TFSA Canada - Power up Your Tax Free Savings Account

A November 2010 survey by BMO Financial Group showed that while more than a third of Canadians have opened a Tax-Free Savings Account (TFSA Canada), they know little about the wide range of investments that they can hold within those plans. As a result, investors may not be taking full advantage of the tax benefits and investment return potential of TFSAs. 

The survey showed that 37% had no idea what investment opportunities are eligible for their TFSA Canada. Only 20% knew that segregated funds were eligible and 26% knew that Guaranteed Investment Certificates (GICs) could be included in their plans. The reality is that a TFSA Canada can hold many types of good investments strategies. Here’s a look: 

A TFSA is not a simple ‘account. The range of eligible investment opportunities in Ontario is similar to what qualifies for inclusion in a Registered Retirement Savings Plan (RRSP) or Registered Retirement Income Fund (RRIF). That means a wide selection of individual securities, such as eligible stocks and bonds, segregated funds, real estate investment trusts (REITs), annuity contracts, foreign currency, and more. 

Diversifying beyond cash or savings-type investments in your TFSA Canada can improve long-term growth potential and returns. Because your investment return is completely tax-sheltered in the TFSA Canada and tax-free upon withdrawal, the more you earn in your Tax Free Saving Accounts, the more you benefit from the tax advantages. Compounding of tax sheltered returns can greatly increase your investment income and leave you with a much larger pool of wealth than you would have if you invest in a taxable account. 

Good investment strategies are key. The investments you hold in your TFSA Canada will depend on your financial goals, your risk tolerance, and other factors. We need to consider your Tax Free Saving Accounts as part of your overall good investment strategies, carefully balancing what you hold in your TFSA, RRSP, and non-registered investments. We also need to ensure that your good investment strategies aren’t driven solely by tax considerations, but that taxes are just one part of deciding how and when to invest. 

Financial security is like your health, getting the best professional and personalized advice is extremely important. There`s no better time than now to get together so we can give you the tips and tactics that will help you get ahead and to make the most of your Tax Free Savings Account  by exploring its full investment and tax-saving potential within your overall investment strategies.  For more information contact Gary Mandel by calling (416) 849-1653 or by visiting www.wecoveryou.ca  

Family Health Insurance – How to Manage the Stress of an Emergency

As the Canadian population ages, more of us in our 40s, 50s and beyond are supporting or helping with our senior parent’s health care. We want to make sure that they have spoken to a health insurance company and already have family health insurance in place.  There’s a good chance that at some point we’ll be called upon to deal with emergencies involving our aging relatives. Sometimes those emergencies require us to supply information needed for our parent’s health, care or well-being. 

When that time comes, you’ll want to access that information as quickly as possible. You or your loved ones don’t want to be scrambling to figure out necessary details when time is critical and stress is high. Your parent’s health depends on it.  

The best way to make sure you can act quickly and confidently is to prepare in advance. Speak with your parents about their information, their family health insurance, the health insurance company, the name of their Life Insurance Agent.  Compile all their info and any documents you might need, and make sure they’re easily accessible. The more knowledgeable you are, the better you’ll be able to look after not just your parent’s health, but yourself as well. 

Medical information and the exchange of family health insurance information is very important. If a parent is in sudden need of medical care, supplying the right information in a hurry can be a lifesaver. Keep a list of your parents’ blood types, medications, details of allergies, a history of past illnesses and surgeries, and contact information for doctors and other caregivers. You’ll also want to have the details of any family health insurance plans, as well as supplemental coverage such as critical illness insurance or long-term care insurance. Speak to the Life Insurance Agent from the health insurance company and they will be able to supply you with all the necessary details needed in regards to their family health insurance coverage. 

Obtaining your parents financial information is also very important. You may be called on to manage or help manage your parents’ finances in an emergency. This will require access to bank account information, credit card information, details of loans and loan payments, investment information, and any other pertinent financial details and documents. 

Having all legal documents as it relates to your parents estate is vital. Quick access to important legal documents is essential for medical and financial matters. If you or another family member has power of attorney to manage your parents’ healthcare or finances, copies and originals must be easily accessible. Other information you may need in an emergency includes your parents’ wills, their written instructions about the level of medical treatment they want if they can’t express their wishes (sometimes known as a “living will”), and family health insurance policies. Other estate planning information should also be readily available. The documents and information you need will depend on your parents’ situation. Your parents Life Insurance Agent from the health insurance company will be able to help you plan a strategy for gathering the necessary documentation, speaking with your parents, and deciding where their information should be kept for immediate access.  It’s also wise to annually contact their Life Insurance Agent on an annual basis to ensure that their family health insurance plans are consistent with their life changing needs. 

For more information please contact Gary Mandel by calling (416) 849-1653 or by visiting www.wecoveryou.ca

Investment advice in Ontario - How You Can Turn Fund Losses into Tax Benefits

With the end of the year approaching, it’s an ideal time to review the performance of your investments — in particular, segregated fund holdings that have declined in value. This is a great way to ensure that you are using insurance to maximize your income tax benefits. 

Because in Ontario fund performance sometimes results in a loss, depending on the markets in a given year, we need to ensure that we are receiving good investment advice and pay as much attention to our “sell” strategy as we did to the steps that originally led us to make those promising investments. 

The end of the year is a good time to consider selling underperforming segregated funds. We may not be able to revive them, but the right strategy can help minimize taxes and give the holdings one last crack at doing some good for your portfolio returns.  

One piece of good investment advice in Ontario is to consider if the proceeds from those funds can be used in more promising investments, this could be the time to sell at a loss to improve your year-end tax position for more income tax benefits. 

More good investment advice in Ontario is to recognize the opportunity to ‘sell low’. By redeeming fund units (outside your registered plans such as Registered Retirement Savings Plans) for less than their original cost, you will create a capital loss that can be used to offset capital gains on your income tax return. By reducing your capital gains, you reduce your income tax bill.  

You may even be able to use that loss towards income tax benefits by reducing income taxes in future or past years. If you own money-losing segregated funds that are likely to make a year-end distribution, you take advantage of the capital loss for income tax purposes and avoid a taxable distribution by redeeming before the distribution date (generally mid-December). 

We need to carefully consider which of your segregated funds holdings are candidates for tax-loss selling. These should be investments that we believe have little opportunity for recovery. We also need to weigh the financial benefits of tax-loss selling in each case. 

When we create a capital loss, it must first be used to offset any capital gains earned in the same income tax year. Any remaining losses can be carried forward indefinitely to future years or applied to gains from the previous three years. 

Here’s an example of how tax-loss selling can work to your benefit. 

Let’s assume you invested $80,000 in a segregated fund a few years ago (outside a registered plan) and sold that investment this year $100,000, for a profit of $20,000. You also sold a money-losing fund investment this year for a loss of $10,000.  You would deduct the $10,000 loss from the $20,000 gain, leaving you with a capital gain of $10,000 for the year. Half that amount must be reported as a taxable capital gain on your income tax return, so you will pay tax on $5,000. You can use a capital loss on any eligible investment to offset a capital gain on any other eligible investment. For example, your segregated fund loss could be used to offset gains from segregated funds, stocks, bonds, exchange-traded funds, or even promising investments in real estate. However, capital losses can normally be used only to reduce or eliminate capital gains, not to offset other income. 

There is one important caveat: When you sell a security to claim a capital loss, do not buy that security again for at least 30 days. Otherwise it will be deemed a superficial loss by the Canadian Revenue Agency and you won’t be allowed to use it to reduce taxable gains. 

Timing is important. Transactions need to be completed before year-end to qualify for your 2011 income tax return. Please refer to your tax professional or accountant for advice. For more investment advice in Ontario, please contact Gary Mandel by calling (416) 849-1653 or by www.wecoveryou.ca  

Life Insurance Brokers Should Review All Your Life Insurance Options with You

With 2011 drawing to a close, it’s an ideal time to review your insurance strategy with your Life Insurance Broker. The goal should be to ensure that your coverage is keeping pace with changes in your life and that you are aware of all your life insurance options.

People get jobs and lose jobs, the stock market goes up and down, unexpected events, and these are just the basics of life. Look at what has happened in your life recently. Some developments that may warrant a visit to your Life Insurance Broker and changes in what you’re paying for insurance can include: marriage or divorce, the birth of children, children growing into adulthood, a death in the family, a new job, a higher salary, an inheritance, or a change in your wealth or debt levels.

Taking the time to review your life insurance options and what you’re paying for life insurance with your Life Insurance Broker also gives you the opportunity to review where your finances have taken you this year. To see whether your portfolio is still in alignment with your goals and consistent with where your life has taken you. It’s not only a chance to review your investments but also review all aspects of your financial life.

Make sure you have enough life insurance because inadequate insurance can lead to financial difficulties or less support for your family in an emergency. Sufficient life insurance coverage will allow you and your family to weather events that could otherwise lead to financial problems.  Having life insurance is good but having sufficient life insurance coverage is key.

Do you need less life insurance coverage? There are lots of life insurance options and there’s no point in paying for life insurance that you no longer require. Instead, your Life Insurance Broker can suggest you consider diverting the money you’ll save on premiums into savings and investments.

Have you considered more than just life insurance coverage? An annual review of your life insurance coverage with your Life Insurance Broker of what you’re paying for life insurance and what you’re life insurance options are is the best way to assess whether your coverage is adequate. It’s also a great way to ensure that you’re making the best use of all the insurance products you need to guard your financial security and that of your family. While life insurance is central to coverage, your Life Insurance Broker should explore possibly unanticipated needs such as long-term care coverage, critical illness insurance, and disability insurance. Together, you can review your life insurance coverage and other life insurance options to ensure you have the peace of mind that comes from knowing you’re well covered for 2012.

For more information about Life Insurance coverage and the life insurance options that are available you can contact Gary Mandel by calling (416) 849-1653 or by visiting www.wecoveryou.ca

Life Plan Insurance – When Life Changes So Should Your Insurance Coverage

Like all aspects of your finances, your life plan insurance needs can change. We should regularly review your insurance coverage to ensure it offers the best possible protection. When life changes so should your insurance coverage. Your evolving insurance needs depend on your current and changing life situation and your financial goals. Our review should be based on an exploration of the key aspects of your life plan and life plan insurance needs. Here are three to consider.

1. Life events - Some of the key developments that can call for life plan insurance changes can include marriage, divorce and a change of income. For example, perhaps you need to increase insurance coverage because your family is larger and you want to leave more for your heirs. Alternatively, perhaps you no longer have a need for as much insurance because you’ve built up wealth, paid off your mortgage and your kids have finished their schooling.

A review of your life plan insurance might even reveal how we can save you money on life insurance coverage. So for instance, if your health has changed for the better by losing a great deal of weight, your high cholesterol has dropped or you’ve quick smoking — we might be able to take advantage of the breaks on life plan insurance premiums some insurers offer under those circumstances.

2. Beneficiaries may change over the course of your life. One thing we should always review is your beneficiaries. Since they’re the ones who receive the proceeds of your policy, it’s important that we always make sure they’re who you want them to be and that you’re taking care of them in the best way possible.

You may want to make beneficiary changes as you go through life, to accommodate new children or grandchildren or even to leave insurance proceeds to your estate so they can be distributed through your will. It depends on your current and changing situation and your financial goals.

3. Your financial situation circumstance could affect your life plan insurance needs. We should explore your insurance coverage in relation to your overall financial picture. Remember, insurance is just one part of a long-term financial strategy, which means the coverage that’s right for you depends on other aspects of your financial life.

If your life insurance policy includes an investment component, we can explore how it fits in with your overall plan. We’ll examine its investment performance and consider the best ways to use the cash value.

Together, we can determine whether the types of policies and the levels of coverage you already have are still appropriate for you and your family. If changes are appropriate, we’ll make recommendations. Let’s discuss your life insurance coverage at least once a year. Then you’ll have the peace of mind that comes from knowing you’re well covered.

For more information about life plan insurance and keeping your insurance coverage current please contact Gary Mandel by calling (416) 849-1653 or by visiting www.wecoveryou.ca  

Beneficiary Designation – Should Your Life Insurance Beneficiary be an Individual beneficiary or your Estate?

Your beneficiary designation will determine who benefits from your estate in the event that you pass away. When buying life insurance, most people assume it’s best to name an individual beneficiary — for example, a spouse or a child. However, there are times when it makes more sense to have the proceeds of your policy go to your estate. This means making your beneficiary designation your estate and not an individual.

Here are the ins and outs of leaving your life insurance to your estate. Naming an estate as your beneficiary designation can be a good choice when you want the proceeds to meet non-traditional life insurance needs — meaning, other than to provide for a spouse or children - or needs that go beyond individual beneficiaries.

When your beneficiary designation is your estate, the proceeds of the policy are distributed according to the terms of your will, along with your other property. Your insurance proceeds are brought together with all your other assets.

Consider whether you think you’ll need to change your estate plan as you move through life. Naming your estate as your beneficiary means changes can be made more simply: through your will. You won’t have to worry about changing beneficiaries on insurance policies.

Here are some other reasons you might want to consider naming your estate as your life insurance beneficiary. You can use this strategy to:

Leave money to charities. You can specify in your will how much of your estate goes to each charity and change your instructions at any time, without naming charities as life insurance beneficiaries. Set up a trust. Leaving cash to an estate can sometimes make it easier, as the will can dictate the setup of trusts for children. This can be useful when you want to specify how money left to children is to be spent or to make provisions for children to receive funds when they reach a certain age.

Pay expenses. You can use life insurance proceeds to pay costs associated with your estate. These can include final expenses, debts and tax liabilities. There are a couple of caveats you should be aware of when considering naming your estate as the beneficiary of your insurance policy. They include the fact that policy proceeds (along with the rest of your estate) may be reduced by the cost of probate — the legal process that validates the authenticity of a will. Probate can also delay distribution of assets and your estate may be subject to legal claims from creditors.

However, under the right circumstances, the advantages of naming an estate can outweigh these considerations. If you name your estate as a beneficiary, it’s important to make sure your will is always up to date.  Together, we can explore when and where insurance proceeds will be needed and determine whether naming your estate as beneficiary makes sense for you. For more information about beneficiary designations and whether to name an individual as your life insurance beneficiary or your estate contact Gary Mandel by calling (416) 849-1653 or by visiting www.wecoveryou.ca

Retirement Planning in Canada - How to Talk to Your Parents About Their Retirement Plans

At some point, you’ll need to have “the talk” with your parents about their finances and their financial future. Retirement planning in Canada is the only way for them to keep their financial future on a solid foundation and for you to prepare yourself to provide the help they might need as they grow older.

Helping your parents make a retirement plan is about their needs, not yours, and retirement planning is not always an easy discussion to have. Parents may see your attempt to discuss their retirement plans as an intrusion - especially in families where talking about money is taboo. They may even fear that you’re trying to take control of their money. But it’s important because one or both of your parents may become ill or incapacitated and unable to manage their finances in the future.

In addition, the health care in Ontario leaves much to be desired and so if your parents want to retire in comfort, a strong retirement plan will be key. Retirement planning in Canada could consider their life insurance needs, long term care planning, critical illness coverage and more. It all depends on your parent’s health, financial circumstances and future desires.

They should be aware that without thoughtful planning, how they are cared for at that time could be entirely out of their control. It’s about their needs, their comfort and how they want to be cared for.

Don’t wait for a crisis. Talking to your parents and planning ahead for their retirement will help make sure their wishes are carried out, and potentially eliminate squabbles among family members if your parent’s wishes aren’t clear.

Retirement planning in Canada is really important and helping your parents see the benefits when making their retirement plans can make the conversation much easier.

You can avoid problems and alleviate worries concerning their retirement planning by showing your parents the benefits of sharing their financial information. Let them know that it will be easier for you to help them in the future if you have the information now. Stress that it’s important for them and their family, financially and emotionally. Some discussion points when discussing retirement planning in Canada include:

• Do your parents have up-to-date wills? If so, where are they kept?

• Do they each have powers of attorney (both for property and health care)?

• Who are the executors in their wills, and has this decision been reviewed lately?

• Will they have enough funds to continue living comfortably? To plan, they need to provide details of assets, liabilities, income and expenses, and details of financial accounts — or at least where accounts are held. As well, contact information for financial and legal advisors is necessary.

Don’t be afraid to seek expert advice. We can prepare you for a talk with your parents about finances. And if it will help, we can be part of the discussion. For more information about retirement planning in Canada and helping your parents make their retirement plans contact Gary Mandel by calling (416) 849-1653 or by visiting www.wecoveryou.ca