It may be cheap but is it worth it ??

 

TOP 5 Things to consider when buying Mortgage Insurance from a Lender versus a Financial Institution.

Mortgage insurance was created for the sole purpose that if something was to happen to you, your mortgage will be paid off. Many people in the marketplace today are not aware of the fact that there are options when it comes to purchasing insurance to cover your mortgage. The key to buying insurance to cover your mortgage is understanding the benefits and the downfalls of the coverage being offered. We have outlined some common questions consumers ask when buying insurance. This will allow you to understand the key differences for obtaining insurance from your lender or as standalone coverage from a financial institution.

  1. Who gets the benefit if you die or become seriously ill?

Lender:

There are no exceptions. Automatically the mortgage lender is the beneficiary.

Financial Institution:

Whatever is best for you and your family? You decide how it’s used and who gets the benefit. Some could be used towards the mortgage or to pay off outstanding debt elsewhere.

  1. What does the insurance cover?

Lender:

Only the balance of your mortgage is what is covered. As your mortgage decreases your coverage decreases along with it. However your premium remains the same.

Financial Institution:

It covers all spectrums. It is up to YOU. This ranges from mortgage to credit cards, lines of credit and even income replacement. Your premium will be a reflection of the kind of product you decide to go with. Various options are available to suit your affordability.

  1. Who does the insurance cover?

Lender:

Only the person(s) listed on the mortgage.

Financial Institution:

It can cover you; from your family to whomever you want, even if they aren’t responsible for paying your mortgage.

  1. When do they underwrite?

Lender:

When you sign up for mortgage insurance with a lender the question is asked if you would like mortgage insurance which is followed by a few additional questions. At the

time of claim it is understood that the underwriting takes place then. This could become problematic for the claim to be paid out.

Financial Institution:

Underwriting is done at the time of application. Once the underwriting has been completed and the insurance is in place, it becomes a legally binding contract with the understanding that all information provided was truthful.

  1. What if I want to change my insurance?

Lender:

No exceptions. You cannot.

Financial Institution:

You get the flexibility and choice depending on the coverage you have chosen. It is all up to YOU.

As a seasoned advisor working with all the major financial institutions, I would be happy to review the coverage you have as well as compare other options that suit your needs.

Please feel free to contact me

article compliments of Wendy Kurzmore   IDC Worldsource

TFSA designation

Hello All

 

Apologies for the gap in my blogging ! Life got complicated and busy .

I did finish my CLU designation and now have more expertise and knowledge in the estate planning area . Recently came across this article on TFSA designations and hope it helps clear up some of the confusion about  who should get what ,when and how  a TFSA holder passes  away.

The April 2015 federal budget made TFSAs more attractive by increasing the cumulative contribution limit to $41,000. But clients should know that financial institutions administer their customers’ TFSA accounts differently, and subtle differences could cost accountholders down the road.

Designation basics

TFSA accountholders may designate their spouse or common-law partner as a successor-holder, and anyone else as a beneficiary. The successor holder and beneficiary designations vary across provinces (for example, Quebec only allows transfers to be done via the deceased’s estate). A successor-holder trumps a beneficiary if both are alive at the time of the original planholder’s death. And, a beneficiary trumps the deceased’s estate if the successor-holder is also dead. If neither is specified, the assets in the TFSA account become part of the deceased’s estate, losing their tax-sheltered status and becoming subject to probate fees.

Read: Clients confused about TFSA rules

The benefits of being a successor-holder

If a surviving spouse is named the successor-holder in the TFSA contract, he or she will become the new TFSA holder immediately when the original plan-holder dies — regardless of whether the TFSA is a deposit instrument, an annuity contract or a trust arrangement.

The deceased holder’s TFSA is never de-registered and the assets remain continuously sheltered inside a TFSA. The deceased is not deemed to have received any amount from the TFSA at the time of death; the TFSA and its tax-sheltering privileges continue, and the successor-holder (surviving spouse or common-law partner) assumes ownership of the TFSA contract and all its contents.

Read: More flexibility for estate donations

If the TFSA is a trust arrangement, the trust continues to be the legal owner of the property held in the TFSA. The financial institution notifies the CRA of any change in ownership based on successor holder designations in the TFSA contracts.

The successor-holder can make tax-free withdrawals from the deceased holder’s TFSA after taking over ownership. The successor-holder can continue having his or her own TFSA, with lifetime and annual contribution limits unaffected. The successor-holder could also consolidate the two separate TFSAs by directly transferring the deceased holder’s assets (via a qualifying transfer) into his or her own plan, without affecting available contribution room.

A spouse as beneficiary is more complicated

Designating a spouse or common-law partner as a beneficiary (instead of a successor-holder) on the TFSA contract imposes a paperwork burden on the surviving spouse, as well as decreased tax sheltering. Similar to the successor-holder designation, a beneficiary designation also allows the surviving spouse to retain the tax-sheltered status of the TFSA without affecting his or her contribution room. However, this happens thanks to an exempt contribution of the deceased holder’s TFSA assets to the beneficiary’s TFSA plan.

This exempt contribution cannot exceed the market value of the original owner’s TFSA on the date of his or her death. Any change in value between the original owner’s death and the exempt transfer by the beneficiary cannot be transferred to the surviving spouse’s TFSA. As a result, any such excess is no longer tax-sheltered.

Read: The importance of beneficiary designations

This excess would likely be small if the exempt contribution is done shortly after the death of the original owner. However, such matters often get neglected around the time of a spouse’s death. The surviving spouse has to notify the CRA within 30 days of the exempt contribution (or the transfer of the original owner’s TFSA assets) using Form RC240.

As a result, many experts recommend designating a spouse (or common-law partner) as a successor-holder in the TFSA contract with the financial institution.

But, financial institutions vary

Most provinces allow a TFSA holder to designate both a successor-holder and a beneficiary. If the original holder and the successor-holder die at the same time, the beneficiary can get the money without having to go through probate. Therefore, most planholders prefer to designate both a successor-holder and a beneficiary.

However, not all financial institutions’ TFSA contract forms offer that option. At least one major self-directed investment firm appears to restrict accountholders to either a successor-holder or beneficiary, not both – even though the law allows both.

Canadians opening TFSAs need to be careful before signing the associated legal contracts. It is hard to undo what has been legally agreed to and signed by the original planholder. It is worthwhile for new plan members to choose financial institutions that offer this valuable option. And, owners of the 13 million TFSA accounts (as of 2014) should ensure the legal contract they signed in their TFSA forms will not obstruct their estate planning.

Most financial institutions have their relevant successor-holder and beneficiary designation forms on the web, and the forms can be retrieved by searching for “financial institution name, TFSA, successor holder.” Here are links to the forms for some of the largest financial institutions, as of May 13, 2015. (Editor’s note: these forms are for self-directed investing accounts. If any institution would like to send their forms, please email us.)

https://www.bmoinvestorline.com/selfDirected/pdfs/TFSA_SuccessorAccountHolderAppointment.pdf

https://www.investorsedge.cibc.com/ie/pdf/10804.pdf

http://www.rbcdirectinvesting.com/pdf/addenda/TFSAbeneficiary.pdf

http://www.scotiabank.com/itrade/en/files/12/05/etca_tfsa.pdf

https://www.tdwaterhouse.ca/document/PDF/forms/529214.pdf

Amin Mawani is an Associate Professor of Taxation at the Schulich School of Business at York University in Toronto.

Originally published on Advisor.ca

Happy New Year !!

 

I hope 2014  brings  health, happiness and financial security to all.

The market was kind in 2013 and we all hope for a similar result for 2014.

I will be back to the books and am starting my CLU  ( Chartered Life Underwriters) designation in Jan.

My resolution for this year ..   try to post more articles  and keep up with my studies !

 

Hope you all enjoyed the holiday season and are ready to kick off a new year .

 

All my best

Beware the Scam

A short while ago I was checking over my Facebook feed. When I {  liked }  a friend’s post she began a chat with me. Apparently she had received a large sum of money from a philanthropic institution. Congratulations I responded, to which she said did I get mine yet?  I too had won a large sum of money she said, she had seen my name on the couriers delivery list when her funds were delivered.  Our conversation continued but something about the phrasing and content made me feel like this was not my good friend. Sure enough a request for some personal information appeared and I quickly ended the conversation. Later I learned her page had been hacked.

Scams come in many forms and on any platform email, face book, telephone or regular mail. The Federal Government Competition agency has a few tips and tricks to avoid being scammed.

Here are a few to help you become more aware and possibly avoid a scam.

 

1 Always get independent advice if an offer involves money, personal information, time or commitment.  Especially if they include deadlines or short time lines to decide.

2 There are no guaranteed get-rich  quick schemes.  If it sounds too good to be true   the only one getting rich is the scammer.

3 Don’t agree to offers or deals  right away, If you think you’ve spotted a great opportunity , insist on time and independent advice before making a decision.

4 Don’t hand over money or personal information , or sign anything until you’ve done  your homework and checked the credentials of the company or person that you are dealing with.

5 Don’t rely on glowing testimonials: find solid evidence of a company’s or person’s success i.e. do they belong to a professional institution or have a designation or license you can check .

6 Log directly onto a website that you are interested in  rather than clicking on links provided.

7Never send money, give credit card , online account details or passwords to anyone you don’t know or trust .

8 If you spot a scam or have been scammed get help. Contact the Canadian Anti Fraud Center , the Competition  Bureau or your local police for assistance.

For more tips and information , visit the Competiton Bureau website   www.competitionbureau.gc.ca and search for  The Little Black Book of Scams

Information provided by September issue  FBC Member Advisor 

 

This article is for informational purposes only, please consult with a tax or financial professional before acting on any of the advice in the above article. Heather Lang, Cedarlane Financial and FundEX  Investments Inc are not responsible for any actions beyond this information piece

New Tax tactics Federal Budget Commentary

Federal Budget Highs and Lows

 

The government giveth and taketh away with this years federal budget .

Here are a few of the highlights

Lifetime Capital gains exemption is a high . Increased to $800,000 for 2014 and indexed for inflation after ,this will allow for less tax owed on farm property or qualified small business corporation share dispositions or sales.

No more safety deposit box  tax deduction  for the cost of renting a safety deposit box for the purpose of earning business or investment income.

Good news for part time farmers , they can now double the amount claimed against their income from other souces . The restricted farm loss deduction limit will now be $17,500.

No more insurance loopholes. Previously 10/8 and leverage insured annuity strategies used by some to create tax advantages will no longer be recognized as such.

Some where in between is the new credits for dividends. The credit after 2013 will drop to 11%, but the gross up is now at 18% instead of the previous 25% . Overall however this tax is higher than before.

More money has been allotted to compliance issues , what does this mean for the average Canadian  ?  It means more audits  more often  !!  so get audit ready ! use a reputable tax preparation service .

 

 ON the family side this budget proposes to extend the adoption period by moving back the beginning of the period to the time the adoptive parents make the application to register with the provincial ministry responsible for adoption.

This change will allow additional expenses related to adoptions such as fees for provincially required home study and mandatory adoption courses to be eligible for this credit.This will apply to adoptions finalized in 2012.

The Canada Job Grant could provide $15,000 or more per person to ensure Canadians are getting the skills employers are seeking. Up to $5,000 will be provided by the federal government, and that amount will be matched by the province/territory and the employer. To be eligible businesses must have a plan  to train unemployed or under-employed Canadians for an existing or better job. Good news for those currently working  or unable to find a job.

 

This piece is meant to be for information only. Data from  FBC.ca and Allied Associates LLP  Please review your personal tax situation  with a qualified tax professional . . Heather Lang, Cedarlane Financial and FundEX  Investments Inc are not responsible for any actions beyond this information piece . For the most recent information please refer to www.cra.gc.ca   or ServiceCanada.gc.ca

Getting Married ??

Come to the Serendipity Studios Bridal Gala

I will be there with a booth and door prize and presenting a short talk on how to manage the rest of your financial life  after the big day !

Feb 28,2013     Doghouse Studios, 99 Dairy Ave, Napanee, On  

 

Happy Birthday 65 !!!

Here are a few things you should consider

1   Apply for Canada Pension Plan (CPP), now remember some of the aspects of CPP are changing so get some help to determine when exactly is the best time to apply and start your CPP benefits. It may make sense to postpone your benefits to a later age. In 2013 pension benefits are increased by 8.4% per year  for those delaying to age 70 that can mean up to 42% more benefits versus taking CPP at 65. Conversely benefits are going to be decreased by more over 2011 to 2016, when pension is taken before 65, by 2016 the max reduction is in place and can result in 36% less pension  if taken at 60.  RRIF and other pension benefits and longevity will all factor into your decision. For more information please refer to the Service Canada web site below.

Changes to the Canada Pension Plan (CPP)

www.servicecanada.gc.ca/eng/isp/cpp/postrtrben/main.shtml

2   Apply for Old Age Security; OAS is a monthly benefit available to most Canadians 65 or over. These do not come automatically you must apply. Even if you are still working or have never worked you may be eligible to receive OAS.

 

3   If in a low income situation you may also be eligible for the Guaranteed Income Support or GIS. OAS and GIS are both affected by net income reported on your tax return so this may change from year to year. Again for the most up to date figures on these government programs please see the Service Canada or CRA websites .

 

4   Consider converting some of your RRSP into a RRIF in order to generate pension income eligible for pension income splitting. Cash lump sum withdrawal   is not able to do this. Pension from registered plans is available before and after 65.

 

5   Make sure your claim the age amount on your income tax. This is a non-refundable tax credit.

 

6   When all those pensions start coming in use the pension income tax splitting strategy. You can allocate up to 50% off certain pension incomes to a lower income partner and have it taxed in their hands. Once you reach 65 there are more types of pensions that are eligible for this tax strategy.

 

7   Claim the Pension Income Tax Credit again a non-refundable tax credit this is available on the first $2000 of some types of pension income. Basically this means you get your first $2000 of pension income  tax free if you are in the lowest bracket.

8   Look at the Tax Free Savings Account or plan if you have not already .  Why pay any tax on income ??

 

 

This article is for informational purposes only, please consult with a tax or financial professional before acting on any of the advice in the above article. Heather Lang, Cedarlane Financial and FundEX  Investments Inc are not responsible for any actions beyond this information piece . For the most recent information please refer to www.cra.gc.ca   or   www.ServiceCanada.gc.ca

 

Welcome to 2013

Welcome to 2013

 

I hope everyone had a great holiday and extend my blessings to all for the coming New Year.

So how are those resolutions coming?  Like many I am determined to spend less, save more, eat less, exercise more and be grateful for all that I do have.

For some it may be a debt situation they are trying to resolve.  Debts like diets require baby steps and changes to established patterns of living.  One of the best books I have read on the subject was Spent by advisor Stephanie Winton-Holmes. The book is designed to help you understand how your personality affects your current financial situation.  Stephanie breaks down our different personality traits and provides advice geared to specific traits and shows you how to use your natural strengths to increase your cash flow and reduce debt.

 

Some important dates for 2013

RRSP deadline this year is March 1, 2013

Again contributions are 18% of earned income from the previous year to a maximum of $23,820.

(This max will increase next year, for more information please sees the CRA website)

TFSA contributions have no absolute contribution deadline and are yearly

Contribution limits for 2013 have increased to $5,500.   Great news for the majority of Canadians

 

The age old question persists   which is better RRSP or TFSA??

The answer I am afraid is different for everyone!

For most of us the TFSA can provide the most benefit and flexibility but really the best strategy is to use both !! Contribute to your RRSP and instead of spending the refund   invest it in a TFSA. Use different products or asset allocations and reduce your risk while increasing the diversity of your savings .

Here are some important considerations to think about when deciding what to do

What is the current /future  income state ?  high to modest  suggests using  RRSP

How much is currently saved for retirement ? and in what form RRSP  or pension  low to high  a TFSA may be better

What do you do with tax refunds?  80%  of us spend it !!  Most RRSP income projections are based on the reinvestment of this refund    why not spend it on yourself  and put it in a TFSA.

 

 

Please note this is for informational purposes only, Heather Lang/CedarlaneFinancial Consulting/FundEX Investments Inc.  and are not responsible for any actions  beyond this information piece .

Financial Literacy Month its here !!!

Are you literate Part 2

 

Statistics Canada released the results of a survey done in2011 on financial literacy. Of the 14 multiple choice questions we got 67%correct . The quiz included questions on inflation, interest rates,  credit reports, stocks and risk, insurance,taxation, debts and loans, and banking fees.
A similar study by the Task Force on Financial Literacy found only about 25% of Canadians surveyed were competent in all five key areas of financial capability. Record high household debt is another indicator of Canadians coming up short in the area of financial know how.
So how to get more fluent in financial terms and concepts so you can
make better decisions?  Help is out there
.

The Financial Consumer Agency of Canada (FCAC) has developed
and launched a comprehensive tool kit program to help consumers .The FREE  resource can be accessed online or obtainedhardcopy. Designed to apply financial ideas and concepts to a range of peoples personal situations the tool kit is flexible and can provide valuable
information for people of all ages and stages , rich or poor. A self assessment
tool will help users select one or several of the 11 modules and tools for
their particular needs.  The modules offer worksheets, quizzes, educational videos and case studies.

The toolkit is based on many of the topics covered by the
Investor Education Fund  web site

( www.getsmarteraboutmoney.ca)  which it
is itself a great source of information on a variety of financial
topics.

You can access the kit
and a trainers toolkit which was designed for teachers or someone in a
work place or community to provide financial literacy training  at  www.fcac-acfc.gc.ca

Check out both sites
and learn the basics whether it be taxes, insurance, investing,
financial planning or how to pick an advisor.

 

This article is for information purposes only Heather
Lang/CedarlaneFinancial Consulting/FundEX Investments Inc are not responsible
for any actions beyond this point.

Dos and Donts of Estate Planning

The Dos and Don’ts of Estate Planning

 

DO   Start now, it’s uncomfortable to confront our own mortality or incapacity   but that’s not something we can plan for! The world we live in is becoming increasingly characterized by legal action and government intervention, estate planning is something everyone should do and can plan for.

 

DON’T   Worry,  if you do nothing  the government will take over your estate and look after it for you .They will determine how to distribute your assets  and who will look after the kids, heirs and beneficiaries will have to take time and money to regain control  of personal or business assets .

 

DO involve professionals, how simple or complex your situation is will determine how and who you need to involve in the process. Your team may include an advisor, lawyer and tax planner.

 

DON’T avoid the inventory, a thorough documentation of all personal assets or property is the foundation of a good estate plan. Too overwhelming to start? , hire someone! Such inventories can also be invaluable in case of fire or theft, maximizing your claim and speeding the process.

 

DO review your insurance needs, Insurance can be a valuable estate tool to pay estate expenses such as income tax and or probate fees, replace income for those left behind or to leave a legacy or charitable gift.

 

DON’T skimp on a will.  If you have no assets or beneficiaries a hand written will may work for you however these are not accepted in all provinces. A formal will is typically drafted by a lawyer, signed by you and witnessed to ensure it is legally valid and meets your needs.

 

DO include powers of attorney for both property and personal care. At some point in your life you may be unable to make your own financial or personal care decisions. Prearrangement for someone to make these decisions according to your wishes means you are able to control your  circumstances .

 

DON’T forget to review and update. Changes to beneficiaries, marital status, insurance or financial plans,  personal and business property or government rules  all can impact how an estate is processed and taxed. The benefits of this exercise to your overall financial picture can help you with long and short term financial planning as well.

 

Your estate plan is as individual as you are. Taking the time to inventory and plan now will give you control over how you provide for those closest to or leave a legacy to. Good planning will avoid unnecessary taxes and administrative delays.

 

 

 One of many available local  companies  Intercept Home Watch  ( www.intercepthomewatch,ca) can provide a professional, reliable third party home inventory designed to thoroughly document all property. Your personal documentation is then presented in an attractive portfolio and CD ready for use in case of insurance claim for fire , theft or other damage ,prior to move or storage  or for use in your estate plan! 

 

Please note  this piece is for informational purposes only. Heather Lang/Cedarlane Financial Consulting/ FundEX Investments Inc have no referral arrangement with Intercept Home Watch and are not responsible for any actions beyond this point .