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Estate Planning

Taxation of Life Insurance New Rules Create Opportunities

In August the Department of Finance published their changes to the taxation of life insurance as previewed in March 2013 Federal Budget.  When final legislation is passed later this year, these changes will result in an updating to the “exempt test” which determines how much tax-deferred value can accumulate in a life insurance policy before it is subject to accrual taxation.  The new rules take effect and will apply to policies issued January 1, 2016 and later.

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A Well-Structured Will

The Canadian income tax system is structured in such a way that taxpayers and their estates are often liable to pay significant taxes upon their death.

These taxes can represent a large proportion of the value of the deceased’s estate and can significantly reduce the amount of residual assets available for distribution to the estate’s beneficiaries.

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Estate Planning Tips for Real Estate Investors

For many Canadians the majority of their wealth is held in personally owned real estate. For most this will be limited to their principal residence however, investment in recreational and real estate investment property also form a substantial part of estates. Due to the nature of real estate, it is important to do estate planning to realize optimum gain and minimize tax implications.

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Reviewing Your Estate Plan

Whether your estate is large or modest, it is always a good idea to review your estate plan regularly to ensure that it continues to meet your objectives and keep up with any changes in your financial or family situation. If you do not have an estate plan, perhaps now is the time to consider implementing one as it is never too soon to start the planning process. The objective of an estate plan is the orderly distribution of one’s assets to intended beneficiaries with a minimum of taxes, expenses, and emotional turmoil.

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Four Things You Need To Know About Inexpensive Term Insurance

The most basic form of insurance and the simplest to understand is Renewable and Convertible Term Insurance. Coverage is provided for a specified term, the policy renews automatically at the end each term period until the policy expires, most commonly at age 85. This plan has the lowest initial cost at entry, but don’t be mesmerized by the low cost because on renewal you will pay a substantial increase. If, however, you become uninsurable before the end of the term period you will have no other option but to renew or convert it to a permanent plan if you want to keep the coverage.

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How Much Risk Can You Tolerate? Part 3 of 3

Over the past two months we have examined some of the risks that challenge most of us. It is almost impossible to avoid risk entirely. Knowing where the pitfalls lie and planning for them will certainly help. You might, however, want to consider shifting the risk to someone else, like a life insurance company. Life insurance companies are in the risk business and they have products and services that can assist you in dealing with risk. Some of these are as follows:

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How Much Risk Can You Tolerate? Part 2 of 3

Last month we discussed how much risk you could tolerate depending on your life situation. This month we will consider other risks to which each of us are exposed:

Market Risk: We all have experienced the effects of a volatile market and the havoc it can cause both financially and emotionally. Since mid 2008 the market has experienced “saw tooth” rates of return and many have fled the equity markets in an attempt to avoid this volatility and the risk that comes with it. For those that were in the process of retiring and were still in equity funds, many had to put retirement on hold.

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How Much Risk Can You Tolerate? Part 1 of 3

Will Rogers, the American humorist, when talking about the investment schemes in North America at the time, said “I am less concerned with the return on my money, than I am with the return of my money”. Will was aware of the truth that the higher the potential rates of return on an investment, the greater chance of loss.

The dictionary defines risk as the exposure of someone or something valued to danger, harm or loss. If that something of value is your financial security the question is “How much risk can you tolerate?” The answer to this question for each of us depends on a number of different factors. A few of these are:

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Preserving an Estate

You’ve done a good job accumulating assets and establishing your financial security.  These assets will funnel down to the next generation, but at what value? What will the tax consequences be?  Will these assets pass directly to your intended beneficiaries, or will they be stuck in probate?  What impact will it have if your spouse dies first?

Life insurance can be a very effective tax and estate solution to ensure that the value of your estate is maximised.  You’ve worked hard to create this asset – take the steps to protect it.  Let’s discuss options to preserve your estate.

 

©iStockphoto.com/Catherine Yeulet

 

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