Financial Planning- Don't Get Caught Unprepared

Susan Creasy Financial Inc.
Don’t Be Caught Unprepared

Emotions and Ignorance = Financial Illiteracy
2 out of 3 Canadians will fail to realize one or more of their important life goals because they have no financial plan
Money is still a mystery…a taboo
Greed and Fear lead to emotional financial planning
Lack of knowledge leads to fear and mistakes
For seniors it is critical that you have proper planning so you ensure you do not outlive your money

Costly Financial Mistakes
Living on more than you make- Income reductions as senior vs. in your working years
Buying newer, bigger and better than you can afford or need now
Taking money from your RSP’s early if you are not yet retired
No emergency fund
No Savings
Not having a budget that you stick to!

Seniors need help and sound advice
Too many financial products and choices available today
Drowning in financial information from a variety of sources – how can you stay on top of things
Insurance and Investment issues and needs change as we age “problems with Term Life insurance”
How do you determine what to believe and then what to do with that knowledge

Where are you getting your advice
Many people are getting bad advice from un-educated and uniformed people who are not keeping their information current- Friends and media
Some advisors tell clients what they want to hear not what is the reality
Not using a well informed educated and designated advisor to assist you in your planning

When I was young, I thought I would live forever…
Now I am afraid that I might!

Seniors issues
Snowbirds- tax and medical needs
Health issues- Sudden and chronic
Possible long term care needs
Estate planning- trillions of dollars in intergenerational transfer
Outliving my money
Emergency needs for cash
Who gets the cottage? The business?

Loans to Family
A recent study shows 64% of Canadians have loaned or borrowed more than $500.00 from friends or family
Needs to be well documented in writing to avoid estate problems between other heirs.

Joint Ownership – Pros and Cons
Pros
No probate fees will be payable with respect to asset on death
Ease of transfer their survivor will not experience any delay in receiving the asset on death
The asset is removed from the scope of will Variation Act in British Columbia
Cons
Loss control over the asset
Possible triggering of immediate tax consequences such as a capital gains or property transfer tax
Possible future tax consequences if for example asset is a principle residence transferred to a child.
Exposure of asset claims made against joint owner from creditors or even spouses on marriage breakdown

Tax-Free Savings Account
Individual > @18 but not a trust
Accumulated $5,000/yr contribution room.
Excess contribution subject to 1% tax/mo.
Non-deductible deposits versus RRSP’s.
Contributions grow tax-free, no tax implications at withdrawal.
May name a beneficiary if invested with a Life Insurance Company.
May use various investments i.e.. GIC’s, Stocks, Bonds and Investment Funds
Opportunity to transfer wealth between generations

Tax-Free Savings Account
Income, losses, gains, withdrawals not included in:
income tax calculations
determining income-tested benefits or credits
OAS
GIS (Guaranteed Income Supplement)
Child Tax Credit
GST credit
Employment Insurance Benefits
Age credit

Life Insurance – A Planning Tool!
Joint Life, last to die plans are cost effective
Pays income tax at death from disposition of an asset(e.g. family cottage/investments)
To equalize an estate – if one child is left a property, business, farm, the other child can be treated equally with tax free death beneficiary from Life Insurance
To pay income tax at death on a RRSP/RRIF if there is no spouse or minor children

Insured Annuity
Provides an attractive alternative to today’s low, fixed income investments and GIC’s
Tax efficient, lifetime income and preserves or increases the original capital for the estate.
Prescribed annuity provides lifetime income
A life insurance policy preserves the capital
Maintenance free, no ongoing investment decisions are needed to maintain lifetime income
With named beneficiaries, the capital passes directly to your heirs, without probate, legal fees or delay!

Example: Male and Female age 70 Non-Smoker
$200,000 Joint Last Survivor Life Annuity $ 13,340
Taxable portion $ 2,977
Less tax @ 35% $ 1,041
Less premium for Life Insurance $ 3,750
NET Income for Life $ 8,549
Net Rate of Return 4.3%
Equivalent Before Tax Rate of Return 5.8%
(average 10 GIC rate 2.75%)
At death $200,000 tax free is returned to your estate!

THANK YOU !
Susan Creasy Financial Inc.

Financial Planning- Don't Get Caught Unprepared

by Gordon's Estate Services on Mar 24, 2011

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Financial Planning- Don’t Get Caught Unprepared — Presentation Transcript