Spousal Registered Retirement Savings Plans are not universally understood by investors, and are certainly not utilized to their maximum benefit.
These financial vehicles were designed to encourage retirement savings with tax breaks at time of contribution and at time of withdrawal, just like regular RRSPs.
Investments can represent a major source of income for some individuals and with that income comes a wide variety of tax implications. The good news is that some types of investment incomes are subject to special tax treatment. Understanding how your investments are taxed is an important part of your financial plan. The most common types of investment income most investors will have to deal with are interest, dividends, and capital gains.
Most of us know that having a will is important, but statistics show that what we know about wills and the action we take with wills are very different. According to a survey conducted by CIBC in 2013, more than half of Canadians die without a will. If you die without a will in Canada it is referred to as dying in intestacy. When you die intestate, it is up to government legislation to handle your affairs. Below are some points that should be seriously considered before deciding against a will and how you could expect the estate will be distributed according to the current rules of intestacy.
Joint-Last-to-Die (JLTD) insurance is designed to protect the assets for the beneficiaries of an estate. A JLTD policy is issued on the lives of two people; typically spouses. The policy continues after the death of one spouse, and the benefit is paid on the death of the surviving spouse.
This type of insurance is an effective estate planning tool that provides protection for your estate as well as keeping premium costs lower than traditional insurance approaches.
t’s a question we hear often – can I guarantee my investment? Well, in a sense, yes – the product you’re talking about is called a Segregated Fund.
Segregated funds, usually referred to as “Seg Funds”, are individual insurance contracts that invest in one or more asset, much like a mutual fund. Unlike mutual funds, Seg Funds provide a death and/or maturity guarantee that protects a portion of invested capital (usually between 75% to 100%).
If you’ve been a good saver and contributed religiously to your RRSP, you should be rewarded with a sizable six or seven figure RRSP that would make your retirement that much more enjoyable. The only issue now is – how do you get the money out of the RRSP without paying more tax than you should?
One thing is for sure – don’t wait until you’re near age 71 to do anything. By then, it would be too late.
The whole point of the RRSP is to defer taxes from the time you are in a high tax bracket until you get into a lower tax bracket, thereby saving some tax on your contributions. At some point, however, you must take the money out. The government has made the deadline to be age 71, when you must convert your RRSP into a RRIF or an annuity and start withdrawing money at a government prescribed rate. The problem with waiting until then is that you have little flexibility as to what you can withdraw. If your RRSP is large, the mandatory withdrawal amount may push you into higher tax brackets.
The Liberal Government’s Federal Budget was delivered by Finance Minister, Bill Morneau, on February 27, 2018. There had been much concern and speculation about the direction the budget would take with respect to the taxation of private corporations. This was due to a release of the Department of Finance in July 2017 which contained private corporation tax proposals which addressed areas of concern to the government involving, among other things, business owners holding passive investments inside of their corporation. There was speculation that if these proposals were implemented the effective tax rate on investment income earned by a private corporation and distributed to its shareholders could increase astronomically. Thankfully, the concerns voiced by business and professional groups following the July proposals were effective in moderating the government’s actions.
Owners of private corporations should be concerned about proposed tax changes being explored by 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 led to the release of a consultation paper along with draft legislation last July. Finance asked for input from interested parties and stakeholders during a consultation period that ended in October 2017.
What happens now is anyone’s guess and most likely, we will probably have to wait until the Spring to find out. There were three specific tax planning strategies employed by private corporations that the department was most concerned with: