As you prepare for your retirement, we know that although it is an exciting time, it can also be a bit nerve-wracking as you move from earning an income to drawing an income from your investments, pension, etc.
In this video, Kelley Doerksen, CFP® walks you through some of the steps you can take to feel more prepared and confident that you will have what you need to live comfortably, retire successfully and enjoy the wealth you have accumulated.
Watch the video here:
A large part of what we do when preparing financial plans for clients is helping to prepare for retirement of course; and although clients are excited to make the transition from working life to retirement, it also comes with some stress and concern related to whether or not you will have enough financially to do the things you want to do when retirement comes. It also can be a challenging period of time mentally, moving from the process of earning an income to drawing an income from your investments, pensions, and so forth. Even though a lot of clients might know factually by way of our financial planning, that they are going to be fully capable of retiring financially, and they might know intuitively that they are going to be able to retire comfortably, it still can be challenging.
One thing that we often recommend clients do is get a good understanding for themselves of what their expenses might look like; and this will help pair the financial plan really successfully with the goals and values that you as the client would like to see achieved over your retirement.
An easy way to start looking at your costs, first and foremost, is understanding what you are spending currently. We all have certain months of the year where we are going to spend a little bit more than usual, so assess your regular spending months – months that you do not have big events or parties or travel or so forth and get a good handle on what those regular costs look like. Understand your fixed expenses – your property taxes and utilities, and all of those things that you can understand are going to be fairly consistent from month to month.
Go forward from that and understand what it is that you might need to spend money on, or more importantly might want to spend money on throughout your retirement stage.
We do recommend that people quite literally take a walk through their homes prior to retirement. Assess for yourself what major expenses are going to be needed through your house, whether that is a new roof or a fence that needs to be replaced or updated. All of those large expenditures can and should be projected in your financial plan. Again, knowing what those might look like and an estimate of cost will help us determine whether or not the assets that you have accumulated are going to be sufficient to cover off those large expenses.
Another thing that you want to keep in mind is, oftentimes, people in the first few years of retirement or maybe just prior, will look at purchasing a vehicle – maybe it is the last vehicle you intend to purchase or own, and understanding what that cost might look like and how that would impact potentially drawing from your assets can be beneficial as well.
The most important part of understanding your retirement expenses is to try and get an assessment for yourself of the expenses that you are excited to spend money on.
Many people are going to put the most time into travel for example, in the first 10 years of their retirement. And so, understanding what that looks like for you, whether that is a number of small trips or a number of once in a lifetime experiences. We can work with those expenses; we can project them into your financial plan and you can walk away feeling confident that the dollars that you have accumulated are going to be able to provide you with your basic living expenses of course, but also most importantly, those need to do, want to do experiences throughout retirement that you have worked hard to save for and you want to be able to comfortably use your money for.
When planning for retirement, understanding your goals and your objectives and what you value is absolutely critical; and pairing those with the expenses that you would like to see for yourself is a really meaningful use of your time and helps us build a financial plan that is going to help you see that you can meet those needs comfortably, retire successfully, and enjoy the wealth that you have accumulated.
Learn more about our retirement planning services here.
Do you know what probate is? In this video, Kelley Doerksen, CFP® explains what it is as well as when and why it might be needed. You will also learn about some of the outcomes that happen whether you apply for it or not.
Watch the video here:
We are going to discuss probate – when and why it might be needed and some of the outcomes of obtaining probate or not.
Probate is simply the process of applying to the courts to validate the will of the deceased. The will does give the executor the authority to administer the estate, however probate can be really important to again, validate with certainty that the will is the final will of the deceased and the executor has full authority.
Many financial institutions will not allocate out assets according to a will alone, especially if there are no named beneficiaries; so for a non-registered account, etc. there often needs to be a process of going through probate in order for those institutions to feel confident that the residuals or the assets being provided are going to the proper beneficiaries and the executor has the authority to request this.
So, for some estates, probate is not necessary, but for many estates it is.
Probate also starts a period of time for a limitation where those who might want to challenge the validity of the will, will have the time and an end point with which to do that. If probate is not applied for, the limitation period never starts, and so therefore, it theoretically does not end either.
Probate fee planning can be an important component of your overall estate plan. In Alberta, of course, probate fees are insignificant, however in other provinces, namely Ontario and BC, probate fees can be quite significant.
Be careful when you are working with probate fee planning or your goal might be to eliminate probate fees in your estate because there can be unintended consequences for your estate and beneficiaries, by engaging in probate fee planning.
Probate fee planning should be part of your overall estate planning goals and objectives, and your financial planner can help you understand and maybe even project out what your outcomes would be by trying to accomplish your probate fee planning you have in mind; and perhaps provide you with some alternatives or other suggestions if the outcome is not what you intend.
Absolutely vital to estate planning, of course, is writing a valid will with a lawyer who understands your goals and objectives. Including your financial planner and involving them in the conversations with your lawyer can be beneficial in understanding by both parties and yourself how you would like to see your goals accomplished.
If you would like us to be involved, or have any questions about how your beneficiary designations or other goals and objectives for your estate needs are going to be met, please reach out to us and we are happy to help.
Today we are sharing a charitable giving strategy that can be implemented as part of your overall estate plan.
Watch our video here:
This strategy involves donating life insurance policies and there are two primary methods of doing so.
The first way to do so is to purchase the life insurance policy with yourself as the owner as well as the insured, and name the charity that you would like the insurance policy to pay out to, as the beneficiary.
This method will provide you with a tax benefit at death. The benefit can be used in your year of death against your income for that year of death, up to 100% of your income in the year of death. As well, if the credits have not been used through in that year of death, credits can be used in the year previous. Again, up to 100% of income in the year prior to death.
A benefit of this method is that if you decide you would like to name a different charity as beneficiary, it is under your control to do so. All you need to do is fill out a beneficiary change form and make the adjustment. So you have a lot more flexibility with this method.
A second method for donating life insurance, is where you as the life insured are the insured on the policy, and the charity is the owner of the policy.
This method allows the charity to provide you with a tax receipt as you are paying premiums, and therefore, your benefit happens while living and helps you reduce your tax on your income while you are alive.
This strategy is beneficial for the charity; it also is beneficial for some clients who find that they need more tax benefit while they are alive, rather than the benefit to their estate, for a variety of reasons.
The downside to this strategy is that the charity remains owner of the policy, and you cannot change ownership of the policy to another charity. So, you need to be very confident that you have chosen a charity that you would like to support, and that they are going to use the proceeds of the policy in a manner that you deem suitable on your death. It can be a good idea to talk to the charity and have them write a letter of understanding for example, outlining that the use of the proceeds of the policy will be in line with what your goals and objectives are.
The benefit is that using that charity receipt while living can obviously help reduce your tax owing through your retirement (which is often when clients put this in place).
If you have any questions about or have any interest in learning about how using a life insurance policy to benefit charities can be suitable for you, please reach out.
This is Part 2 in our 3-part series on RDSP accounts or Registered Disability Savings Plans.
Today we are talking about working with RDSPs.
RDSPs are an effective way to save for your child’s financial future, or for your own if you are age of majority.
RDSPs can be started if you are eligible for the disability tax credit.
Contributions can be made to an RDSP up to a lifetime maximum of $200,000. Grants can also be earned in an RDSP – the government will contribute up to $70,000. Bonds can be paid into an RDSP from the government as well and bonds can be paid up to $20,000. Bonds are based on income – family income or your personal individual income; and it is a lower income threshold than grant contributions. You can consult the current legislation for the amount of income on an annual basis. Grants will be paid to an RDSP based on contributions and can be paid up to 300% of any contribution that has been made.
A contribution can attract up to $3,500 of grant money with a $1,500 contribution if family income is under, currently, about $100,000. And that can be collected back on years that grants may not have been applied for or one was eligible, but did not open an RDSP in time. You can go back up to 10 years to collect unearned but eligible grants in an RDSP.
RDSP withdrawals are designed such that an RDSP is kept open for the long-term financial security of the beneficiary of the RDSP. If withdrawals are made within 10 years of a grant or bond being paid into the account, there can be a proportionate claw back on withdrawals, and grants and bonds may need to be paid back to the government to some extent. Therefore, waiting for 10 years before withdrawals are made, is usually a really effective way to maintain the integrity of the account.
When withdrawals are made, you can withdraw in two formats. One is a Disability Assistance Payment or a DAP, and that’s a one-time lump sum withdrawal that might be made. An LDAP or a Lifetime Disability Assistance Payment is made or has to be started by the time the beneficiary is age 60. And it’s an annual recurring amount that needs to be withdrawn on a regular basis. There are some minimum and maximum requirements on an LDAP withdrawal, and it is dependent on a number of factors within the RDSP account.
You may be wondering what the difference is between a holder of an RDSP and the beneficiary. The holder of the RDSP is the individual who makes the decisions on the account. The beneficiary is the one who receives the benefit of the RDSP account. Many times the holder and the beneficiary are the same individual, but that is not always the case. For example, if the beneficiary is a minor, oftentimes the parents or guardian will be the holder of the RDSP account. And grants and bonds will be based on any income of the beneficiary’s family or parents in that circumstance. When the beneficiary and holder are the same individual, the beneficiary has to be at least 18 years of age and has to have capacity to make decisions on their own.
Parents can maintain the holder status on their child’s RDSP account, even if the child is 18 years of age or older, if the parent is the legal guardian of the child still.
RDSPs can be some of the most important dollars that families save for their loved ones, but they are also very complex. If you have any further questions, please reach out to us and we’re happy to discuss.
The following is general tax filing information that may or may not apply to you.
Our clients will be receiving a tax package from their Portfolio Management team onlyif you have a Non-Registered account and there was activity in your Non-Registered account(s) in 2022. If you do not have a Non-Registered account you should not expect to receive this.
The tax package includes a Statement of Annual Management Fees, Foreign Asset Report, and a Realized Gain & Loss Report for Non-Registered accounts if there was any activity in 2022. You will need the Gain & Loss Report to pair with your T5008 tax slip that you will receive from your Custodian. The Gain & Loss Report provides the book value of activity in the account, while the T5008 provides the proceeds of disposition. Please provide both documents to your tax preparer. If there was no activity in your Non-Registered account or you do not have a Non-Registered account, you will not receive these forms.
Special Reporting: Our Portfolio Managers may invest in certain holdings which have a different type of reporting. The distributions for Non-Registered accounts that contain these holdings are reported on CRA Form T3 and/or T5013. These forms are expected to be sent out near the end of March. Your Portfolio Manager advises you to wait until after March to file your return to ensure you receive all necessary slips.
Note that if you have made an RRSP or Spousal RRSP contribution in the first 60 days of 2023, the deadline for mailing these slips is the end of March.
Please ensure you have received all necessary slips before filing your 2022 tax return. If you are signed up for online access with NBIN and have your preferences set to electronic delivery, your tax slips are available online only. Therefore, you will need to login to your account to check for tax slips as there will not be a hard copy mailed.