When all systems are a 'go' you have to sometimes stop and look out the rear view mirror. Often, I see clients who are so busy chasing future dollars but they don't stop to look after the wealth that they have already created. Remember, life is dynamic not static, so once you have your financial plan in place it doesn't mean that task should be off your radar forever. As we chug along we should stop, at intervals, to re-assess the validity of our previous financial commitments. A few things to reflect are:
1) Is my Will still up-to-date? What about my Power's of Attorney, both financial and medical?
2) Is my portfolio working for me? If not, is it time to consider a different strategy....????
3) Is my retirement planning in place? Will my pension be enough? If not how much do I have to supplement?
4) What will happen if I die tomorrow? Do I have enough insurance to ensure my family is not hit by financial hardship? How much is enough?
5) Do I want to help my kids with the cost of post-secondary education? Are they thinking of going to school and staying home or are they planning to leave the family home to attend school?
6) Do I have elder care issues? What is going to happen to my aging parents/grandparents?
So how often is reflection required? I advise my clients to reflect upon these issues on an annual basis. Pick a birthday, end of the year, June 1st (half way through the year), anniversary or some other date that is going to trigger you to remember. All too often these questions get ignored and then when we are faced with issues we are often ill-prepared. After all, spending a few hours every year ensuring the wealth you have already created is well looked after is worth putting aside the potential for a few hours worth of potential future value, isn't it?
Showing posts with label save. Show all posts
Showing posts with label save. Show all posts
Thursday, November 4, 2010
Wednesday, July 7, 2010
Spousal Loans ~ Potentially saving Thousands!!!
I saved a client over $23,000 a year employing this strategy, a YEAR, in taxes!!!!!
OK, so....this is how it works. You have to be married. Your spouse has to be unemployed or have a big variance in income to employ this strategy. It's a form of income splitting that is a way to avoid paying taxes that is completely legal.
Canada Revenue Agency (CRA) rules that a higher income earning wife, for example, cannot gift her husband a large sum of money to invest to take advantage of his lower marginal tax rate. Any investments made on his behalf must come from his earned income, otherwise the income (in the form of interest, dividends and capital gains) is attributable back to the wife. If, however, the lower income spouse does the savings and the higher income spouse pays the bills then it's OK to attribute any income from investments to the lower income earner PROVIDING that he does not invest, annually, more than her makes net of taxes.
If, however, you have a spouse who has no income then you can lend that spouse money at CRA's prescribed rate (currently 1%) and then that spouse can invest and any growth attributed from the investments are taxed at their lower marginal tax rate. Because the spouse is borrowing to invest and is earning income from the investment then the spouse can also write off the cost of borrowing (ie: the interest charges) on their income tax return. The lending spouse, however, must claim the interest as income but at the low rate of 1% the cost is more than offset by the spouses lower marginal tax rate.
OK, so....this is how it works. You have to be married. Your spouse has to be unemployed or have a big variance in income to employ this strategy. It's a form of income splitting that is a way to avoid paying taxes that is completely legal.
Canada Revenue Agency (CRA) rules that a higher income earning wife, for example, cannot gift her husband a large sum of money to invest to take advantage of his lower marginal tax rate. Any investments made on his behalf must come from his earned income, otherwise the income (in the form of interest, dividends and capital gains) is attributable back to the wife. If, however, the lower income spouse does the savings and the higher income spouse pays the bills then it's OK to attribute any income from investments to the lower income earner PROVIDING that he does not invest, annually, more than her makes net of taxes.
If, however, you have a spouse who has no income then you can lend that spouse money at CRA's prescribed rate (currently 1%) and then that spouse can invest and any growth attributed from the investments are taxed at their lower marginal tax rate. Because the spouse is borrowing to invest and is earning income from the investment then the spouse can also write off the cost of borrowing (ie: the interest charges) on their income tax return. The lending spouse, however, must claim the interest as income but at the low rate of 1% the cost is more than offset by the spouses lower marginal tax rate.
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