Last will and testament: ensuring your will is executed
Tuesday, July 22, 2014
A properly prepared will - reviewed periodically to allow for changes in your personal, emotional, and financial situations - is critical to successful estate planning. Without a will, your financial affairs will be in limbo after your death and it will take some time before a provincial court will appoint an administrator. A will gives you the opportunity to put the right person in charge as executor and to designate who will inherit your assets.
Your will should be updated as changes in your life occur.
These changes may include:
- A death, birth, marriage, divorce of your beneficiaries.
- Your divorce or remarriage.
- A change in your executor/estate liquidator or trustee.
- The deletion or addition of a gift or bequest.
- A change in the value of your property.
- The change of residence to another province or country.
- The acquisition of property in another province or country.
- A major unexpected increase or decrease in your net worth (or net assets).
- The addition of another dependent, such as a child, elderly parent or other relative.
- A major change in your insurance program.
- Changes in tax laws affecting inheritances.
Benefits you will gain by having a current will:
- You choose those people who will receive your property and assets.
- Your personal effects, memorabilia, and family heirlooms will go to those you've selected.
- Someone you know and trust will administer your estate. That person will be able to locate your assets and pay your bills.
- Depending on your marital status, you'll be able to name the guardian of any minor children.
- The possibility of costly and lengthy estate litigation is reduced.
- Your executors will be aware of your wishes regarding burial or cremation.
- You will be able to appoint those people who will hold, invest and manage the share of your estate for any minor children or grandchildren.
To avoid difficulties and additional costs of administering your estate, a lawyer or legal advisor can assist you in the preparation of a will.
Where will your estate end up?
Liana Carvalho at 7:00 AM
Steps to financial independence
Tuesday, July 15, 2014
Steps to financial independence
Financial success is a journey, not a destination. Are you taking the steps to get you on the road to financial independence and keep you there?
Check the items that you have provided for or are in the process of providing for.
- I have set reasonable and achievable financial goals and check to ensure I'm on track.
- I have eliminated outstanding loans and do not carry a balance on my credit cards.
- I have established an emergency fund totaling three to six months of expenses.
- If I were to die or become disabled today, my family would have sufficient resources to maintain my family home and care for my children.
- I have sufficient life insurance to cover all my outstanding debts, including mortgage and final expenses (burial costs and probate fees).
- I fully understand all the options available under my employer or association plan.
- I am maximizing my RRSP or spousal RRSP (if applicable) and have diversified my investments to reduce risk and investment vulnerability.
- I consider borrowing money to invest in my RRSP if I can repay it within the year.
- I am saving and will have adequate funds for my children's education.
- I have a mortgage with an amortization schedule and payment frequency that will save interest and pay off the mortgage in the shortest possible time.
- I have a current list of important papers and their location (for example, bank accounts, stocks, bonds, insurance policies, etc.).
- I have credit cards in my own name so that I can maintain a good credit rating independent of my partner.
- I have an up-to-date will that ensures that my beneficiaries will receive their rightful inheritance.
- I have appointed a power of attorney for managing my property as well as my personal care in the event that I am unable to do so myself.
- I have personal coverage to supplement the group life and disability insurance I have through my employer or association.
- I have a plan in place to cover future health care and nursing home costs for my parents.
How is your financial future shaping up?
Liana Carvalho at 11:18 AM
Understanding market volatility: it's a part of investing!
Tuesday, April 22, 2014
You may have heard the terms “bull market” and “bear market” batted around. What do these terms really mean, and do they affect your investments?
A bull market is a period of time when stock prices are on the rise. These are the times when the markets give a 20 per cent return for a number of years in a row. A bear market is when stock prices fall for a sustained period of time. The fear and uncertainty of a bear market is what makes most people nervous about investing in market-based products. Bear and bull markets, along with in-between periods of less dramatic ups and downs, are a normal part of investing.
The markets have seen some pretty dramatic fluctuations over the past few decades. Market volatility is not an unusual experience. In fact, severe short-term volatility happens regularly - about every two years or so.
While there is no way to completely protect your money from this volatility, you can put a plan in place to moderate the impact. Think back to when you put your savings plan into place. Your advisor helped you to create your plan based on your long-term goals and expectations. You considered your hopes for the future, your comfort with investing and even market volatility.
No one can predict what the markets will do tomorrow, but remember to keep a few points in mind.
Your advisor may have walked you through the asset allocation process to build your plan. This process includes selecting a mix of investments to diversify your portfolio and help minimize risk and maximize return. It's designed to help cope with market volatility.
Dollar cost averaging
Investing a set amount of money on a regular basis, such as through a monthly savings plan, can offer you more buying power. When the markets are down, your regular contributions purchase more units when prices are low. When prices rise, you'll purchase fewer units at the higher price. The result—the average cost per unit could end up being lower.
Before you make any decisions about your investments, talk to your Sun Life Financial advisor.
Your priorities and needs change as you move through different stages in your adult life. Throughout these stages, your advisor can help you choose the right products and services that meet your evolving needs.
Off to work
In the first stage of adult life, you leave high school, college or university and enter the workforce. Your career is just getting underway. You may want to add to any group insurance coverage you have through your employer with personal insurance, such as disability, life and health insurance. Personal insurance is even more important if you're starting your own business, or working in a contract position that doesn't offer a benefit package. Retirement is generally the last thing on your mind. However, the sooner you start planning for your financial future, the better it will be. That head start can translate into thousands and thousands of dollars.
A partnership, such as marriage, means your financial planning now includes two. You need to develop a financial plan to help make sure you and your partner are provided for today and in the future. You can investigate money management and investment strategies, as well as protection solutions such as long term care and critical illness insurance. You'll want to review your life insurance needs, for you and your partner. If you're buying a home, think about the advantages of purchasing life insurance, rather than mortgage insurance. Since you're just starting on your journey through life together, it's important that you head in the right financial direction from the start.
Raising a family
If and when children enter the picture, your financial priorities change again. It's more important than ever to maintain a strong financial plan through these formative years to help keep your financial future bright. You'll need to ensure your life insurance plan continues to meet the needs of you and your family, and that your beneficiary information is up-to-date. If you haven't yet investigated long term care and critical illness insurance, you should do so now. Products can be adjusted to help ensure the success of your plan while at the same time allowing you to save adequate funds for your children's education, perhaps through RESPs.
At this stage, your children have left home and gone out on their own. Your career is beginning to peak and retirement is just around the corner. Your discretionary income has grown now that the expenses of raising your children have all but disappeared. You'll have the capital to pursue financial investments that can further enhance your retirement plans. You may have questions about your and your partner's RRSPs, or if you should make adjustments to the investments in your portfolio. You can protect your retirement funds with long term care insurance.
Finally, it's time to turn your retirement plans into reality. You'll move into new financial products that will provide you with a comfortable living, in a tax effective manner. You'll look at income options such as annuities and Registered Retirement Income Funds (RRIFs). It's important that you develop and maintain a specific financial plan so you can enjoy your new life of leisure. It's also time to get your estate in order to ensure that after all of your hard work your wishes will be carried out as you planned.
In most regions across Canada, you're guaranteed some bone-chilling cold in January and February. Another sure thing during these months, which coincide with RRSP campaigns, is that you'll be facing a sea of financial advice delivered on TV and the radio, in newspapers and magazines, and through e-mail messages.
Your challenge will be to wade into these sometimes uncertain waters and make the right investment decisions to suit your specific financial needs.
Investing in guaranteed investment certificates (GICs) using the laddering strategy could be a comfortable choice in your overall financial strategy. You'll know that your investment is earning a secure rate of return. And by laddering your investments, you can put your money away for the short term to gain flexibility, as well as for the long term to get better interest rates.
Laddering works like this: you choose the amount of money you want to invest. Divide this initial amount into five smaller guaranteed investments. Then pick different terms and maturity dates for each of these smaller investments.
Here's an example:
Your initial investment is $10,000
Divide this amount into five separate investments of $2,000 each
Invest $2,000 each into a one-year, two-year, three-year, four-year and five-year term
When your first investment matures after one year, you reinvest that $2,000, plus the interest you've earned, in a five-year term investment
Each year, one of your investments will mature. You would then reinvest in a five-year term, possibly benefiting from a higher interest rate and continuing the laddering process.
How can laddering benefit you?
Security in guaranteed investments:
Minimize interest rate risk: By investing in regular intervals, you can reduce your investment risk. Only a portion of your portfolio comes due at any one time. This strategy can limit your exposure to possible fluctuating interest rates.
Maximize the long-term rate of return: If you convert your maturities to five-year terms, you can take advantage of the possibility of higher interest rates. Longer-term investments typically offer better interest rates than short-term investments.
Comfort of guaranteed returns: You're secure with the knowledge that your investments will grow at a constant interest rate, with a guaranteed return at the end of the term. Flexibility to respond to investment opportunities and financial needs:
Ability to respond to interest rate changes: You'll have access to 20 per cent of your investments every year. If the interest rates are higher, you can invest in longer-term investments. If interest rates drop or temporarily flatten out, you can minimize your risk because only 20 per cent of your investments are maturing at any one time.
Increased availability: Each year a part of your investment matures and you'll be able to spend it if that's what you need to do. You also have the opportunity to make new investment decisions.
Ability to choose the maturity dates: You can have specified investments mature when you need money for a large purchase or special occasion, for example college or wedding expenses.
Your advisor can help you to decide if this strategy matches your long-term and retirement objectives. Using your advisor's knowledge and experience, you'll be better able to sort through the many investment options available and identify how long you want to invest, and what level of risk you're prepared to take: low, medium, or high.
Deciding where to put your money each year is one of the most important financial decisions you make. Talk to your advisor about getting help to build your portfolio around a sound financial strategy that includes your personal investment style, objectives, and risk tolerance. You may even experience a warm and cozy feeling knowing that the storms of uncertainty won't affect your guaranteed investments.
Liana Carvalho at 10:24 AM
Using Your RRSPs To Buy A Home - The Home Buyers' Plan (HBP)
Tuesday, March 25, 2014
The Home Buyers' Plan (HBP) is a program that allows you to withdraw funds from your registered retirement savings plans (RRSPs) to buy or build a qualifying home for yourself or for a related person with a disability. You can withdraw up to $25,000 in a calendar year.
Your RRSP contributions must remain in the RRSP for at least 90 days before you can withdraw them under the HBP, or they may not be deductible for any year.
Generally, you have to repay all withdrawals to your RRSPs within a period of no more than 15 years. You will have to repay an amount to your RRSPs each year until your HBP balance is zero. If you do not repay the amount due for a year, it will have to be included in your income for that year.
Before applying to withdraw funds under the HBP you must meet the following conditions (as quoted on CRA site):
•You have to enter into a written agreement to buy or build a qualifying home for yourself, for a related person with a disability, or to help a related person with a disability buy or build a qualifying home. Obtaining a pre-approved mortgage does not satisfy this condition.
•You have to intend to occupy the qualifying home as your principal place of residence no later than one year after buying or building it. If you buy or build a qualifying home for a related person with a disability, or help a related person with a disability buy or build a qualifying home, you must intend that that person occupy the qualifying home as his or her principal place of residence.
•You have to be considered a first-time home buyer.
•In all cases, your repayable HBP balance on January 1 of the year of the withdrawal has to be zero.
Repaying your withdrawals:
Over a repayment period of no more than 15 years, you have to repay to your RRSPs the amounts you withdrew under the HBP. Generally, for each year of your repayment period, you have to repay 1/15 of the total amount you withdrew, until the full amount is repaid to your RRSPs or PRPPs. Your repayment period starts the second year following the year you made your withdrawals.
To make a repayment under the HBP, you have to make contributions to your RRSPs or PRPPs in the year the repayment is due or in the first 60 days of the following year. Once your contribution is made, you can designate all or part of the contribution as a repayment under the HBP.
In 2011, Robert withdrew $6,000 from his RRSPs to participate in the HBP. Robert's repayment for 2013 is $400 ($6,000 ÷ 15).
In 2013, Robert contributes $8,200 to his RRSPs. Robert could deduct the full amount as an RRSP contribution on line 208 of his 2013 income tax and benefit return because his notice of assessment for 2012, shows that he has an RRSP deduction limit of $11,000 for 2013. However, he knows an HBP repayment is required.
Therefore, Robert files Schedule 7 with his 2013 income tax and benefit return and records his $8,200 RRSP contribution on line 245. He designates $400 of this amount as an HBP repayment on line 246 of Schedule 7. Robert deducts the remaining $7,800 as an RRSP contribution on line 208 of his 2013 income tax and benefit return.
The HBP can be an effective way to own your own home. Please ensure to speak to a financial advisor for assistance and consult a licensed account when filing your repayments.
When it comes to buying life insurance, it's easy to procrastinate and put off the decision. Some people push the thought completely out of their minds, thinking, "Why put money into something that won't pay until after I'm dead?"
Good question, but life insurance isn't really for the person whose life is insured. It gives protection and security to the living -- the spouse, children, and loved ones left behind after the person insured dies.
Depending on the value of the policy, the person named as the beneficiary could receive $10,000, $100,000 or even $1 million. That money could go a long way toward paying funeral costs, the mortgage and day-to-day bills.
Your insurance advantage
One of the major advantages of owning life insurance, in addition to protecting your family, is that the death benefit you receive from a life insurance policy is tax-free -- and we all know that's a good thing.
Obviously, the higher the policy's death benefit or the type of insurance purchased, the higher the amount you pay for your coverage (the premium). Each kind of life insurance has its advantages and limitations. Depending on your life stage and other factors, one kind may meet your needs better than the others. "What's the difference between term and permanent insurance?" is a frequently asked question.
Term insurance covers a specific period (or term), say five, 10 or 20 years. If you pass away during this period, your beneficiary receives the death benefit stated on the policy. If you pass away even one day after the policy expires, your beneficiary won't receive anything.
The length of the term is important because after the term, you may not be insurable. Your health may have deteriorated, or you may have contracted an illness, making you too high of a risk to be insured again. If you're still insurable after the term ends, your premiums will likely increase because you're older and a higher risk to the insurance company. Whatever your age, though, term insurance typically has a lower premium than a permanent policy of comparable value.
Term insurance is an affordable, simple step in your financial strategy. It provides temporary protection for now, with the flexibility to adjust your insurance to meet your needs in the future. Premiums are guaranteed and will automatically renew at the end of each term. Even if your health may have deteriorated, or you may have contracted a disease or illness, your insurance coverage will continue to renew until the expiry (usually age 75 or 80). If during that time, renewal premiums are too expensive, you can choose to convert your term insurance to permanent insurance that will have a guaranteed level premium for the lifetime of your coverage.
Term insurance meets a particular need, for example to ensure your family has money to pay for a mortgage, a car payment, or tuition after you die. It gives you affordable protection with the flexibility to choose from a wide range of terms.
Permanent or whole life insurance
A permanent life insurance policy covers you for as long as you live, rather than just a specific term.
Advisors often recommend that if you're under a specific age, you should buy permanent insurance as protection against future medical problems. Your premiums will stay the same regardless of your health.
A permanent policy typically has a cash value. This is the amount of money you'll receive if you allow your policy to lapse by not paying the premiums, or cancelling the coverage. The cash value is based on the premiums you've paid and grows over time because the insurance company invests those payments at a fixed rate for you.
Your policy may allow you to take out a loan secured by this cash value. If you die before you've paid back the loan in full, your beneficiary's death benefit will be decreased by the unpaid amount.
With term life insurance, you protect your beneficiary. With a permanent policy, you pay a higher premium, but you have the opportunity to both protect your beneficiary and have a cash value.
Universal life insurance is a form of permanent insurance that provides lifetime protection with lots of flexibility.
With universal life, you have a policy fund, which is your cash value and acts like a cash reserve. This reserve holds both your basic payments and any additional lump sum payments you make. Your cost of insurance is deducted from your policy fund and the rest is left to accumulate interest. But unlike a regular permanent plan where your cash value increases at a fixed rate, the cash value of your universal life policy achieves an interest rate that mirrors the performance of the market indexes or managed fund accounts you select to have your policy track.
You don't pay tax on the interest in your policy fund unless you withdraw it or exceed the maximum tax-exempt limit. If there's enough in your policy fund to cover your cost of insurance, you can skip a payment because it will be deducted from the amount you've already paid into your policy fund.
Depending on the kind of universal life insurance you purchase, your beneficiary may receive not only the amount of the death benefit (your insurance coverage), but also the amount in your policy fund.
You can also include additional coverage like critical illness insurance and term coverage for your spouse or children on your universal life policy.
How much is enough?
When most people think about life insurance, they usually have two main questions: how much coverage do I need, and how long do I need it for?
Many financial experts advise that the total value of all your life insurance policies should equal five to seven times your annual income. If you're the primary salary earner, you should have coverage that equals six to 10 times your annual income; and if you’re a young adult with a mortgage and children, your coverage should be closer to the high end of the range.
Why is this ratio so high? If your household's income is $70,000 a year and your family has $200,000 worth of life insurance, almost three times your annual earnings, how far would that money go? There are numerous expenses that your spouse would have to cover if you die: the $150,000 mortgage, childcare, education, car loans and funeral expenses. The death benefit could quickly disappear.
When considering how much insurance to purchase, you should think about how much it would cost to maintain your family's standard of living if you were to die.
As a consumer, you have access to some protection if your life insurance company goes bankrupt. The Canadian Life and Health Insurance Compensation Corporation (CLHIC) is a federally incorporated, non-profit company that guarantees the payment of benefits (up to specific limits) to policyholders when a company is unable to pay its debts.
To check up on the health of the insurance companies, annual financial reports and periodicals like the Stone & Cox publication 2007 Canadian Life & Financial Services Directory are helpful. The number of life insurance policies a company has in force is one good indicator of their financial strength.
Logging on to several insurance companies' websites is a great way to find out what they're offering.
When important changes happen in your life - starting a new job, the birth of a child, buying a home, approaching retirement - your needs change. Those life events are a perfect time to contact an insurance advisor to help you re-evaluate your needs.
outline the many insurance choices available and explain their features.
send you updates about the latest products and services on the market.
customize a financial strategy designed to meet your specific financial goals.
It's a good idea to have concerns and questions prepared before that first contact in order to have a valuable meeting with your advisor. Make sure you don't sign anything until you're absolutely certain you're getting exactly what you want.
Life insurance is a key component of a personal financial plan. It's investing in security so that your loved ones can complete their hopes and dreams.
2013 RRSP Deadline is March 3rd: Here are some tips to Investing in RRSPs
Wednesday, February 26, 2014
Tips to investing in RRSPs
Let's start with an obvious but important question. What is an RRSP?
You may know that RRSP stands for Registered Retirement Savings Plan. But it's easy to be confused about what that really means.
If you think you buy an RRSP, you wouldn't be the first person to make that mistake. Actually, you buy investments -- mutual funds, stocks, bonds, guaranteed investment certificates, annuities, etc. -- and register them with the federal government. When you retire, you'll be able to use the money that comes from the investments.
Is it a good idea to invest in an RRSP?
The simple answer is yes. Many people are putting their money in RRSPs because they've been told they can reduce the amount of income tax they pay. They think, "Okay, I'm getting this tax savings every year. It reduces my taxable income, so my overall taxes aren't going to be as high." For a lot of people, that's a good enough reason to contribute to an RRSP. Paying less income tax has always been a good idea.
If you're self-employed, you have another reason to invest in an RRSP. It may be the only way to save for retirement, since you probably aren't working at a company that sets up pension plans for its employees.
Whatever your reasons, the most important thing you can do as far as investing in RRSPs is concerned is to start contributing regularly as early as possible. When you start early, you give your money more time to grow.
Let's say you're 45 years old and put $100 dollars into RRSP investments every month and don't make any withdrawals. We'll assume a return of 6% per year. At age 65, the total value of your investment would be $45,344. Now, if you're 25 years old and invest the same monthly amount with the same return and don't make any withdrawals, the total value of your RRSP at 65 would be $190,768. You can see how the extra two decades of investing makes a big difference.
Perhaps you're thinking that you don't have $100 to put away every month. Try investing in small doses by setting up a plan where your contributions flow directly from your bank account to your RRSP on the day you're paid. A few dollars now will go a long way later. You'll be surprised at how quickly your RRSP will grow -if you contribute regularly!
Think about borrowing money to invest in your RRSP. At today's low interest rates this can be a very effective strategy. You will reduce your taxable income and may increase your tax refund. Many people then take that refund and use it to help pay off their loans. Ask your advisor if this approach makes sense for you.
Remember: the best thing you can do for your retirement fund is to put away the maximum amount allowed by the government. If you're short, you can take out a "catch-up" loan. Or, you can carry forward your unused contribution to a future year.
You can also help your money grow by including foreign investments in your RRSP. Canada is a big country, but it makes up only a small part of the global investment market. There are lots of great opportunities to invest outside our borders and the federal government has no limit on investing your RRSP in foreign securities.
To keep track of all your assets, you may want to consider keeping them in one investment company. There are distinct advantages to this strategy. You'll receive more effective advice because your advisor has access to your full financial picture. And you'll be able to see all or most of your investments by looking at one statement.
Nobody's financial situation will be exactly the same as yours. That's why your financial strategy should reflect your needs, desires, and goals. Professional money managers can help because they understand the complexities of the market. Don't be afraid to ask for help from the pros!
You're sitting in an office across from a mortgage loans officer. It could be in a bank, a credit union, or another lender. You've signed all the papers for your mortgage. Now comes a question that you haven't thought about:
"Would you like to have mortgage life insurance?"
"What's that?" you ask.
"If you die, the mortgage life insurance will pay off your mortgage so your spouse or family doesn't have to worry about it."
You, like many others, are tempted to respond, "Where do I sign?"
But wait a minute!
Think about what you're getting before you put your name on that mortgage life insurance application.
Put yourself in charge!
The primary difference between a life insurance policy and mortgage life insurance from a mortgage lender is control. With a life insurance policy that you own, you decide who the beneficiary will be; with mortgage life insurance, the financial institution is the beneficiary and gets all of the death benefit.
With life insurance, your beneficiary chooses how to spend the tax-free death benefit from your life insurance policy. That could be to pay down the mortgage or other debts, invest rather than pay off a low-interest mortgage, cover living expenses, or make important purchases. These options don't exist when your mortgage lender controls the proceeds.
Many homeowners don't realize that mortgage life insurance is actually decreasing term insurance. The amount you owe on your mortgage goes down as you make payments on the principal. At the same time, the death benefit of the mortgage life insurance goes down by the same amount. But your mortgage life insurance premiums stay the same, so you're actually getting less coverage for your money every time you make a mortgage payment.
Here's another point worth considering. Many homeowners will change mortgage lenders during the time they're paying off their home, especially if they can get a lower interest rate somewhere else. If you take your mortgage to another company, in most cases, you lose your mortgage insurance and have to apply again at the new company.
In short, you lose control, value, and flexibility when you sign for mortgage life insurance with your mortgage lender.
An alternative to consider
Using an individual life insurance policy to protect your mortgage offers numerous advantages. It's important to note the difference between an individual and group insurance policy. With mortgage life insurance, you're a member of a group -- a collection of people who have mortgage debt with the same lender. The lender or insurer may cancel a group policy at any time, and that means you could lose your coverage.
With an individual life insurance policy, you're in control, so you're the only person who can cancel or alter your policy.
Another benefit if you choose the life insurance route: the value of the death benefit doesn't decrease as you make mortgage payments. A life insurance policy with a face value of $100,000 will be worth that much as long as you make the premium payments.
Control leads to flexibility
If you have a life insurance policy to protect your mortgage, and a better mortgage rate exists at another company, you can transfer your mortgage to that company knowing your insurance remains in force. You don't need to re-apply. You're protected from the danger of not qualifying for a new life insurance policy if your health changes.
If price is a concern, be sure to consider all your options and what value you get for your money. Depending on the policyholder's age and the amount of the insurance policy, individual life insurance may be cheaper than the lender's mortgage life insurance. It's worth talking to an advisor to see how the policies compare.
Articles supporting mortgage insurance rather than a policy to protect your mortgage have indicated the lender probably won't ask you to fill out a medical questionnaire. If you're applying for a large mortgage, however, banks in particular will likely demand that you fill out a more detailed health application, and perhaps ask for a blood or urine sample. Usually the more detailed medical information required by insurance companies actually protects you.
In short, these articles often fail to explain the benefits of value, control, flexibility, and security when an individual life insurance policy covers mortgage debt.
The final choice is up to you. Weighing your options will help you get the most out of your money.
Sun Life Financial Advisor,
Waterloo Grand Financial Centre
94 Bridgeport Rd E
Waterloo, Ontario N2J 2J9
Ph: 519-885-4000 ext. 2220