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David Allard

Leaving a job: changing careers

Many people, who find themselves out of work and with time on their hands, and money in their pockets due to lay-off, start thinking about a career change.

If you weren’t happy with the direction your career was taking, this can be your opportunity to move into a field you are more interested in. Quite often this may mean retraining or further education. In addition to your severance package, there are a number of other sources of funding to help you make a career transition.

Here are some resources you should consider if you are thinking about a career change:

The Lifelong Learning Plan (LLP)

The LLP is a way to draw on your RRSP savings to fund a full-time return to school. As with the Homebuyer’s Plan, this enables either you or your spouse to essentially borrow from yourself by withdrawing funds from your RRSP(s) and paying it back at a later date. The following link provides a good description of the LLP: Lifelong Learning Plan

 

Career Counselling and Skills Assistance

The federal government and many provinces provide counselling services to those looking to change careers, and provide information about training and educational programs as well as funding assistance. Here is a link to a Service Canada site providing a broad range on information: Training and Careers

 

Economic Action Plan

The federal government’s recently released Economic Action Plan also contains a great deal of initiatives and support to financially assist those who find themselves out of work. It also discusses programs to assist workers in retraining and beginning a new career. Information on the Economic Action Plan can be found at: Economic Action Plan.

 

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: Tax Issues

If your parent has become ill, there can be several tax issues that come into play depending on the nature of their illness, their age and the role that family members are playing.

For example, if your parent is unable to complete and file their own tax return, it will have to be completed by someone else. If they are legally capable, they can fill out tax form T1013 – Appointing or Cancelling a Representative, which would allow that person to fill out the form. Where your parent is not in the position to legally appoint a representative, his or her legal representative can file on his or her behalf and a legal Power of Attorney document will have to be provided.

There are various tax benefits available where an individual is considered disabled. For your parent or you to take advantage of these, a Disability Certificate will have to be filed with the tax authorities (The Canada Revenue Agency or CRA). The Income Tax Act has guidelines as to what qualifies as a disability and you should approach a qualified medical practitioner to acquire the Certificate.

Various tax deductions and credits may be claimed by your parent or by you in some cases. The rules relating to these benefits can be rather complex and they are interrelated. Feel free to contact me and I can provide you with some additional information but you should consult a qualified tax professional when planning to make claims.

 

Here is a brief overview:

The Attendant Care Deduction

If your parent qualifies as disabled and requires the services of an attendant to enable them to work, they may be able to claim some or all of the costs of the attendant. The attendant must be at least 18 and not a spouse. The deduction cannot be claimed where the expenses were claimed for the Medical Expense Tax Credit (explained below).

 

Disability tax credit

This credit is available for disabled persons and is 15% of $7,767 or $1,165 for 2014. The credit can be transferred in certain cases. Provincial credits are also available.

 

Medical expense tax credit

A credit for medical expenses not covered by other sources is available. The amount of the credit is for expenses in excess of the lesser of $2,171 or 3% of the person’s net income in 2014. The credit can be transferred in certain cases. Provincial credits are also available.

 

Infirm dependent credit

Where your parent is dependent on you due to physical or mental infirmity, you may be able to claim this credit. The amount of the credit depends on your parent’s net income and is a maximum of $688 in 2014 (15% × $4,533). Provincial credits are also available.

 

Caregiver tax credit

This credit is available to taxpayers who are providing in-home care for a relative over the age of 65. The amount of the credit will be related to the dependent’s net income and is a maximum of $688 in 2014 (15% × $4,533). Provincial credits are also available.

 

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.



When a parent needs full-time care

If it is decided that your parent cannot continue to live at home during his or her illness, you will have to consider the out-of-home options, all of which will have different financial implications. As mentioned earlier, this will probably represent a significant change in your parent’s life and it is very important that he or she is brought into the discussion and consulted if he or she is able, before any decisions are made. Other family members should also be consulted. The potential options are:

Have Your Parent Live In Your Home or the Home of another Child

This may appear to be an attractive option since your parent will have the benefit of continued close family contact. However, this decision needs to be carefully thought out and the various implications considered.

Some of the questions to ask are:

  1. Does your parent want to do this?
  2. What are the costs (renovations, additional living costs, etc.)?
  3. How will the additional costs be shared?
  4. What will be the effect on the current family situation?
  5. What time commitment will be required from family members?

 

Institutional Care for an Ill Parent

Generally speaking there are three types of institutional care:

a. Retirement or independent living

This is where the individual is living in a retirement community but is able to take care of him/herself to a great degree and does not want the stress of taking care of a home and/or doing day-to-day chores such as cooking, laundry and cleaning. This arrangement also provides social interaction with other seniors and appropriate activities.

b. Assisted-living care

With this arrangement the individual not only will have the meals and other services that are provided under independent living but also some medical assistance such as bathing and supervision and/or delivery of medications.

c. Skilled nursing facilities

This is the highest degree of assistance and is appropriate for those individuals who need a high degree of skilled assistance and are not really able to take care of themselves. Some facilities have separate areas exclusively for those afflicted with Alzheimer’s disease.

Not surprisingly, in the three options above, the independent living is the least expensive while the skilled nursing facilities are the most expensive, reflecting the degree of assistance required by the resident.

 

Finding a Suitable Care Facility

Given the large number of facilities available across the country, this will require some research. It is assumed that your parent will want to stay in his or her own community so a local search is the best way to begin. The Internet can certainly be of assistance as well as talking to friends and local medical professionals.

Visit this site to see a helpful retirement home database.

Once some potential facilities have been identified, do a web search. Visit the facility’s website to get a feel for what they do and how they do it. A web search may also bring up independent comments and observations from others.

You might also contact associations such as the Canadian Association of Retired People (CARP), who may have some information about the care facility.

A personal visit to the facility is extremely important. Once it has been determined what sort of care your parent requires, a checklist (below) should be completed to ensure that the individual will be getting the care that he or she needs. Some approaches to take are:

  • make an appointment to have a tour;
  • consider dropping by unannounced at a subsequent time. With a scheduled appointment it is assumed that the facility staff will be ‘putting their best foot forward’ and the impression given may not be indicative of the day-to-day situation.

Here is a check list you can use when shopping around for a facility for your ill parent.

Retirement Home Checklist

 

Questions or comments? http://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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Small business: retirement planning

If you are a small business owner, you may want to consider the transfer of your business at retirement. Many factors such as tax will come into play when a business is transferred and it is very important that you have a plan in place to ensure that the business is transferred to whom you want in an efficient manner.

 

Corporations and Transfer of Ownership Interests

As a shareholder of a Corporation you need to consider your retirement implications. You will want to ensure that should you want to sell your interest, there will be a mechanism in place to ensure that you receive the fair market value. This is of particular interest to shareholders of small private companies where there is no ready market for the shares as there is in the public Corporation sphere. Sole owners of Corporations have various mechanisms available to them to pass on an ownership interest to family members in a tax-efficient manner where no actual outlay of cash is required. A common strategy is the use of the Section 85 Rollover.

 

Buy/Sell Agreements

For those shareholders wishing to sell their shares on retirement rather than pass them on to family members, it is a common strategy to institute a Buy/Sell agreement with the remaining shareholders. Creating a formal Buy/Sell agreement achieves several goals. First, it ensures that there is a ready market for the shares. Finding an outside buyer for private Corporation shares can be difficult. Secondly, it ensures an orderly transition for the remaining shareholders. Where the remaining shareholders have the first right of refusal or obligation to purchase the shares, they can maintain control of the Corporation on their own terms and not have to deal with the potential problems and complications of having a new ‘outside’ shareholder becoming part of the ownership structure. There are various ways to structure and provide funding for a Buy/Sell agreement upon retirement.

 

Deferred Compensations Arrangements

You will probably want to set aside funds for your retirement years in addition to selling your Corporation and there are various measures in place to create retirement savings. Many of these can be done through your Corporation. Each one of these plans has particular features and advantages. The alternatives are:

  • Individual/Group Registered Retirement Savings Plans (RRSPs)
  • Deferred Profit Sharing Plans (DPSPs)
  • Individual Pension Plans (IPPs)
  • Registered Pension Plans (RPPs)
  • Retirement Compensation Arrangements (RCAs)

I can provide you with details on the aspects of these particular plans.

 

Voluntary Retirement Savings Plan (VRSP)

Both the Federal and Provincial governments have become concerned about the amount of retirement savings of Canadians, particularly those who do not have access to traditional pension plans offered by employers. The Federal government recently introduced the Pooled Registered Pension Plan (PRPP) to provide small employers with a flexible savings alternative for employees. The Province of Quebec, as part of their 2012 budget, introduced a similar vehicle for small business owners in their province titled the Voluntary Retirement Savings Plan (VRSP). This will be a mandatory program for employers with five or more permanent employees.

While initial participation for eligible employees is required, those employees may “opt out’ if it doesn’t suit their retirement plans. Employers have the option of making tax deductible contributions on behalf of their employees and any employee contributions will be a tax deduction. As registered plans, VRSPs will be subject to the usual federal restrictions on contributions (a maximum of 18% of earned income up to the statutory limits).

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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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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