Golden Girl Finance
 
Trinity Wealth Partners
Posts (24)
 
 

Insurance

The insurance industry just made some seriously big moves

June 29th, 2016 by ,    photos by

Eligibility now includes HIV-positive individuals & marijuana users

 
 

I’ve been a licensed insurance agent for over 10 years and cannot count the number of times I’ve explained to clients that insurance companies are cautious in certain situations and therefore we sometimes see ratings due to the increased risk compared to someone without the specific condition or area of concern.

It seems that this year, both insurance companies and the federal government who regulates them are changing the view on many situations.  I’ll start with the bigger insurance company changes.

Manulife insures HIV-Positive individuals 

In April, 2016 Manulife was among the first insurance companies to announce they will now insure people who are HIV positive due to the increased life expectancy that has come with advances in technology and research.  If you are between the ages of 30 and 65, and meet other criteria for life insurance, you could be approved.

Marijuana users no longer classifies "smokers"

Another situation I’ve found myself in many times over the years with the tobacco usage question!  Most insurers address this on their application for life insurance as a long question looking for specific details on your current (and past usage).  This question typically includes the usage of cigars, cigarillos, marijuana and various nicotine substitutes. 

Earlier this week, we received notice from various insurance companies including Great-West Life that marijuana users will no longer be classified as smokers!  This means that they can qualify for a standard, non-smoker rate.  They will consider the insureds overall lifestyle so I would think if you are a frequent user it would still have an impact but often people use this socially and on rare occasions. 

If you have an insurance policy and have been classified as a smoker for this reason, please let us know as we can help you with the process to apply for non-smoker rates which would reduce your overall premium if approved.  Note, there are several considerations when applying for this change so it doesn’t guarantee approval.

If you would like more information on any of these, please reach out!

Personal Finance

'Til debt do us part

June 23rd, 2016 by ,    photos by

Financial advice might just be this season's 'it' wedding gift

 
 

Ah yes, long sunny days, flowers in bloom, warm starlit nights. It’s officially wedding season! We’ve already attended two weddings this year and our eldest son and his partner are busy planning their own celebration next year.

Exchanging various versions of “I do,” some couples meticulously plan every last detail while others eschew all the frills and trimmings and run off to city hall with some friends to formally link their lives together. I’ve often wondered if the amount of detail that goes into the wedding planning is an accurate reflection of how much detail goes into planning other aspects of this new shared life, like finances. And who does the planning?

While I suspect the farthest thing from their minds as they share that first dance, or drive off into the sunset, is retirement, Fidelity recently completed a study* which sheds some light onto just this subject.

Some key findings:

  • Most couples (72%) said they communicate “exceptionally or very well” yet almost half (43%) were wrong about how much money their partner makes (10% of them by $25,000 or more).
  • 36% disagreed on the amount of savings they currently owned.
  • 47% disagreed on how much they’ll need for retirement
  • Half of the couples don’t agree on their exact retirement age

The couples in the study were asked for their best piece of advice for newlyweds with more than half agreeing the biggest priority should be to plan as early as possible for retirement (57%).

Some other advice that was shared:

  • Make all financial decisions together (41%)
  • Make a budget and stick to it (39%)
  • Have an emergency fund (38%)
  • Don’t hide your expenses (26%)
  • Make sure your partner knows your complete financial status (24%)

So perhaps a new toaster isn’t the most practical gift for the newly married couple, maybe it’s a contribution to their retirement fund and an introduction to your favourite financial advisor!  

Personal Finance

How to transfer oversea pensions

April 25th, 2016 by ,    photos by

Keep calm, pension on

 
 

When moving to Canada from the UK I am sure the last thing on your mind is “what should I do with my UK Pension Plans?” Hopefully some of the information below will prove useful and informative.

When I first moved to Canada, I saw lots of ads encouraging British expats to move their pensions. However, I’ve been a pension advisor in the UK and know how complicated UK pensions can be. You could have one of several pension types, including: final salary, money purchase, Section 32, 226 or a straight forward personal pension. Each has different pension rules – and both positive and negative attributes. Whether you should transfer your pension depends on a number of considerations. Would it be beneficial or detrimental to transfer your pensions to Canada? What tax benefits would be lost or gained? How would Her Majesty’s Revenues & Customs (HMRC) view a transfer? How easy would it be to transfer your pensions to Canada?

In deciding whether or not to transfer, the first question I would ask is do you think you’re likely to retire here in Canada? If so, having all your finances in one place and in a single currency would certainly be beneficial since currency rates, of course, fluctuate. At the current CDN-GBP exchange rate, for every £1 you get $2. This means that for every £50,000 transferred you would be able to invest $100,000. With the Canadian dollar’s current value, now certainly seems like a good time to consider transferring your pension.

If you’ve decided that you’re ready to consider transferring, you need to be sure you’re not giving up valuable benefits. It’s important to review each of your pension plans with your advisor and assess the advantages or disadvantages of transferring. The transfer must be what HMRC calls a “recognized transfer” and your pension plan administrator must approve an overseas transfer. If you don’t meet these conditions, you might have to transfer between plans within the UK before transferring overseas. The actual UK to Canada transfer process is quite simple – the difficult part is understanding what pensions you have and which ones you should transfer.

Once the transfer has been made you also need to decide how to invest your pension – there are several factors to consider. Having in-depth knowledge of UK pension rules helps me guide you through this process.

There are complexities of UK pensions that I don’t believe comes across from advertising I’ve seen, but with the right help, this process doesn’t have to be difficult. It can be very beneficial to transfer your pensions, but it’s crucial to get the right advice.
 

 

Money Media

8 ways Trudeau's new budget will affect you

April 19th, 2016 by ,    photos by

Student, senior or starting a family- he's got change in mind for everyone

 
 

On March 22, 2016, Liberal Finance minister Bill Morneau delivered the first budget for the Trudeau government. As was widely expected, it followed through on a number of spending initiatives announced in the election campaign as well as massive wealth redistribution efforts. The 2016 budget forecasts a deficit of nearly $30 billion and forecasts are for large deficits annually for the next 5 years, which are expected to add almost $120 billion to Canada’s national debt. The numerous spending initiatives are being covered heavily by the press so I thought I would just focus on the tax and benefit changes that could impact you the most:

Introducing the Canada Child Benefit

The government will be rolling out a new tax-free Child Benefit, starting July 2016, that will replace the current system of child benefits, some of which are income-tested and one of which is paid out universally, regardless of income. The new Canada Child Benefit will be targeted to lower and middle income families; higher income families (generally over $150,000 in family income) will receive less, or none. It is expected that 9 out of 10 families will see higher benefits after tax than they did under the old system.

The new Child Benefit will provide a maximum annual benefit of up to $6,400 per child under the age of 6 and up to $5,400 per child for children aged 6 through 17. The highest benefit will be given to families with less than $30,000 in net income

Eliminating the Children’s Fitness Tax Credit and the Children’s Arts Tax Credit

To help pay for the enhanced Child Tax Benefit, and to simplify the tax code, the government has pledged to cancel the Children’s Fitness and Arts Tax Credits by reducing these to half for the 2016 tax year and to zero for 2017 and beyond. These credits currently give a benefit of up to $150 per child for expenses up to $1,000 for the Fitness Tax Credit and $75 per child for eligible expenses up to $500 for the Children’s Art Credit.

Eliminating income splitting for couples with children

Another policy objective to help pay for the enhanced child benefits is the announced removal of income splitting for couples with children under the age of 18, starting with the 2016 tax year. PENSION income splitting will not be affected by this change.

Changes for students

To reduce dependence on repayable student loans, the budget announced that it will be increasing the amount available as Canada Student Grants by 50 percent as per the following:

  • from $2,000 to $3,000 per year for students from low-income families;
  • from $800 to $1,200 per year for students from middle-income families; and
  • from $1,200 to $1,800 per year for part-time students.

To help new graduates struggling to find optimal employment in the workforce, the government will no longer be requiring repayment of student loans issued under the Canada Student Loans Program until graduates are earning at least $25,000 per year. In addition, there will be a new flat-rate student contribution introduced to determine eligibility for Canada Student Loans and Grants, replacing the application system which assesses student income and financial assets.

To help pay for the enhanced student grants for low and middle income families, the government will be eliminating the Education Tax Credit and the Textbook Tax Credit starting in 2017.

Extending Employment Insurance regular benefits in affected regions

The budget update also includes changes to the Employment Insurance system in various regions across the country. The duration of EI regular benefits will be extended by 5 weeks in the 12 EI economic regions that have experienced the most severe increases in unemployment, up to a maximum of 50 weeks of benefits. These changes go into effect in July 2016 and will be retroactively applied to all eligible claims as of January 4, 2015.

In addition, they have offered up to an additional 20 weeks of EI regular benefits to long-tenured workers in the same 12 EI economic regions, up to a maximum of 70 weeks of benefits.

Changes for Seniors

As expected, the government formalized their intent to roll back the age of eligibility for Old Age Security (OAS) payments, to age 65 from 67, and the Allowance, to age 62 from 60.

The Budget also proposes to increase the Guaranteed Income Supplement (GIS) by up to $947 annually for single seniors with annual income (excluding OAS and GIS benefits) of about $4,600 starting in July 2016.

The Government announced that it will be looking at creating a new Seniors Price Index that more accurately reflects the real-world cost of inflation experienced by seniors, rather than using the broad measure of the Consumer Price Index that measures the broad change in inflation in the economy, excluding food and energy. This new Index will apply to annual increases to OAS and GIS benefits, not CPP or government pensions.

Changes for small business owners

The budget also made clear the government’s intent to “crack down” on small business owners and professionals who were using their corporate structures to potentially reduce or defer tax. While no changes have taken effect yet, disappointingly, a few of these measures may negatively impact strategies we regularly engage in with small business owners and professionals, including:  

  • Possible changes to the tax treatment of investments paid from an operating company to a Holding Company for investment purposes;
  • Limiting the fairly common practice of allowing life insurance policies that had been funded with corporate after tax dollars instead of personal after tax dollars to be paid out tax free to beneficiaries through the company’s capital dividend account.

Taxation of corporate class funds

In a very disappointing, and surprise, move the government announced that they will be disallowing the practice of tax-deferred switching between funds inside a mutual fund corporate class structure. This corporate class structure provides the following tax benefits:

  • Potentially lower distributions;
  • Preferential treatment of distributions or withdrawals;
  • Tax-deferred fund switching and portfolio rebalancing.

After September 2016, an exchange of shares of a mutual fund corporation that results in the investor switching between mutual funds will trigger a capital gain or loss, the same as the sale of individual shares or a mutual fund trust. For clients with non-registered portfolios, any rebalancing decisions will have to be made prior to October 1st, 2016, otherwise they will be taxable.

In many ways, this change impacts seniors the most as they have not had the bulk of their investment years to have benefitted from the tax advantages  of the TFSA and in many cases have built up considerable non registered investment portfolios with after-tax dollars. Similarly, it will impact business owners who have chosen to set up their financial affairs to invest corporately.

If you have any questions or concerns about how this budget update could affect your or your investments, give me a call or email!

The federal government announced its annual budget on March 22, 2016. This article doesn’t contain a complete list of proposals, but outlines the ones that may be relevant to the financial service industry. Please note the announced budget contains proposals that may undergo revisions before becoming law. You may wish to keep in mind that any planning based on proposed rules may need revision should the proposals undergo any changes or are not enacted. Since the government has a majority it’s likely that most proposals will eventually become law.

Tax

Real change... next tax season?

February 18th, 2016 by ,    photos by

Your guide to Trudeau's new tax plans

 
 

There is an old saying that the new broom always sweeps clean. This is certainly true in politics. Last year Trudeau’s Liberals won a decisive victory and promised sweeping changes for Canadians, including in their tax policy.  Here is a look at some of the proposed tax changes based on the specific groups that they will impact:

Middle class taxpayers

The federal second tax bracket (known as the “middle class bracket”) will be lowered from the current rate of 22 percent to 20.5 percent. The middle class bracket includes income between $45,282 and $90,563 and will provide a maximum tax break of $679/year for individuals who earn at the highest end of this range. There were no tax breaks for those earning less than $45,282.

To help pay for this modest tax cut a new tax bracket of 33 percent for annual incomes over $200,000 has been introduced. Previously those who earned over $200,000 were taxed federally at 29 percent. When combined with the provincial tax rate, this will push the effective tax rates on higher income to well over 50 percent in several provinces (Nova Scotia being one of the highest at 54 percent). Several commentators have suggested that the government will likely not collect as much tax revenue as expected from this higher bracket as higher income individuals will have behavioural responses to earn less, or augment their financial positions in other ways, to stay below this limit. Many have also suggested that having a tax bracket north of 50 percent puts Canada at a competitive disadvantage globally. Another, perhaps unintended, consequence is the number of estates of middle-class Canadians that will have at least some portion, and perhaps a fairly large portion, of the estate taxed at this new higher rate. Perhaps some consideration will be given in future to an intended tax increase to higher income individuals punishing middle income Canadians upon their passing. 

Income splitting

The Family Tax Cut, in force for just one year which allowed families with young children and spouses who had a large dispersion in income between them, to reduce taxes by up to $2,000, will be cancelled. This probably has a fairly limited impact as this program was not being utilized by the vast majority of working families.

Do keep in mind that pension income splitting for seniors remains unchanged.

Families with young children

The government announced that it intends to create a new Canadian Child Benefit which is a monthly tax free payment that will replace the current mix of programs that include the Universal Child Care Benefit (a non-income tested program) and the Canada Child Tax Credit & National Child Benefit Supplement (both income tested programs). The new benefit will be income tested and will provide a maximum benefit of $11,800 for families with two children where household income is $15,000 or less. This benefit is clawed back as income increase and will disappear completely when combined family is $200,000 or more.  For combined family income between $90,000 and $140,000, the income will be similar to what was provided under the former UCCB (though it is now a tax free payment.) More details and a calculator to see what your new estimated entitlement will be can be found here: https://www.liberal.ca/realchange/helping-families/

Lower income seniors

As a positive for soon-to-be retirees, the government announced that it will roll back the eligibility age for the Old Age Security (OAS) and the Guaranteed Income Supplement (GIS) to 65.  (It was planned to be phased out to age 67 under the Conservatives).

The Guaranteed Income Supplement, which is an enhancement to OAS that is payable to low income seniors, will be increase by 10 percent.

Another positive development is the introduction of a new “Seniors Price Index” which will ensure that OAS and the GIS payments keep pace with the real world inflation experienced by seniors on things like food, heating and prescription drugs; the costs of which have historically exceeded the basic inflation rate. (It is not currently expected to be linked to CPP.)

Students

The government plans to eliminate the education and textbook tax credits. Combined these credits were $465 per month of full time enrollment and $140 month of part time enrolment. For a typical 2-term school year this means a diminished tax credit of $3,720 per year.

Better news is that an overhaul of the student loan system is likely; ensuring that a graduate will not have to make any repayment until they are earning at least $25,000/year.

First-time home buyers

This program is also likely to be given a facelift. Currently you can only use the program for your first home or if you haven’t owned a home in the preceding 5 calendar years. The government proposes to make the plan more flexible, to better respond to sudden life changing circumstances such as caring for an elderly relative.

Investors

As expected, the government rolled the TFSA contribution limit back to the previous limit of $5,500 and re-introduced indexing (meaning that every four years the limit should see an increase of $500). As of 2016 the allowable lifetime contribution limit is now $46,500 per person. 

If you would like any further details on any of the above, and how they might impact your financial situation, do not hesitate to get in touch.