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The Importance of Critical Illness Insurance in Retirement Planning

There are a number of obstacles that could potentially de-rail a comfortable retirement. These include marriage breakdown, a stock market crash, and being sued. Another huge obstacle would be the diagnosis of a life threatening critical illness affecting you or your spouse. While it might be difficult to insulate yourself against some of the threats to retirement security, Critical Illness insurance goes a long way to mitigate the financial disaster that could result from a change in health as we approach retirement.

Considering that the wealth of many Canadians is comprised of the equity in their homes and the balance of their retirement plans, having to access funds to combat a dreaded illness could put their retirement objectives in jeopardy. Imagine that you are just a few years into or approaching retirement and you or your spouse suffers a stroke. The prognosis is for a long recovery and the cost associated with recovery and care is projected to be substantial. Statistics show that 62,000 Canadians suffer a stroke each year* with over 80% surviving* many of whom would require ongoing care. Since 80% of all strokes happen to Canadians over 60 those unlucky enough could definitely see their retirement funding jeopardized. Read more

TFSA or RRSP 2018

One of the most common investment questions Canadians ask themselves today is, “Which is better, TFSA or RRSP”?

Here’s the good news – it doesn’t have to be an either or choice.  Why not do both? Below are the features of both plans to help you understand the differences.

Tax Free Savings Account (TFSA) 

  • Any Canadian resident age 18 or over may open a TFSA. Contribution is not based on earned income.  There is no maximum age for contribution.
  • Maximum contribution is $5,500 per year.
  • There is carry forward room for each year in which the maximum contribution was not made. For those who have not yet contributed to a TFSA, the cumulative total contribution room as of 2017 is $52,000.  Read more

The Genetic Non-Discrimination Act and its Impact on Life Insurance

One of the many advancements in medicine has been the use of genetic testing in determining the probability that an individual will develop a life- threatening illness or condition.   Knowing that you or your children are not at risk of a major illness can be of great comfort while knowledge to the contrary can be of great value in preventative treatment and planning.  There was a growing concern, however, that individuals would be very reluctant to undergo genetic testing if knowing the results could affect their ability to properly insure themselves or impact their opportunities for employment.  As a result, a private member’s bill, Bill S-201, was introduced in the senate resulting in the Genetic Non-Discrimination Act being recently enacted into law.

What does the Act do?

It is now illegal for employers, insurance companies, or any other entity or individual to require anyone to undergo genetic testing or to disclose the results of a genetic test before entering into a contract which provides goods or services.  Now, if you apply for life, disability or critical illness insurance living benefit coverage, you cannot be denied coverage due to the results of a genetic test.  Insurance companies and their agents are also prohibited from “collecting, using or disclosing” the results of a genetic test without an individual’s written consent. Penalties for not complying with the new law are severe. Read more

Are Life Insurance Premiums Ever Tax Deductible?

Considering that the proceeds of a life insurance policy are received tax free upon the death of the life insured, it is not surprising that the premiums of the policy are not tax deductible.  There are two circumstances, however, where premiums would be deductible for income tax purposes:

  1. If the life insurance policy is assigned to a lending institution that requires the assignment as a condition for a loan, for either investment or business purposes.
  2. If the life insurance policy is donated to a registered charity and the donor continues to pay the premiums on behalf of the charity.

Life insurance policies used as collateral security for a loan Read more

Private Corporations in the Cross Hairs

If you are the owner of a private corporation you should be concerned about the commentary that is coming from the Department of Finance.  In the Federal Budget of March 2017, Finance expressed their concern that private corporations were being used by high income Canadians to obtain tax advantages that were not available to other Canadian tax payers.  That concern has led to the release on July 18th 2017, of a consultation paper along with draft legislation.  Finance is currently asking for input from interested parties and stakeholders and has stated that the consultation period will end on October 2, 2017.  At this point, whatever happens after that date is anyone’s guess, but speculation is high that changes will be introduced to close what the Department perceives as abusive practices relating to private corporations.

Specifically, there are three specific tax planning strategies employed by private corporations that the department is most concerned with:

Sprinkling income using a private corporation

Income tax paid on income from a private corporation can be greatly reduced by causing that income to be received in the form of dividends by individuals who would pay tax at a much lower rate or not at all.  These dividends are usually paid to adult children or other family members who are shareholders of the private corporation or to a family trust.  By “sprinkling” the income in this manner the amount of income tax paid can be greatly reduced. Read more

Insurance Audit for the Business Owner

Many business owners understand the important role that life insurance plays in effective corporate planning.  Whether it is the funding of a shareholders’ agreement, life insuring corporate debt, or protecting against loss from the death of a key employee, life insurance is of great value in underpinning the financial success of a corporation.

Just as life insurance needs for families change over time the same is also true for requirements of a business.  If it has been some time since you last reviewed your corporate needs then it is probably time for a corporate insurance audit. This is especially true if the company has grown in value since the time the insurance was first implemented.  The scope of the audit and the insurance related issues include the following: Read more

ARTICLES OF INTEREST

5
Jan

Budgeting

If you’ve made a resolution to be more disciplined with your spending, or you’ve overspent over the holidays, a budget is a good way to get back on track.  Here’s a good article from Practical Money Skills that you might find helpful.


A budget is a plan, an outline of your future income and expenditures that you can use as a guideline for spending and saving.

Only 47 % percent of Canadians use a budget to plan their spending. But Canadians are feeling more in debt than ever with 90% saying they have more debt today than five years ago. A budget can help you pay your bills on time, cover unexpected emergencies, and reach your financial goals — now and in the future. Most of the information you need is already at your fingertips. Read more »