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It-s-Your-Life

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.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.



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About the Author

Jeff Stathopulos, CIM, CFP, Portfolio Manager

Jeff is an advisor and partner with The Navigation Team at Scotia Wealth Management.

He lives in Kelowna with his wife Tanya, their two university bound daughters and their canine kids.

You can contact Jeff by email at [email protected]

Website:  www.yourlifeyourplan.ca

The Navigation Team

Scotia Wealth Management

This column is for information purposes only. It is recommended that individuals consult with their financial advisor before acting on any information contained in this article. The opinions stated are those of the author and not necessarily those of Scotia Capital Inc. or The Bank of Nova Scotia. ScotiaMcLeod is a division of Scotia Capital Inc., Member Canadian Investor Protection Fund.



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The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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