether it is earned from GICs, Canada Savings Bonds, or a bank/trust company savings account, is generally the least-favourably treated source of income, followed by capital gains and dividend income. This tax discrimination translates into a simple investment strategy - when you can, and if it suits your investment objectives, invest in equities and equity mutual funds to take advantage of the favourable treatment of dividends and capital gains over other sources of investment income.
Ask your Financial Advisor how you can start converting your highly taxed interest-bearing investments into more tax-advantaged investments.
EXPLORE OTHER TAX - ADVANTAGED INVESTMENTS AND VEHICLES
If they suit your investment objectives, and depending on the level of taxation you face, tax-advantaged investments will help you defer taxes. Specifically, these investments may give you the ability to claim a tax deduction equal to a portion or in some cases the entire amount of the investment, over a period of time. They may also allow you to defer taxes until income from these investments are received in a subsequent year.
For the highly taxed individual or corporation, more sophisticated arrangements such as off-shore trusts, may be the solution. Your financial advisor can help you determine if this strategy may work for you and if it may form part of an integrated investment and Estate strategy for deferring taxes.
MINIMIZE THE TAXES YOUR HEIRS PAY
Estate planning is often neglected as an area in which you can reduce the tax burden you leave for your loved ones. A substantial amount of taxes and probate fees may be payable upon your death, depending on how your affairs have been planned and your investments have been structured. Some of this tax burden may be spared from your beneficiaries by establishing a well structured Estate plan, with the objective of reducing your Estate for probate and tax purposes, as well as for providing income and liquidity for your loved ones in the event of your death.
WE CAN HELP YOU
These are just a few examples of strategies you may implement for the purpose of minimizing the amount of taxes you pay. A no-obligation review of your current tax situation and a strategic plan for reducing the amount of tax you pay is available by contacting your Financial Advisor today.
Contact Us today for a no-obligation review of your current tax situation and a strategic plan for reducing the amount of tax you pay.
We specializes in providing businesses, their management and employees with the full range of financial and risk management services and products including:
Risk Management and Business Succession Planning
For many entrepreneurs, the long hours and sacrifices over the years have paid off resulting in a financial asset that provides and income and financial security. The picture dims, however, when the subject turns to their plans for business succession. Over 95 % of all entrepreneurs do not have a viable estate succession plan.
Whether a small family-owned business or a large corporation, two of the most critical issues that must be faced by business owners and shareholders is how to plan for the disability or death of the owner or shareholder, and how to minimize tax liability due on the transfer of the business or shares to heirs.
Your Financial Advisor can coordinate strategic legal planning, entity formation, trusts, insurance-funded buy/sell agreements, deferred compensation plans and business succession insurance plans to ensure the business owner, shareholder and their respective families and heirs are protected.
Employee Benefits
Presenting employees with a meaningful benefits plan is integral in retaining a quality workforce. Your Financial Advisor will help you design, implement and service a customized benefit plan to address health, dental, vision, life insurance and long and short-term disability benefits. We have extensive experience in structuring and restructuring plans to provide maximum benefits at minimum cost, while providing clear communication to employees and employers alike.
Employee Retirement Plans
Methods of designing Group RRSP programs, profit sharing and defined benefit plans have changed substantially over the years. Your Financial Advisor can analyze plan types to help accomplish your company’s overall goals, eliminate costly or underutilized features, and coordinate executive and employee retirement needs.
Individual Pension Plans (IPPs) provide significantly more tax savings than Registered Retirement Savings Plans (RRSP). IPPs are becoming increasingly popular, especially amongst business owners (including incorporated professionals) who own the corporations that employ them.
IPPs are registered pension plans (RPPs) that are subject to the requirements of both the Income Tax Act (ITA) and pension standards legislation. IPPs are typically defined benefit (DB) arrangements, although it is increasingly popular to have an additional defined contribution (DC) component, or perhaps at earlier ages to implement them on a DC basis.
IPP Advantages
Who should consider an IPP
Investment Tax Minimization with IPPs
Sale of a business
A shareholder selling their shares could implement an IPP at the time they sell their business. This will let them extract funds from the business and reduce the capital gain arising on the sale of shares. Remember here that an IPP could be implemented as late as age 71!
Have family members join IPP
It is often possible to add members to an IPP with nominal incremental costs, or perhaps even no cost. Thus, consideration should be given to adding a spouse to the arrangement. The spouse will need to have T4 income. This is especially attractive where both spouses are of an age in which a funding advantage exists, and when there are additional RRSP assets that can be rolled over into the defined contribution component.
In instances when there are significant assets in the IPP. The IPP might be used as a wealth maximization tool. Let’s look at the situation where the members choose to draw pensions that do not have a guaranteed form. That means that upon their death no further amounts are payable to them or their estates. Thus, upon their deaths, the IPP has no further liability in respect of this pension. Typically, the I PP would have to be wound up. This could lead to a large tax liability. However, if another member who received T4 income from the corporation (perhaps a child of the business owner) were added to the IPP, the wind-up of the plan is not required upon the death of the original members. While it is possible that no new contributions could be made in respect of the new members because of the excess surplus in the IPP, there is no requirement to withdraw excess assets from the IPP. Thus, there is a significant tax deferral.
Surplus withdrawal
Subject to the applicable pension standards legislation and the provisions of the plan text, it may be possible to withdraw surplus from the IPP. Thus, there may be access to these assets.
Contact us today to determine whether you are a suitable candidate for an IPP. We will assist you in all aspects of the development of an IPP specifically tailored to your needs.
What is the RDSP?
The RDSP is a long term savings plan to help Canadians with disabilities and their families save for the future. To open a RDSP, a person must be under 60 years old, approved for the Disability Tax Credit, be a resident of Canada and have a Social Insurance Number.
What is the Disability Tax Credit (Disability Amount)?
The Disability Tax Credit is a non-refundable credit that reduces the amount of income tax that an individual with a severe and prolonged disability may have to pay. A qualified practitioner must certify that an individual has an impairment that is both severe and prolonged with effects in one of these categories:
For more information about the Disability Tax Credit, visit the Canada Revenue Agency Web site www.cra-arc.gc.ca/disability or call 1-800-959-8281 (TTY users call 1-800-665-0354).
In order to assist families to save for individuals with disabilities, the Government of Canada introduced the Canada Disability Saving Grant and the Canada Disability Savings Bond. These are both means tested i.e. they are dependent on the “Beneficiary’s Family Income”. For individuals under age 18, “Beneficiary Family Income” is the income that was used to determine the Canada Child tax benefit for that beneficiary. Beginning in the year the beneficiary turns 19 years of age, “Beneficiary Family Income” is his or her own income plus the income of his or her spouse.
Canada Disability Savings Grant
RDSP beneficiaries may be eligible to receive a matching Grant subject to a maximum of $3,500 each year with a lifetime limit of $70,000. The amount of the matching Grant depends on the amount contributed and the Beneficiary’s Family Income (defined above).
If the Beneficiary's Family Income is $ 78,130 a year or less:
If the Beneficiary's Family Income is greater than $ 78,130 a year:
Canada Disability Savings Bond
The Canada Disability Savings Bond is paid into an RDSP until the year the beneficiary turns 49 years old. To receive the Canada Disability Savings Bond money, beneficiaries or the family must file tax returns regularly. For details on this and other aspects of the Canada Disability Savings Bond, please visit www.disabilitysavings.gc.ca
Apply now for your Registered Disability Savings Plan.
A Henson trust (sometimes called an absolute discretionary trust), in Canadian law, is a type of trust designed to benefit disabled persons. Specifically, it protects the assets (typically an inheritance) of the disabled person, as well as the right to collect government benefits.
The key provision of a Henson trust is that the trustee has "absolute discretion" in determining whether to use the trust assets to provide assistance to the beneficiary, and in what quantity. This provision means that the assets do not vest with the beneficiary and thus cannot be used to deny means-tested government benefits.
In addition, the trust may provide income tax relief by being taxed at a lower marginal rate than if the beneficiary's total assets were considered. It can also be used to shield assets from matrimonial division in case of divorce of the beneficiary. In most cases, the trust assets are sheltered from claims by creditors of the beneficiary.
Trustees
Trustees play a very important role in planning for our sons and daughters with a disability. Very often, they are required to replace us in handling the financial decisions that affect the person with a disability's well being and quality of life. Some factors which must be considered are:
The Trustee(s) must do the following:
Funding a Trust
The vehicle use to fund a trust is dependent on the family’s financial situation. We will review your particular situation and advise you on the best course of action. Some possible funding methods include:
Savings. The establishment of a regular savings program.
Parent's Estate. For more affluent families the parent's estate may be sufficient to provide for their own needs in their elder years, as well as having enough left over to fund the trust.
Life Insurance: For the average family, life insurance provides a tax effective way of funding a trust.
Please contact us for assistance in establishing and funding your Henson Trust.
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At Hunt and Associates we take the time to listen to your needs and look at the whole picture to approve your first mortgage. This includes situations that fall outside traditional lending categories and include:
We address the individual needs of our clients. Your mortgage is integrated with your overall Financial Plan to ensure that you are better able to accomplish your desired goals.
Whether you are taking on your first or second mortgage, Hunt and Associates offers a number of services to help you:
And our commitment to you is to find the best:
We aim to provide you with a high level of tangible savings. We do this by developing well-established relationships with many of Canada's most stable and respected Financial Service companies. This gives you access to an extensive and professional range of products and services.
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When does your mortgage renew?
Mortgage renewal is an important moment of opportunity. At renewal, you may find your mortgage needs have changed. This is an excellent time to eliminate high interest debt such as credit cards and some lines of credit, by rolling them into your lower interest mortgage. You may want to use some of your home equity for:
We have access to over 50 lending institutions, including major banks, credit unions, trusts and other national and regional lenders. We are therefore in a position to the best mortgage to fit your specific situation.
Let us contact you four months prior to your renewal to explain why. Just enter your email address and the maturity date of your mortgage. There is no obligation. Please contact us for assistance with your mortgage needs.
