Do you REALLY need life insurance?

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. 

Shared Ownership Critical Illness

Shared Ownership Critical Illness offers business owners and incorporated business professionals a way to access the retained earnings in their corporation or provide benefits to a key employee.

Talk to us to see how we can help you.

2019 Federal Budget

2019 Federal Budget

The 2019 budget is titled “Investing in the Middle Class. Here are the highlights from the 2019 Federal Budget.

We’ve put together the key measures for:

  • Individuals and Families

  • Business Owners and Executives

  • Retirement and Retirees

  • Farmers and Fishers

Individuals & Families

Home Buyers’ Plan

Currently, the Home Buyers’ Plan allows first time home buyers to withdraw $25,000 from their Registered Retirement Savings Plan (RRSP), the budget proposes an increase this to $35,000.

First Time Home Buyer Incentive

The Incentive is to provide eligible first-time home buyers with shared equity funding of 5% or 10% of their home purchase price through Canada Mortgage and Housing Corporation (CMHC).

To be eligible:

  • Household income is less than $120,000.

  • There is a cap of no more than 4 times the applicant’s annual income where the mortgage value plus the CMHC loan doesn’t exceed $480,000.

The buyer must pay back CMHC when the property is sold, however details about the dollar amount payable is unclear. There will be further details released later this year.

Canada Training Benefit

A refundable training tax credit to provide up to half eligible tuition and fees associated with training. Eligible individuals will accumulate $250 per year in a notional account to a maximum of $5,000 over a lifetime.

Canadian Drug Agency

National Pharmacare program to help provinces and territories on bulk drug purchases and negotiate better prices for prescription medicine. According to the budget, the goal is to make “prescription drugs affordable for all Canadians.”

Registered Disability Savings Plan (RDSP)

The budget proposes to remove the limitation on the period that a RDSP may remain open after a beneficiary becomes ineligible for the disability tax credit. (DTC) and the requirement for medical certification for the DTC in the future in order for the plan to remain open.

This is a positive change for individuals in the disability community and the proposed measures will apply after 2020.

Business Owners and Executives

Intergenerational Business Transfer

The government will continue consultations with farmers, fishes and other business owners throughout 2019 to develop new proposals to facilitate the intergenerational transfers of businesses.

Employee Stock Options

The introduction of a $200,000 annual cap on employee stock option grants (based on Fair market value) that may receive preferential tax treatment for employees of “large, long-established, mature firms.” More details will be released before this summer.

Retirement and Retirees

Additional types of Annuities under Registered Plans

For certain registered plans, two new types of annuities will be introduced to address longevity risk and providing flexibility: Advanced Life Deferred Annuity and Variable Payment Life Annuity.

This will allow retirees to keep more savings tax-free until later in retirement.

Advanced Life Deferred Annuity (ALDA): An annuity whose commencement can be deferred until age 85. It limits the amount that would be subject to the RRIF minimum, and it also pushes off the time period to just short of age 85.

Variable Payment Life Annuity (VPLA): Permit Pooled Retirement Pension Plans (PRPP) and defined contribution Registered Retirement Plans (RPP) to provide a VPLA to members directly from the plan. A VPLA will provide payments that vary based on the investment performance of the underlying annuities fund and on the mortality experience of VPLA annuitants.

Farmers and Fishers

Small Business Deduction

Farming/Fishing will be entitled to claim a small business deduction on income from sales to any arm’s length purchaser. Producers will be able to market their grain and livestock to the purchaser that makes the most business sense without worrying about potential income tax issues. This measure will apply retroactive to any taxation years that began after March 21, 2016.

To learn how the budget affects you, please don’t hesitate to contact us.

The Difference between Segregated Funds and Mutual Funds

 

Segregated Funds and Mutual Funds often have many of the same benefits such as:

 

 

  • Both are managed by investment professionals.
  • You can generally redeem your investments and get your current market value at any time.
  • You can use them in your RRSP, RRIF, RESP, RDSP, TFSA or non-registered account.

 

So what’s the difference? Who offers these products?

 

 

  • Segregated Funds: Life Insurance Companies
  • Mutual Funds: Investment Management Firms

 

Why is this important?

 

 

  • Since Segregated funds are offered by life insurance companies, they are individual insurance contracts. Which means….
  • Maturity Guarantees
  • Death Benefit Guarantees
  • Ability to Bypass Probate
  • Potential Creditor Protection
  • Resets
  • Mutual Funds do not have these features.

 

What are these features?

 

Maturity and Death Benefit Guarantees mean the insurance company must guarantee at least 75% of the premium paid into the contract for at least 10 years upon maturity or your death.

Resets means you have the ability to reset the maturity and death benefit guarantee at a higher market value of the investment.

 

Bypass Probate: since you name a beneficiary to receive the proceeds on your death, the proceeds are paid directly to your beneficiary which means it bypasses your estate and can avoid probate fees.

Potential Creditor Protection is available when you name a beneficiary within the family class, there are certain restrictions associated with this.

 

What are the fees?

 

 

  • Segregated Funds: Typically higher fees (MERS)
  • Mutual Funds: Typically lower fees

 

We can help you decide what makes sense for your financial situation.

Financial Planning for Business Owners

Financial Planning for business owners is often two-sided: personal financial planning and planning for the business.

Business owners have access to a lot of financial tools that employees don’t have access to; this is a great advantage, however it can be overwhelming too. A financial plan can relieve this.

A financial plan looks at where you are today and where you want to go. It determines your short, medium and long term financial goals and how you can reach them. For you, personally and for your business.

Why do you need a Financial Plan?

  • Worry less about money and gain control.
  • Organize your finances.
  • Prioritize your goals.
  • Focus on the big picture.
  • Save money to reach your goals.

For a business owner, personal and business finances are connected. Therefore both sides should be addressed: Personal and Business.

What does a Financial Plan for a Business include?

There are 2 main sides your business financial plan should address: Growth and Preservation

Growth:

  • Cash Management- Managing Cash & Debt
  • Tax Planning- Finding tax efficiencies
  • Retaining & Attracting Key Talent

Preservation:

  • Investment- either back into the business or outside of the business
  • Insurance Planning/Risk Management
  • Succession/Exit Planning

 

What does a Personal Financial Plan include?

There are 2 main sides your financial plan should address: Accumulation and Protection

Accumulation:

  • Cash Management – Savings and Debt
  • Tax Planning
  • Investments

Protection:

  • Insurance Planning
  • Health Insurance
  • Estate Planning

 

What’s the Financial Planning Process?

  • Establish and define the financial planner-client relationship.
  • Gather information about current financial situation and goals including lifestyle goals.
  • Analyze and evaluate current financial status.
  • Develop and present strategies and solutions to achieve goals.
  • Implement recommendations.
  • Monitor and review recommendations. Adjust if necessary.

 

Next steps…

  • Talk to us about helping you get your finances in order so you can achieve your lifestyle and financial goals.
  • Feel confident in knowing you have a plan to get to your goals.

BC Budget 2019

BC Finance Minister Carole James delivered the province’s 2019 budget update on February 19, 2019. The budget anticipates a surplus of $274 million for the current year, $287 million for 2020 and $585 million in 2021.

The biggest announcements are:

  • BC Child Opportunity Benefit
  • Interest Free Student Loans

BC Child Opportunity Benefit

The BC Child Opportunity Benefit covers all children under 18 and can be applied for starting in October 2020. (This replaces the Early Childhood Tax Benefit where the benefit ended once a child turned six.)

Starting October 2020, families will receive a refundable tax credit per year up to:

  • $1,600 with one child
  • $2,600 with two children
  • $3,400 with three children

Families with one child earning $97,500 or more and families with two children earning $114,500 or more will receive nothing.

Interest Free Student Loans

The provincial portion of student loans will now be interest-free effective as of February 19, 2019.  The announcement covers both current and existing student loans.

Medical Services Premium

As previously announced in the last budget, 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.

Public Education System

The public education system will receive $550 million in additional support.

Healthcare

Pharmacare program will be expanded with an additional $42 million to cover more drugs, including those for diabetes, asthma and hypertension.

To learn how these changes will affect you, please don’t hesitate to contact us. 

Getting the best from a financial advisor

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. 

RRSP Tax Savings deadline – March 1, 2019

RRSP Deadline: March 1, 2019

This is the deadline for contributing to your Registered Retirement Savings Plan (RRSP) for the 2018 tax filing year. You generally have 60 days within the new calendar year to make RRSP contributions that can be applied to lowering your taxes for the previous year.

If you want to see how much tax you can save, enter your details below!