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David Allard

Parenthood: Estates, insurance & taxes

It is now even more important to ensure your loved ones are well looked if anything should happen to you. Here are a few topics to consider helping you prepare for some of the unexpected events that can happen in life.

Life Insurance

If something happened to you tomorrow, how much financial assistance would your family need to manage everyday living expenses – and for how long? Let’s discuss how much coverage you need and what type of coverage is best, as well as ways to save on your insurance costs. For example, if you and your spouse purchase policies together you can save significantly, and some plans will discount your costs by up to 15% if you pay annually instead of monthly. Remember that your premiums are lower when you’re younger, as statistically you’re generally healthier and will likely live a long time. If you are a non-smoker, you can also ask for ‘preferred’ rates, which may also reduce your premiums.

 

Disability Insurance

An employer often offers about two-thirds of your pre-tax employment income as part of a basic disability insurance package. In fact, according to Today’s Parent magazine, a 35-year-old woman is seven times more likely to suffer long-term disability than die before she turns 65. The last thing you want to worry about if you are sick is your finances. If you do not have disability insurance through your employer, ask me for a recommendation.

 

Critical Illness Insurance

This is a type of insurance protection that pays you a lump sum if you are diagnosed with a serious disease like cancer, or have a stroke or heart attack. This lump sum can help cover costs of treatment or child care or household costs as you look after your health.

 

Update Your Wills and Powers of Attorney

It is always important to keep your Will and Power of Attorney up-to-date with changes in your life - especially the birth of a new baby. When you have a legal Will, you control who receives your assets and money. Without a Will, the government decides who gets what. It’s also important to name a guardian for your child in your Will. When choosing a guardian consider these issues:

  • Will they be comfortable with the emotional and financial responsibilities of raising your children?
  • What are their attitudes on how to bring up children – and are they very different from yours?
  • How do they get along with the rest of your family, who will likely want to remain involved with your children and continue spending time with them?
  • If you are thinking of a married couple, how old are they? If something happens to them, who will be the backup guardians for your children? What will happen if they divorce? It may be better to appoint one as the primary guardian.

 

For a more extensive list of things to consider before making your Will, refer to this Will planning checklist. A Will is the most important aspect of your estate plan. Here is an estate planning checklist that provides insight to the areas you should give attention to when planning your estate.

Here is a link to a basic Will: Last Will and Testament

A lawyer should be consulted when a Will is being considered. There are legal and family issues that need to be addressed if this route is taken.

Use this personal record keeper to gather important information that you can share with your loved ones including your executor or executrix.

 

Filing Your Tax Return

According to a recent study, having kids in Canada doesn’t save you much money in taxes. In 2004, couples with family incomes of $40,000 and two kids saved 9% in taxes because of tax implications of supporting children. However, if your income was over $80,000, the difference was only 1% and if your family income was over $120,000, there is no tax break for having a child. However, there are some ways that your tax returns will change. Let’s discuss which tax breaks you can benefit from.

 

Child Care Expenses

If both partners work outside the home, the lower-income spouse can deduct a certain amount of child care expenses. For every child who is under the age of seven at the end of the year, you can claim up to $7,000 for daycare expenses. For every child over seven but under 17, you can claim up to $4,000 for daycare expenses.

Universal Child Care Benefit (UCCB)

This provides a $100 benefit per month per child under six years old. The money is taxed in the hands of the lower-income spouse. You will have to apply for this benefit.

Child Fitness Credit

You probably won’t claim this for an infant but as your child ages, you can claim a credit of up to $500 a year for eligible programs that enhance the child’s fitness.

Five provinces (BC, MB, NS, ON, SK) and one territory (YT) also offer similar credits for provincial/territorial tax purposes. Your advisor can provide further details.

Children’s Arts Tax Credit

As with the Children’s Fitness Credit, this non-refundable credit will probably not be used for an infant but in later years this credit will serve to reduce the after-tax effect of expenses relating to artistic, musical or cultural programs. Up to $500 can be claimed per year per child for eligible programs beginning in the 2011 tax year. This will serve to reduce taxes payable by $75 ($500 X 15%). These amounts will be entered at Line 370 of the T1 General Tax Form.

Note: Where a program is eligible for both the Fitness Credit and the Arts Tax Credit, only one can be claimed.

Four provinces (BC, MB, ON, SK) also provide credits for provincial tax purposes.

Questions or comments? www.yourlifeyourplan.ca

 

This publication is intended as a general source of information and should not be considered as estate, tax planning, personal investment or tax advice, nor should it be construed as being specific to an individual’s investment objectives, financial situation or particular needs. We recommend that individuals consult with their professional financial or tax advisor before taking any action based upon the information found in this publication. The information and opinions contained herein have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. While we endeavour to update this information from time to time as needed, information can change without notice and Dynamic Funds® does not accept any responsibility for any loss or damage that results from any information contained herein.

© 2013 1832 Asset Management L.P. – All rights reserved. Reproduction in whole or in part of this content without the written consent of the copyright owner is forbidden. Snapshots™ is a trademark of its owner, used under license.



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Ailing Parents: Home Care

Your parent’s illness may be such that he or she requires some degree of in-home care. There are various services available.

Your parent may find that due to his or her illness he or she does not have to be hospitalized or in an institution but can remain at home with some assistance. The extent of the assistance will vary. Depending on the circumstances you, your family or friends may be able to provide some of this help and this is an area where you should have an open and frank discussion with the interested parties to determine if this is practical. Your parent’s needs might be quite modest and able to be met without putting unreasonable demands upon anyone else’s time. In other cases you may come to the conclusion that outside help is required. Some of the areas of assistance to be considered are:

 

Meals

Your parent may be in the situation where he or she can manage to make himself or herself breakfast and lunch, but do not feel up to making an evening meal. You and your family may decide that you can do some periodic shopping to keep him or her supplied with essentials as well as provide an evening meal. However, family schedules and proximity may make providing regular meals impractical so a popular alternative could be ‘Meals on Wheels’ or a similar program in your community. For a relatively modest cost, usually about $5, your parent will receive a nutritious, balanced meal delivered to his or her home.

 

Transportation

When you parent is ill but still able to get around you will need to consider the extent of their mobility and needs. Devices such as canes and walkers can be of great assistance to people with reduced mobility. Electrically powered scooters are also available but can be rather expensive (~$2,000). If your parent is relatively mobile, he or she may want to get out periodically to shop or attend doctor’s appointments. You and other family members or friends may be able to arrange a schedule to make these trips. If this is not practical, many communities have organizations that provide transportation services for those with limited mobility as well as volunteer drivers who can take the patient to doctor’s appointments or therapy sessions. If your parent is still able to drive their car, you should look into getting a disabled parking sticker to minimize his or her walking. The appropriate provincial ministry will require a signed statement from a qualified health professional that the applicant qualifies on medical grounds.

 

Home and Garden Care

If your parent is able and prefers to remain at home, he or she will probably require some assistance in maintaining his or her home and garden. You and your family members may be able to arrange an acceptable schedule and list of responsibilities. Required assistance will probably include laundry and cleaning as well as garden maintenance, snow removal, etc. If family and friends are unable to manage these things, there may be local volunteer services available that provide assistance for infirm/disabled persons. You may have to make arrangements with local companies that will require paying commercial rates which must be factored into the budget.

 

Visiting and Monitoring

When your parent is at home, you will want to arrange for visitors to call on a regular basis. This will not only help to ensure that he or she is managing but provide some important social contact.

 

Live-in Assistance

Your parent’s condition may be such that he or she will require more constant care with an attendant in his or her home for most or all of the day. This will be a more expensive option. You should check to see if there are government agencies to assist you in finding and paying for in-home care. The relative costs of having your parent live in a residential facility would need to be considered as well as the emotional factors since many elderly people are attached to their homes and are very reluctant to move to a care facility.

 

Adult Day Care

Many communities offer facilities where seniors can spend their days in a safe, social environment.

 

Respite Care

If you and/or other family members are providing in-home care for your parent, there are Respite Care programs where a qualified attendant will visit periodically to provide care for your parent while the primary caregiver can ‘take a break’. This can be an important service to prevent the build-up of stress for the caregiver(s).

 

Questions or comments? www.yourlifeyourplan.ca

 

This publication is intended as a general source of information and should not be considered as estate, tax planning, personal investment or tax advice, nor should it be construed as being specific to an individual’s investment objectives, financial situation or particular needs. We recommend that individuals consult with their professional financial or tax advisor before taking any action based upon the information found in this publication. The information and opinions contained herein have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. While we endeavour to update this information from time to time as needed, information can change without notice and Dynamic Funds® does not accept any responsibility for any loss or damage that results from any information contained herein.

© 2013 1832 Asset Management L.P. – All rights reserved. Reproduction in whole or in part of this content without the written consent of the copyright owner is forbidden. Snapshots™ is a trademark of its owner, used under license.



Second marriage issues

It is not unusual that one or both of the parties planning to marry are approaching marriage for the second time. There are pluses and minuses to this new situation.

On the plus side, individuals entering a second marriage tend to be somewhat older and, if not necessarily ‘wiser’ than first-time couples, they have a good idea of their needs and wants, and are often in a more secure financial situation. On the minus side, there can be complications in regards to previous spouses and children that require careful consideration when planning the domestic situation (custody, etc.) and estate plans.

 

Children and Custody

If you or your new spouse has minor children from a previous marriage, it is assumed under law that those children will be properly provided for. Child support requirements are generally based on federal/provincial guidelines relating to the relative income of the parents. When becoming remarried, the income of the new spouse is typically not an issue unless the basic support award had been reduced. When minor children are being introduced to a new home life, it is strongly recommended that legal counsel be retained to ensure that the new arrangement is in their best interests, with the agreement of any other parent, and compliant with legal guidelines.

 

Spousal Support

Unlike child support, spousal support is not subject to specific government guidelines and as such each case needs to be judged on the facts. As a general rule, remarriage is not grounds for a person to reduce his or her spousal payment responsibilities to a former spouse. However, the remarriage of the recipient of the spousal support may result in a reduction, suspension or even elimination in spousal support payments depending on the specific situation.

 

Insurance

If you previously had a spouse, it is often the case that you had life insurance on your life with the former spouse as the beneficiary. This may be the case with both group life insurance through your employer and individual life insurance. If you intend your new spouse to be your insurance beneficiary, you need to review your life insurance policies, both group and individual, to ensure the changes are made. Although there have been some interesting court decisions on this matter, in almost all cases it has been determined that the stated beneficiary will receive the insurance proceeds. That means if no action is taken, your former spouse will probably receive your life insurance benefits if he or she is the named beneficiary.

 

Estate Planning

When becoming remarried, it should be a primary objective to renew your Will. If your former spouse was the beneficiary or part beneficiary of your Will, the granting of a divorce will nullify that. Consequently, you will need to consider how you want your estate to be distributed. Your remarriage may be reason to reconsider how your children will be dealt with in your Will as well. Finally, there may be other assets with your former spouse named as the beneficiary including RRSPs, RRIFs and pensions where you need to think about new beneficiary designations.

 

This publication is intended as a general source of information and should not be considered as estate, tax planning, personal investment or tax advice, nor should it be construed as being specific to an individual’s investment objectives, financial situation or particular needs. We recommend that individuals consult with their professional financial or tax advisor before taking any action based upon the information found in this publication. The information and opinions contained herein have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. While we endeavour to update this information from time to time as needed, information can change without notice and Dynamic Funds® does not accept any responsibility for any loss or damage that results from any information contained herein.

 

© 2013 1832 Asset Management L.P. – All rights reserved. Reproduction in whole or in part of this content without the written consent of the copyright owner is forbidden. Snapshots™ is a trademark of its owner, used under license.



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Retirement: Health Issues

Our health is really our greatest asset and maintaining our health is of tremendous importance.

You want to do what you can to ensure that health issues will not jeopardize the enjoyment of your retirement years. There is nothing you can do to completely avoid health problems, but you will try to minimize the problems as much as you can and ensure that problems that occur are dealt with as quickly and efficiently as possible. It is also an important fact that older people require more health care.

Once you retire and lose your workplace health benefits, you cannot necessarily rely on the government to address all of your health issues. You may be faced with large personal costs, particularly in the area of chronic care. Your provincial/territorial health care system covers all medically necessary treatments; however, these programs do not always pay for some health-related issues such as:

  • Drugs (Pharmacare) – all provinces and territories currently provide support to seniors for drugs but the degree of coverage varies across the country.
  • Dental Care – coverage will be limited to medically required procedures (in a hospital).
  • Chronic Care – some provinces offer chronic care but it may be difficult to obtain.

 

Having health insurance can help protect you from some of the potential costs. Some examples are:

 

Group Insurance Plans

If you have been a member of a company group insurance plan, your coverage may extend into retirement for certain health-related costs. However, even if the coverage is provided it is usually a reduced amount. Consult with your employer to determine if coverage is available.

 

Private Health Insurance

You can purchase private health insurance to cover expenses not covered by your provincial/territorial plan.

 

Critical Illness Insurance (CI)

CI pays you a lump sum if you experience one of a specified list of diseases or afflictions. Standard coverage applies to heart attack, stroke, coronary bypass and cancer although coverage for additional issues is available. The proceeds are not taxable and may be used for any purpose.

 

Long-Term Care (LTC)

The cost to live in a nursing home can be substantial; $2,500 per month is not uncommon. LTC insurance makes regular payments (monthly) if you require institutional or at-home care. The benefits begin when it can be shown you cannot take care of yourself as defined by the policy.

 

Powers of Attorney for Personal Care or “Living Wills”

Unless you have completed a Power of Attorney for Property and Personal Care, if you become physically or mentally incapacitated and cannot take care of you own affairs, someone else, typically a family member, will have to approach the court and be appointed as your representative. This can result in several problems. First, where there are several adult children, the decision to name a representative may result in family conflicts and hard feelings. Second, the representatives will be making decisions about your care and future that may not be what you would have intended.

A Power of Attorney (POA) lays out specifically who will be your representative(s) and what powers he or she has. You should seek guidance from a lawyer when completing a Power of Attorney.

 

This publication is intended as a general source of information and should not be considered as estate, tax planning, personal investment or tax advice, nor should it be construed as being specific to an individual’s investment objectives, financial situation or particular needs. We recommend that individuals consult with their professional financial or tax advisor before taking any action based upon the information found in this publication. The information and opinions contained herein have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. While we endeavour to update this information from time to time as needed, information can change without notice and Dynamic Funds® does not accept any responsibility for any loss or damage that results from any information contained herein.

 

© 2013 1832 Asset Management L.P. – All rights reserved. Reproduction in whole or in part of this content.



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About the Author

Jeff Stathopulos, CIM, CFP, Portfolio Manager

After two decades in the financial services industry, Jeff's experience as an advisor and branch manager define his approach to providing customized financial planning, estate planning, and managed income solutions. Key to this approach is a thorough understanding of the unique challenges and goals that exist in every client's life. He is a partner in Navigation Wealth Management.

Jeff holds the Certified Financial Planning and Chartered Investment Manager designations. He lives in Kelowna with his wife Tanya, and their two (almost adult) enterprising children.

 

You can contact Jeff by email at [email protected]

Website:  www.yourlifeyourplan.ca




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The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet presents its columns "as is" and does not warrant the contents.



These articles are for information purposes only. It is recommended that individuals consult with a financial advisor before acting on any information contained in this article. The opinions stated are not necessarily those of Scotia Capital Inc. or The Bank of Nova Scotia. ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF.


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