Archive for the ‘articles’ Category

Don’t be worried – yet – about tardy T3s

via Don’t be worried – yet – about tardy T3s – The Globe and Mail.

I want to file my taxes and get my refund, but I’m still waiting for tax slips for a few REITs and ETFs that I own. Shouldn’t I have this information by now?

Not necessarily. Different types of tax slips have different mailing deadlines.

T5 slips – which report dividend and interest income – were supposed to be mailed out by the end of February, so you should have these by now.

But T3 slips – which report distributions from incDifferent types of tax slips have different mailing deadlines. (Mackon/Thinkstock)ome trusts (including real estate investment trusts), exchange-traded funds and mutual funds – have a deadline of March 31. So it could be a week or more before they land in your mailbox. T3s for REITs and ETFs are sent by your broker, whereas T3s for mutual funds are mailed directly by the fund company.

Occasionally, tax slips are delayed, however.

My discount broker, BMO InvestorLine, says on its website that it will “make every effort to ensure that tax slips are mailed by the date indicated; however, in the event that an issuer does not supply us with the necessary information in time, tax slips will be processed on an individual security basis and mailed as soon as the information is made available.”

I had a quick look on the websites of three ETF providers – iShares, BMO and Horizons – and the 2014 tax information has already been posted. I also checked the websites of three REITs – RioCan, Canadian REIT and Calloway – and they have also published the 2014 tax breakdowns for their distributions. So if you want to crunch the numbers yourself, you can. But to avoid mistakes on your return, you might want to wait until the official T3 slips arrive.

In the meantime, if you’re using tax software, you can always complete the rest of your return and then spend a couple of minutes entering the information from your T3 slips when they arrive. That way you’ll still get your return in long before the April 30 deadline.

Global News

Depending on your income and circumstances, recent changes to Canada’s tax system could provide you a bit of a break at tax time.

“Always do your research, there are always changes,” said Caroline Battista, senior tax analyst at H&R Block Canada. “Some years the changes are bigger than others, but there’s always changes. Make sure you’re getting back as much as you can.”

Here’s what’s new for the 2014 tax year:

1. Family Tax Cut

A new Family Tax Cut (FTC) was introduced in October 2014. It’s a non-refundable tax credit for eligible couples with children under 18.

Often referred to as income-splitting, the FTC allows a spouse or common-law partner to receive a credit (up to $2,000) based on the tax they would have saved if income had travelled from the higher income earner to the lower (up to $50,000 of taxable income).

“The income doesn’t actually travel to the other’s…

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Why are employees leaving free pension money on the table? – The Globe and Mail.

Fred Vettese is the chief actuary at Morneau Shepell, a human resources and actuarial consulting services firm.

Canadians are forgoing as much as $3-billion annually by not taking full advantage of employer matching contributions within their company defined contribution (DC) pension plans, according to a recent Sun Life Financial report. One has to wonder why employees would pass up free money when there are no strings attached.

Employees in most DC plans have the option of contributing extra, and if they do, the employer makes a matching contribution on their behalf. Sometimes it is a partial match, such as 50 cents for every dollar contributed by the employee, and sometimes it is a full match. Employers offer contribution matching to encourage employees to save more for retirement.

To gain some insight into why a significant percentage of DC participants balk at contributing more, I analyzed data from a number of DC pension plans for which Morneau Shepell does record-keeping. My investigation, which encompassed tens of thousands of employee records, turned up the following:

  • About one third of participants in a given plan do not make an optional contribution, even if it is 100 per cent matched by the employer.
  • Up to two thirds will not make an optional contribution if the basic required contribution they are already making is high, such as 4 per cent of pay or more.
  • One would expect older employees to contribute more since they will get their hands on the employer’s money sooner. But it turns out the impact of age is quite minimal, especially if we correct for salary differences. In some groups, a fifth of the employees in their 50s do not make optional contributions.
  • Salary level has a big impact on optional contribution rates but only up to the average national wage level – the low $50,000s. In one case, nearly half of employees in their mid-40s who were earning under $50,000 opted not to contribute versus only 18 per cent of employees in the same age group who were earning over $50,000.
  • In plans where the range of optional contribution rates is limited, the employee’s decision is practically binary. The vast majority either contribute enough to earn the maximum employer matching or they contribute nothing. This suggests that deciding how much to contribute is not based on ability to pay or on perceived retirement income needs, but rather on whether or not one understands the idea behind the optional matching.

What is noteworthy is that many of the employees who elect not to make optional contributions to their DC plans still contribute to their own Registered Retirement Savings Plans (RRSPs). According to Statistics Canada data, over half of the participants in pension plans, including DC plans, also contribute to RRSPs. A rough estimate is that several hundred thousand DC plan participants are forgoing employer matching contributions in their DC plans and instead make personal RRSP contributions that are not matched.

Read the rest of the article here…

Why are employees leaving free pension money on the table? – The Globe and Mail.

Allen LaRose, EPC, FMA, CIM, FCSI

If there is one thing that I have a real “bee in my bonnet” about, it’s this!

Canadian banks (and other mortgage lenders) tacking on the sale of Mortgage insurance when you get a mortgage from them.  Of course this isnt just for mortgages, they do this will all types of loans.  They will sell you insurance on any and all loans.

They make it so simple, and they are great at selling you on the reasons why you need the insurance.  One little check box and a signature on the credit/mortgage application and BANG! you’ve just bought one of the worst forms of insurance!  As far as I’m concerned, a complete waste of money.  Even worst then the wasting of money… The false sense of security you get thinking your family will be taken care of if something happens to you, when in fact odds are they will get…

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Allen LaRose, EPC, FMA, CIM, FCSI

When the economy (and financial markets) are at it’s extremes, either doing extremely well or extremely poorly, dangerous financial products and ideas become more prevalent.

Portus, Eron Mortgage Corp, Shire International Real Estate Investments, and Arbour Energy and just a few Canadian examples. The one common denominator they share, is they all are catagorized as Exempt Market Securities.

What are Exempt Market Securities?

…when companies (issuers) sell securities such as stocks, options, or bonds, they are generally required to file a prospectus. This document contains material facts about both the issuer and the security. However, in certain cases securities can be sold without a prospectus and these investments are called exempt securities; the sale is called an exempt distribution or a private placement.

What should I know about Exempt Market Securities?

These investments are not for everyone. A prospectus is meant to ensure an investor has key facts to be…

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27 Ways to Get More Sh!t Done | Greatist.

How to Get More Done

Whether we’re overwhelmed by that never-ending to-do list or simply distracted (thanks, Facebook), sometimes it feels like we just can’t get enough out of the day. Until 30-hour days are invented, follow these easy, effective tips for getting more done in the 24 we have.

 

Productivity Hero—Your Action Plan

 

1. Get enough sleep. Whoever coined the phrase “I’ll sleep when I’m dead” didn’t have all the facts straight. Not getting enough Zzz’s could hinder productivity at work, so try to get those recommended seven to nine hours of snooze time [1]!

 

2. Create routines. Make a habit of, well, sticking to habits. Schedule actions like writing emails at a certain time or hitting the gym after work, and try to do them daily. Soon that routine will happen on autopilot.

 

3. Wake up earlier. As long as you’re still able to squeeze in enough sleep, try extending the day by getting up an hour earlier—when it’s still quiet and there are fewer distractions.

 

4. Step away from the inbox. Incoming emails can be a nuisance. Make a habit to only check the inbox at certain times of the day to avoid getting sidetracked with requests and responses.

 

5. Make a daily to-do list. Stay away from huge to-do lists. Instead, create a daily list of realistic jobs to tackle, like folding laundry, scheduling a doctor’s appointment, or paying the cable bill. Break up big goals into micro-tasks, like going to a yoga class over getting six-pack abs, or writing a page over completing a thesis. Soon, the small things will add up to big accomplishments.

Read the rest…. 27 Ways to Get More Sh!t Done | Greatist.

Lowest cost versus best value

Posted: June 1, 2014 in articles

Differences between an RRSP and a TFSA

Since its inception, the goal of an RRSP has been to help Canadians accrue after-tax income to finance their retirement. While a TFSA can also be used to save for long-term needs, the two savings vehicles have important differences:

  1. Tax deductibility – RRSP contributions are tax deductible and reduce your income for tax purposes. In contrast, TFSA contributions are not tax deductible.
  2. Contribution limits – You may be able to contribute more to an RRSP—up to 18 percent of your previous year’s earned income or to an annual RRSP dollar limit ($23,820 for 2013) adjusted for certain amounts (e.g., pension adjustment, past service pension adjustment, and pension adjustment reversal). In 2013, the annual TFSA dollar limit is $5,500. In future years, the annual TFSA dollar limit will be indexed to the inflation rate in $500 increments. This means that the annual TFSA dollar limit could increase in some years but not every year depending on the inflation rate. However, your unused contribution room in either program may be carried forward to subsequent years. RRSP withdrawals (excluding the Home Buyers’ and the Lifelong Learning Plans) are added to your taxable income and are subject to tax at your marginal tax rate at the time of withdrawal. TFSA withdrawals, on the other hand, are not counted as income and are tax-free. You can take out as much as you like at any time for any reason.2 Unlike an RRSP, your TFSA withdrawal will be added to your contribution room in the following calendar year(s).
  3. Withdrawals – RRSP withdrawals could reduce amounts you receive from federal income-tested benefits and tax credits such as the OAS, the GIS, and the Canada Child Tax Benefit. TFSA withdrawals do not impact these government benefits.
  4. Spousal contributions – Attribution rules apply to spousal RRSPs (i.e. total contributions made to your personal and spousal RRSP must not exceed your personal contribution limit), but they do not apply to TFSAs. Although you cannot directly contribute to your spouse’s TFSA as you can with a spousal RSP, you can give your spouse money to contribute to his or her own TFSA without affecting your personal TFSA contribution room.
  5. Maturity date – An RRSP must be collapsed by December 31st of the year in which you turn 71. A TFSA has no plan maturity.

The answer to whether it may be better for you to contribute to an RRSP or to a TFSA, will depend on a number of factors, including whether you will need to access your money on a short-term basis or your expected tax rate at the time of contribution and at the time of withdrawal (i.e. during retirement). For example, if your income level and corresponding tax rate are unlikely to change between now and retirement, a TFSA may be a sensible choice due to its flexibility and because you won’t lose any tax-savings benefits should you need to access your cash along the way. If you’re in a higher-tax bracket now but expect to be in a lower tax bracket in retirement, it may be a good idea to contribute to an RRSP first as the contributions could produce favourable tax benefits now while deferring taxation on your investments to the future. Any extra savings could then be allocated to a TFSA. If you’re just beginning your career, you may not be earning much at present. However, if you foresee your income rising down the road, you could start off with a TFSA now and then contribute to a RRSP later on when you’re in a higher tax bracket—this strategy would allow you to reap an RRSP tax deduction in the year you make the contribution and would create additional TFSA contribution room (in the following year).

Important Estate Planning for Tips You & Your Executor

Choose Your Executor Wisely – Candidate should be capable, responsible, local and impartial.  Importantly the Executor you choose needs to outlive you, otherwise their Executor becomes Your Executor.  A Named Executor Can Renounce their Position, be sure your Executor is willing to serve, which means talk to them in advance.

No Will? – Intestate – Not leaving a will, means leaving a big mess! – Otherwise the Courts decide who gets your hard earned Estate.

What is Probate? The process of the Provincial Court approving the presented Will as authentic and valid.  When an executor of a will applies to probate (in other words prove) the will in British Columbia, he/she must pay probate fees before the court will grant probate.  Similarly, a person applying to court to be appointed an administrator of an estate (where there is no will or no executor willing and able to act) is required to pay probate fees before the court will grant letters of administration.

Calculating Probate Fees – In the province of British Columbia – The amount of probate fees is based on the value of the estate assets. There is an initial filing fee of $208. After the application for probate is filed, but before the court registry will release the grant of probate, the executor is required to pay $6 for every $1,000 or part of $1,000 by which the value of the estate exceeds $25,000 up to $50,000, plus $14 for every $1000 or part of $1000 by which the value of the estate exceeds $50,000. Accordingly, for most estates probate fees are a tax approaching 1.4 percent of the value of the estate.

Strategies to Avoid Probate

Joint or Co-Ownership – Can trigger a taxable disposition/capital gains, if you are joint owner with someone other then a spouse (like your kids)  .  While still alive, you are exposed for their misfortunes.  If they divorce the ex can lay claim to half of your asset. If they go bankrupt, the jointly owned asset could be subject to the bankruptcy.  I feel this is poor estate planning and can do more to you and your beneficiaries then good.

Segregated Funds, the Estate Friendly Investment – Segregated Funds are much easier for your Executor, the value is not submitted for probate, thus avoiding probate fees, avoids delays, and remains private and out of public record.  Segregated Funds (Investment funds offered by a Canadian Life Insurance companies), are an excellent tool to avoid probate fees & delays  Available in Money Market Funds, Bond Funds, Dividend Funds, etc… (like other Investment Funds).  They can be held in a variety of accounts: RRSPs, RRIFs, TFSAs, and Non-Registered accounts.  Chartered banks haven’t told you about them because they can’t offer them!  Lawyers often don’t even know about them, and are unlikely to recommend them as they can greatly simplify Estate Planning, and can preclude the need for complex trust structures.

A Probated Will becomes Public Record – Anyone can pay a fee to obtain a probated copy of your Will.   This may create problems, from disgruntled family members wanting a larger piece, too scam artists looking for the those who just received more money then they know what to do with.