When putting together your financial plan, there is no question about the benefits of consolidation. It’s common to have your finances all over the place. Savings at the bank, investments with several financial institutions, retirement savings at another. The importance of having a financial plan is the ability to coordinate, consolidate and be able to implement your plan to achieve your goals.
By putting it all together, it allows for better planning where there’s less confusion, more control over your finances, efficient investing and tax planning and creates a clear picture of what needs to be done to fulfill your financial goals.
Consolidation means you have an accountability partner on your side that will keep you on track and stay the course and address gaps in your plan and introduce you to specialists if needed.
Financial Planning issues that should be addressed are:
- Wealth Protection
- Is your disability insurance adequate?
- What about your life insurance in case of premature death?
- What do you do in case of a critical illness?
- Estate Planning- what’s the primary goal of your estate plan?
- Wealth Accumulation
- Are you looking to preserve or grow your investments?
- Is your investment mix suitable for you?
- Are your investments tax efficient?
- When do you plan to retire?
These issues are just scraping the surface, talk to us and we can chat further on how we can help.
Retirement planning can be challenging, we’ve outlined what we feel are 6 steps to retirement success.
- Have a written plan which merges life priorities with financial resources.
- Consolidate your income-producing assets with one advisor.
- Layer different sources of income in the most efficient manner.
- Structure income in order to preserve valuable tax credits and government benefits.
- Create efficient cash flow by investing your income-producing assets wisely.
- Implement efficient solutions for health-cost risks and wealth transfer strategies.
Talk to us about a complimentary comprehensive review of your retirement plan.
Working with us to create your financial plan helps you identify your long and short term life goals. When you have a plan, it’s easier to make decisions that align with your goals. We outline 8 key areas of financial planning:
- Income: learn to manage your income effectively through planning
- Cash Flow: monitoring your cash flow, will help you keep more of your cash
- Understanding: understanding provides you an effective way to make financial decisions that align with your goals
- Family Security: having proper coverage will provide peace of mind for your family
- Investment: proper planning guides you in choosing the investments that fit your goals
- Assets: learn the true value of your assets. (Assets – Liabilities)
- Savings: life happens, it’s important to have access to an emergency fund
- Review: reviewing on a regular basis is important to make sure your plan continues to meet your goal
You most likely do, but the more important question is, ‘What kind?’ Whether you’re a young professional starting out, a devoted parent or a successful CEO, securing a life insurance policy is probably one of the most important decisions you will have to make in your adult life. Most people would agree that having financial safety nets in place is a good way to make sure that your loved ones will be taken care of when you pass away. Insurance can also help support your financial obligations and even take care of your estate liabilities. The tricky part, however, is figuring out what kind of life insurance best suits your goals and needs. This quick guide will help you decide what life insurance policy is best for you, depending on who needs to benefit from it and how long you’ll need it.
Permanent or Term?
Life insurance can be classified into two principal types: permanent or term. Both have different strengths and weaknesses, depending on what you aim to achieve with your life insurance policy.
Term life insurance provides death benefits for a limited amount of time, usually for a fixed number of years. Let’s say you get a 30-year term. This means you’ll only pay for each year of those 30 years. If you die before the 30-year period, then your beneficiaries shall receive the death benefits they are entitled to. After the period, the insurance shall expire. You will no longer need to pay premiums, and your beneficiaries will no longer be entitled to any benefits.
Term life insurance is right for you if you are:
- The family breadwinner. Death benefits will replace your income for the years that you will have been working, in order to support your family’s needs.
- A stay-at-home parent. You can set your insurance policy term to cover the years that your child will need financial support, especially for things that you would normally provide as a stay-at-home parent, such as childcare services.
- A divorced parent. Insurance can cover the cost of child support, and the term can be set depending on how long you need to make support payments.
- A mortgagor. If you are a homeowner with a mortgage, you can set up your term insurance to cover the years that you have to make payments. This way, your family won’t have to worry about losing their home.
- A debtor with a co-signed debt. If you have credit card debt or student loans, a term life insurance policy can cover your debt payments. The term can be set to run for the duration of the payments.
- A business owner. If you’re a business owner, you may need either a term or permanent life insurance, depending on your needs. If you’re primarily concerned with paying off business debts, then a term life insurance may be your best option.
Unlike term life insurance, a permanent life insurance does not expire. This means that your beneficiaries can receive death benefits no matter when you die. Aside from death benefits, a permanent life insurance policy can also double as a savings plan. A certain portion of your premiums can build cash value, which you may “withdraw” or borrow for future needs. You can do well with a permanent life insurance policy if you:
- …Have a special needs child. As a special needs child will most likely need support for health care and other expenses even as they enter adulthood. Your permanent life insurance can provide them with death benefits any time within their lifetime.
- …Want to leave something for your loved ones. Regardless of your net worth, permanent life insurance will make sure that your beneficiaries receive what they are entitled to. If you have a high net worth, permanent life insurance can take care of estate taxes. Otherwise, they will still get even a small inheritance through death benefits.
- …Want to make sure that your funeral expenses are covered. Final expense insurance can provide coverage for funeral expenses for smaller premiums.
- …Have maximized your retirement plans. As permanent life insurance may also come with a savings component, this can also be used to help you out during retirement.
- …Own a business. As mentioned earlier, business owners may need either permanent or term, depending on their needs.
A permanent insurance policy can help pay off estate taxes, so that the successors can inherit the business worry-free. Different people have different financial needs, so there is no one-sized-fits-all approach to choosing the right insurance policy for you. Talk to us now, and find out how a permanent or term life insurance can best give you security and peace of mind.
Working with a professional to help you to make sense of your finances can be a wise move, but for this relationship to work effectively it is important that you understand what to expect from your financial advisor.
What can your financial advisor help you with?
- Defining your financial goals and creating a step by step plan or strategy to achieve them.
- Planning for the future, including for retirement, future education or housing needs.
- Choosing the mix of investments and assets that suit your goals, lifestyle, time horizon and appetite for risk.
- Building a solid estate for your family to inherit in the future.
- Choosing the most tax-efficient methods of saving and investing.
What should your financial advisor inform you of?
- The range of services that they offer and how much and by which method you will compensate them.
- Your mutual responsibilities and obligations towards each other.
- What the planning process will look like and the documents that they will provide you with.
What will your financial advisor need from you or need to ask you about?
- What your financial goals are.
- What your personal circumstances – such as your marital status, any dependents, your job, earnings and tax situation.
- Any investments or assets that you currently have – such as registered accounts, workplace pensions, property etc.
- Your appetite for risk and investment preferences.
- Information on your income and also your outgoings, including debts such as mortgages, loans or credit cards.
- Whether or not you have a will, and its contents.
- Your estate and inheritance planning situation.
If you’re looking to achieve your financial goals, talk to us. We can help.
The government’s 2018 federal budget focuses on a number of tax tightening measures for business owners. It introduces a new regime for holding passive investments inside a Canadian Controlled Private Corporation (CCPC). (Previously proposed in July 2017.)
Here are the highlights:
Small Business Tax Rate Reduction Confirmed
Lower small business tax rate from 10% (from 10.5%), effective January 1, 2018 and to 9% effective January 1, 2019.
Limiting Access to the Small Business Tax Rate
A key objective of the budget is to decrease the small business limit for CCPCs with a set threshold of income generated from passive investments. This will apply to CCPCs with between $50,000 and $150,000 of investment income. It reduces the small business deduction by $5 for each $1 of investment income which falls over the threshold of $50,000. This new regulation will go hand in hand with the current business limit reduction for taxable capital.
Limiting access to refundable taxes
Another important feature of the budget is to reduce the tax advantages that CCPCs can gain to access refundable taxes on the distribution of dividends. Currently, a corporation can receive a refundable dividend tax on hand (known as a RDTOH) when they pay a particular dividend, whereas the new proposals aim to permit such a refund only where a private corporation pays non-eligible dividends, though exceptions apply regarding RDTOH deriving from eligible portfolio dividends.
The new RDTOH account referred to “eligible RDTOH” will be tracked under Part IV of the Income Tax Act while the current RDTOH account will be redefined as “non-eligible RDTOH” and will be tracked under Part I of the Income Tax Act. This means when a corporation pays non-eligible dividends, it’s required to obtain a refund from its non-eligible RDTOH account before it obtains a refund from its eligible RDTOH account.
Health and welfare trusts
The budget states that it will end the Health and Welfare Trust tax regime and transition it to Employee Life and Health Trusts. The current tax position of Health and Welfare Trusts are linked to the administrative rules as stated by the CRA, but the income Tax Act includes specific rules relating to the Employee Life and Heath Trusts which are similar. The budget will simplify this arrangement to have one set of rules across both arrangements.
BC Finance Minister Carole James delivered the province’s 2018 budget update on February 20, 2018. The budget anticipates a surplus of $219 million for the current year, $281 million for 2019 and $284 million in 2020.
Corporate and personal tax rates remain unchanged.
The biggest changes are:
- Elimination of Medical Services Plan (MSP Premiums) effective January 1, 2020
- Addition of the Employer Health Tax (EHT)
- Provincial Property Taxes
The Employer Health Tax and Medical Services Plan premiums:
Effective January 1, 2020, the Medical Services Premium (MSP) will be eliminated. In last year’s budget update, MSP was reduced by 50% effective January 1, 2018. Starting in 2019, the budget introduces the Employer Health Tax (EHT). The EHT is to help fund the elimination of the MSP premiums.
The Employer Health Tax will be calculated as a percentage of payroll:
Provincial Property Transfer Taxes
Effective February 21, 2018, the following will occur:
- The provincial property transfer taxes (PTT) will increase to 5% (from 3%) on residential property values above $3 million.
- The PPT applies to foreign purchasers of residential properties in BC will increase to 20% (from 15%) and the tax will extend to include the Fraser Valley, Capital, Nanaimo and Central Okanagan Regional Districts.
- There is a new speculation tax on residential property in BC. This tax is targeted at foreign and domestic homeowners who don’t pay income tax in BC. Starting in 2018, it’s a rate of $5/$1,000 of assessed value, in 2019, this will increase to $20/$1,000.
There will be a new affordable child care benefit that will reduce child care costs by up to $1,250 per month per child by 2020. The new benefit will apply in September 2018. Families with pre-tax incomes of $45,000 or less will receive the full benefit, (up to the cost of care) while those who make up to $111,000 will receive a reduced amount, scaling based on income. The government will be releasing an online benefit calculator to help parents budget.
The budget will provide up to $350/month directly to licensed child care providers to reduce fees. They will be the following:
- Up to $350/month for group infant/toddler care
- Up to $200/month for family infant/toddler care
- Up to $100/month for group care for children aged 3-5
- Up to $60/month for family care for children aged 3-5
To learn how these changes will affect you, please don’t hesitate to contact us.
CorePlan Financial Inc. Burnaby Office
CorePlan Financial Inc. Fort St. John Office
2 – 11116 100th Ave.
Fort St. John, BC
Phone: (250) 785-9603
Toll Free: 1 (877) 461-5140
Fax: 1 (888) 453-3277
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