Insurance Planning

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Insurance is often thought of as an optional extra in the area of personal and business finance – a “nice to have” which can offer protection if things go wrong but certainly not as an important asset in its own right. However, it’s true to say that intelligent insurance planning is a strategy which can protect the vital asset of your ability to earn an income – perhaps the most important asset that you have.

Of course, with so many different types of insurance policies out there, the key challenge lies in working out exactly what type of insurance can add the most value to your portfolio and offer you the most benefit.

If you are serious about ensuring robust protection for your finances and your family, here are the three main areas of insurance that you should consider:

Life insurance

Term insurance offers temporary protection of around 10 to 30 years, usually with an option to renew or convert your policy at the term end. On the other hand, permanent insurance lasts for a lifetime and often offers a death benefit which is payable to your beneficiaries.

Living benefits

This term covers a range of insurance policies, as follows:

  • Disability insurance offers income protection against injury or illness which means that the policyholder cannot work and earn an income.

  • Critical illness insurance covers many common illnesses such as cancer and strokes and offers lump sum payments upon diagnosis.

  • Long term care insurance is often used in later life to insure against the possible need of becoming dependent upon others for your care and can pay for care facilities or care providers.

Although many individuals receive some form of living benefit from their employer, it is recommended that they enhance this policy to ensure that they benefit from an appropriate level of cover which suits their income and financial needs

Understanding your insurance values

It could be said that your personal values dictate the type of insurance that you take out, reflecting what is important to you in their professional and personal lives and how you best want to protect such assets.

The key to smart insurance planning is making sure that your insurance portfolio perfectly matches your financial and life priorities and objectives.

Talk to us, we can help with what makes the most sense for your situation.

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The Benefits of Working With An Employee Benefits Specialist

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We understand that when looking for employee benefits, you’re looking to do so cost-effectively. But it’s essential to make sure you work with an employee benefits specialist, no matter what the price tag is on your benefits package. 

We’ll explain how an employee benefits specialist differs from a generalist and why working with an employee benefits specialist is so important.

How does an employee benefits specialist differ from a generalist?

You may have approached financial advisors who can handle various tasks, such as selling you insurance products, investments, and employee benefits. However, this kind of financial advisor would be considered a generalist, and they lack in-depth knowledge of how complex employee benefits can be.

An employee benefits specialist is the opposite of a generalist. They are licensed advisors who have dedicated their practice to employee benefits. Employee benefits specialist prides themselves on understanding all the nuances associated with employee benefits. A specialist undergoes further training and acquires in-depth knowledge about employee benefits. 

Why is it essential to work with an employee benefits specialist?

Employee benefits plans are complex, and your business could be at risk if your employee benefits program isn’t administered correctly. As you know, employee benefits form a part of an employee’s compensation package. 

These are the benefits of working with an employee benefits specialist:

  • We help provide the best employee benefits suited for you and your business. 

  • We provide a smooth employee enrollment program so your employee saves time. 

  • We help your employees with questions about their employee benefits program. 

  • We educate your employees about how the benefits program works for them. 

  • We know how to deal with complicated benefits claims. 

  • We can explain how to reduce the risk of any liabilities associated with offering employee benefits programs—for example, offering mandatory enrollment versus voluntary enrollment in a benefits program. You can run into issues with voluntary enrollment if your enrollment level is below the required threshold.

  • We can explain how your benefits program can work for different employment situations, such as seasonal and contract workers.

The bottom line is that working with an employee benefits specialist means you’ll have access to a well-designed and administered benefits plan. 

How can I get started working with an employee benefits specialist?

Ready to make a move to working with an employee benefits specialist? We’re here to help you get the benefits program to attract and retain employees. Call us today to get started!

Contact us

Is it Time for Your Insurance Audit?

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Has it been awhile since you last looked at your insurance portfolio?

Are you a little vague in your recollection of all the coverage you have and why you have it?

Are you uncertain as to whether or not your portfolio reflects your current situation?

Just like going to the dentist for regular checkups is a necessary evil, reviewing your financial plan and products on a regular basis is also recommended. Circumstances can change over time and making sure your protection is keeping pace is a worthwhile exercise.

A comprehensive audit should review the following:

Is the total death benefit of your life insurance appropriate to your needs? A current capital needs analysis can help to determine this.

If your current coverage is renewable term insurance should the policy be re-written before it renews at a substantial increase? Premiums for new coverage can be significantly lower than the renewal premium of an existing policy.

Is your need for life insurance permanent? If that is the case, you should ensure you have at least some of your needs covered by a permanent plan.

Are you nearing the end of the conversion period on your term policy? If yes, this may be the time to consider converting to permanent insurance.

Is your disability protection in place consistent with your current income? If you have changed jobs does new group coverage impact your personal plan?

Are the beneficiary designations still valid for your current situation? Has there been a re-marriage that may require changing the beneficiary or ownership of the current policy?

In addition, the following are important to note:

  • If your policy is a Universal Life policy with cash value are the investment options still appropriate to market conditions and/or your risk tolerance?

  • If the policy is a Whole Life policy are the dividends adequate to now fund the premium should you wish to take a premium holiday?

  • If your policy was assigned to a lender as collateral for a loan and that loan has been repaid make sure the assignment has been removed.

Does your existing policy qualify for a reduction in premium?

  • If you have you stopped smoking you may qualify to have the premiums reduced to those of a non-smoker.

  • If your policy was issued with a substandard extra premium and your health has improved you may qualify to have the rating removed.

  • If your policy was rated as a result of participation in hazardous activities, e.g. flying, mountain climbing, heli-skiing this rating can be removed if you no longer are active in these activities.

If the current policy is for business purposes the following should also be reviewed:

  • If the policy was to fund a Shareholders’ Agreement or Partnership Agreement, does the amount and type of coverage still satisfy the terms of the agreement?

  • Are the ownership and beneficiary provisions of the policy still valid for Capital Dividend Account planning?

Reviewing your coverage on a regular basis is recommended. Connect with me if you think it would be beneficial to arrange a time to do an Insurance Audit. As always, please feel free to share this information with anyone that may find it of interest.

Copyright © 2020 FSB Content Marketing – All Rights Reserved

Tax Tips You Need To Know Before Filing Your 2022 Taxes

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Tax Tips You Need To Know Before Filing Your 2022 Taxes

This year’s tax deadline is May 1, 2023, as April 30 falls on a Sunday this year. It’s important to make sure you’re claiming all the credits and deductions you’re eligible for. In this article, we’ll provide you with tips to help you maximize your tax refund and ensure you’re taking advantage of all the available tax benefits.

Canada Workers Benefit

The Canada Workers Benefit (CWB) is a refundable tax credit designed to help low-income working families and individuals. The credit is made up of two parts:

  • The basic amount

  • A disability supplement (if you qualify).

To determine whether you qualify for the tax credit, you’ll need to consider your net income and where you live. The CRA website provides full details about the net income qualification amounts.

The maximum amounts you can qualify for are as follows:

  • The maximum basic amount is $1,428 for single individuals and $2,461 for families.

  • The maximum amount for the disability supplement is $737 for single individuals and $737 for families.

Claiming Home Office Expenses Due To COVID-19

You can still claim home office expenses if you’re not self-employed but worked from home due to the pandemic. You can:

  • Claim the temporary flat amount if you worked more than 50% of the time from home for at least four consecutive weeks in 2022. You can claim $2 for each day worked from home, up to a maximum of $500. No paperwork or forms are required!

  • Use the detailed method and claim the actual amounts. In this case, you’ll need supporting documentation, plus a completed and signed T2200S form from your employer. You can claim various applicable expenses, including home Internet access fees.

The Tax Deduction for Zero-Emissions Vehicles

A capital cost allowance (CCA) is a tax deduction that helps cover the cost of an asset’s depreciation over time. The CRA created two new capital cost allowances, which apply to zero-emission vehicles bought after March 18, 2019.

They are as follows:

  • Class 54. This class is for motor and passenger vehicles, excluding taxis or vehicles used for lease or rent. It has a CCA rate of 30%. For 2022, capital costs will be deductible up to $55,000, plus sales tax. This amount will be reassessed every year.

  • Class 55 is for leased and rented vehicles or taxis. The CCA rate is 40%.

Return Of Fuel Charge Proceeds To Farmers Tax Credit

You may be eligible for this tax credit if you are either self-employed or part of a farming partnership in Alberta, Manitoba, Ontario and Saskatchewan.

This tax credit aims to help farmers offset the high cost of the carbon tax.

Eligible Educator School Supply Tax Credit

You can claim up to $1,000 of eligible supplies and expenses if you qualify for the educator school supply tax credit.

The tax credit rate for the 2022 tax year is 25%, with a maximum credit of $250.

Need help?

Do you qualify for a credit or deduction? Call us – we’re here to save you money on your taxes!

The Best Way to Buy Mortgage Insurance

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Before buying insurance from your bank to cover your mortgage, understand the difference between self owned mortgage life insurance and bank owned life insurance. The key differences are ownership, premium, coverage, beneficiaries and portability.

Ownership:

  • Self: You own and control the policy.

  • Bank: The bank owns and controls the policy.

Premium:

  • Self: Your premiums are guaranteed at policy issue and discounts are available based on your health.

  • Bank: Premiums are not guaranteed and there are no discounts available based on your health.

Coverage:

  • Self: The coverage that you apply for remains the same.

  • Bank: The coverage is tied to your mortgage balance therefore it decreases as you pay down your mortgage but the premium stays the same.

Beneficiary:

  • Self: You choose who your beneficiary is and they can choose how they want to use the insurance benefit.

  • Bank: The bank is beneficiary and only pays off your mortgage.

Portability:

  • Self: Your policy stays with you regardless of your lender.

  • Bank: Your policy is tied to your lender and if you change, you may need to reapply for insurance.

We’ve created an infographic about the difference between personally owned life insurance vs. bank owned life insurance.

Talk to us, we can help.

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Federal Budget 2023 Highlights

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On March 28, 2023, the Federal Government released their 2032 budget. This article highlights the following financial measures:

  • New transfer options associated with Bill C-208 for intergenerational transfer.

  • New rules for employee ownership trusts.

  • Changes to how the Alternative Minimum Tax is calculated.

  • Improvements to Registered Education Savings Plans.

  • Expanding access to Registered Disability Savings Plans.

  • Grocery rebate.

  • Deduction for tradespeople tool expenses.

  • Automatic tax filing.

  • New Canadian Dental Care Plan.

Amendments To Bill C-208 Intergenerational Transfer Introduces Two New Transfer Options

Budget 2023 introduces two transfer options associated with the intergenerational transfer of a business:

  1. An immediate intergenerational business transfer (three-year test) based on arm’s length sales terms.

  2. A gradual intergenerational business transfer (five-to-ten-year test) based on estate freeze characteristics.

For the three-year test, the parent must transfer both legal and factual control of the business, including an immediate transfer of a majority of voting shares and the balance, within 36 months. The parent must also transfer a majority of the common growth shares within the same time frame. Additionally, the parent must transfer management of the business to their child within a reasonable time, with a 36-month safe harbour. The child or children must retain legal control for 36 months following the share transfer, and at least one child must remain actively involved in the business during this period.

For the gradual transfer option, the conditions are similar to the immediate transfer, but with a few differences. The parent must transfer legal control, including an immediate transfer of a majority of voting shares and the balance, within 36 months. They must also transfer a majority of the common growth shares and the balance of common growth shares within the same time frame. As well, within 10 years of the initial sale, parents must reduce the economic value of their debt and equity interests in the business to 50% of the value of their interest in a farm or fishing corporation at the initial sale time, or 30% of the value of their interest in a small business corporation at the initial sale time. The child or children must retain legal control for the greater of 60 months or until the business transfer is completed, and at least one child must remain actively involved in the business during this period.

The extended intergenerational transfer now applies to children, grandchildren, stepchildren, children-in-law, nieces and nephews and grandnieces and grandnephews.

The changes apply to transactions that occur on or after January 1, 2024. If the election is made, the capital gain reserve period is extended to ten years, and the limitation period for assessing a return is extended to three years for an immediate transfer and ten years for a gradual business transfer.

New Rules for Employee Ownership Trusts

The employees of a business can use an employee ownership trust (EOT) to purchase the business without having to pay the owner directly to acquire shares. Business owners can use an EOT as part of their succession planning.

Budget 2023 introduces new rules for using ownership trusts (EOTs) as follows:

  • Extending the five-year capital gains reserve to ten years for qualifying business transfers to an EOT.

  • A new exception to the current shareholder loan rule which extends the repayment period from one to fifteen years for amounts loaned to the EOT from a qualifying business to purchase shares in a qualifying business transfer.

  • Exempts EOTs from the 21-year deemed disposition rule that applies to some trusts. This means that shares can be held indefinitely for the benefit of employees.

Clean Energy Credits

The upcoming Budget 2023 is set to introduce a series of measures aimed at encouraging the adoption of clean energy. These measures include several business tax incentives such as:

  1. Clean Electricity Investment Tax Credit: This is a refundable tax credit of 15% for investments in equipment and activities for generating electricity and transmitting it between provinces. The credit will be available to new and refurbished projects starting from March 28, 2023, and will end in 2034.

  2. Clean Technology Manufacturing Credit: This tax credit is worth 30% of the cost of investments in new machinery and equipment for processing or manufacturing clean technologies and critical minerals. It applies to property acquired and put into use after January 1, 2024. The credit will be phased out starting in 2032 and fully eliminated in 2034.

  3. Clean Hydrogen Investment Tax Credit: It offers a refundable tax credit ranging from 15% to 40% of eligible project expenses that produce clean hydrogen, as well as a 15% tax credit for certain equipment.

  4. Clean Technology Investment Tax Credit: This tax credit will be expanded to include geothermal systems that qualify for capital cost allowance under Classes 43.1 and 43.2. The phase-out will begin in 2034, and it will not be available after that date.

  5. Carbon Capture, Utilization and Storage Investment Tax Credit (CCUS): The budget broadens and adjusts specific criteria for the refundable Investment Tax Credit (ITC) for CCUS. Qualified equipment now includes dual-purpose machinery that generates heat and/or power or utilizes water for CCUS and an additional process, as long as it meets all other requirements for the credit. The expense of such equipment is eligible on a proportionate basis, based on the anticipated energy or material balance supporting the CCUS process during the project’s initial 20 years.

  6. Reduced rates for zero-emission technology manufacturers: The reduced tax rates of 4.5% and 7.5% for zero-emission technology manufacturers will be extended for three years until 2034, with phase-out starting in 2032. The eligibility will expand to include the manufacturing of nuclear energy equipment and processing and recycling of nuclear fuels and heavy water for taxation years starting after 2023.

  7. Lithium from brines: Allow producers of lithium from brines to issue flow-through shares and expand the Critical Mineral Exploration Tax Credit’s eligibility to include lithium from brines.

Changes To How Alternative Minimum Tax Is Calculated

Budget 2023 proposed several changes to calculating the Alternative Minimum Tax (AMT), including the following:

  • The capital gains inclusion rate will increase from 80 percent to 100 percent, while capital losses and allowable business investment losses will apply at a rate of 50 percent.

  • The inclusion rate for employee stock option benefits will be altered to 100 percent, and for capital gains resulting from the donation of publicly listed securities, it will be modified to 30 percent.

  • The 30 percent inclusion rate will also apply to employee stock option benefits if any deduction is available because underlying shares are also publicly listed securities that were donated.

  • Certain deductions and expenses will now be limited to 50 percent, and only 50 percent of non-refundable credits (excluding a special foreign tax credit) will be permitted to reduce the AMT.

  • The AMT tax rate will increase from 15 percent to 20.5 percent.

  • The AMT exemption will rise from the present allowable deduction of $40,000 for individuals to an amount indexed to the fourth tax bracket, expected to be $173,000 in 2024.

  • The AMT carryforward period will remain unaltered at seven years.

Improving Registered Education Savings Plans (RESPs)

Budget 2023 introduces the following changes to RESPs:

  • As of March 28, 2023, beneficiaries may withdraw Educational Assistance Payments (EAPs) up to $8,000 (from $5,000) for full-time programs and $4,000 (from $2,500) for part-time programs.

  • Individuals who withdrew EAPs before March 28, 2023, may be able to withdraw an additional EAP amount, subject to the new limits and the plan terms.

  • Divorced or separated parents can now open joint RESPs for one or more of their children.

Expanding Access to Registered Disability Savings Plans

Qualifying family members, such as a parent, a spouse, or a common-law partner, can open an RDSP and be the plan holder for an adult with mental disabilities whose ability to enter into an RDSP contract is in doubt and who does not have a legal representative.

Budget 2023 announces the government’s intention to extend the provision that allows this until December 31, 2026. To further increase access to RDSPs, the government also intends to expand the provision to include adult siblings of an RDSP beneficiary.

Grocery Rebate

The Budget 2023 will implement the Grocery Rebate, which will be a one-time payment managed through the Goods and Services Tax Credit (GSTC) system. The maximum amount that can be claimed under the Grocery Rebate is:

  • $153 for each adult

  • $81 for each child

  • $81 for a single supplement.

The implementation of the Grocery Rebate will be gradual and will follow the same income thresholds as the present GSTC regulations.

Deduction for Tradespeople’s Tool Expenses

Budget 2023 increases the employment deduction for tradespeople’s tools to $1,000 from $500. This is effective for 2023 and subsequent taxation years.

Automatic Tax Filing

The Canada Revenue Agency (CRA) will pilot a new automatic filing service for Canadians who currently do not file their taxes to help them receive certain benefits to which they are entitled.

The CRA also plans to expand taxpayer eligibility for the File My Return service, which allows taxpayers to file their tax returns by telephone.

Canadian Dental Care Plan

In Budget 2023, the federal government is investing in dental care for Canadians with the new Canadian Dental Care Plan. The plan will provide dental coverage for uninsured Canadians with annual family incomes of less than $90,000, with no co-pays for those under $70,000.

The budget allows the CRA to share taxpayer information for the Canadian Dental Care Plan with an official of Employment and Social Development Canada or Health Canada solely to administer or enforce the plan.

Wondering How This May Impact You?

If you have any questions or concerns about how the new federal budget may impact you, call us – we’d be happy to help you!

Ontario 2023 Budget Highlights

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Ontario 2023 Budget Highlights

On March 23, 2023, Ontario’s Minister of Finance delivered the province’s 2023 budget. Here are some of the highlights.

No Changes To Corporate or Personal Tax Rates

Budget 2023 did not change Ontario’s corporate or personal tax rates.

Corporate Tax Credits

Budget 2023 introduces a 10% refundable Manufacturing Investment Tax Credit for Canadian-controlled private corporations (CCPCs). This tax credit applies to qualifying capital investments related to manufacturing or processing, with the goal of helping Ontario manufacturers lower their costs and become more competitive.

The budget confirms extending eligibility for Ontario’s film and television tax credits to productions distributed exclusively online.

Budget 2023 also confirms that the province will align with the federal government’s increase in the upper limit for the small-business deduction phase-out range from $15 million to $50 million. This change will take effect for taxation years beginning on or after April 7, 2022.

Consequently, the small-business deduction will only be reduced to zero once a Canadian-controlled private corporation (CCPC) and its affiliated companies have a combined taxable capital of $50 million or more.

Indirect Tax Changes

As of July 1, 2023, a single 12% tax will be applied to wine and wine coolers sold in off‐site winery retail stores. This includes wine boutiques. This tax will replace the four separate tax rates currently applied and is expected to result in an overall tax reduction of about $4 million per year.

Increasing Healthcare Options

Budget 2023 commits $200 million to help the healthcare workforce grow, including training more nurses and helping foreign-trained nurses and doctors attain accreditation in Ontario. In addition, $569 million will be spent to expand home care options.

To help address backlogs, an additional $72 million has been committed to providing OHIP-covered surgeries at community surgical and diagnostic centres.

Over three years, $425 million has been committed to mental health services.

Supporting Communities

The Guaranteed Annual Income System, designed to assist low-income seniors, is set to expand. With an increase in the private income threshold, approximately 100,000 more seniors will be eligible to benefit from the program starting July 2024. The Ontario 2023 budget includes plans to adjust the benefit annually to keep pace with inflation.

Budget 2023 contains $22 billion to build more schools and childcare spaces.

Supporting The Economy And Infrastructure

Ontario is investing an additional $3 million this year to help junior mining companies finance mineral exploration and development.

Budget 2023 commits $224 million to build and upgrade training centres in Ontario and $75 million to the Skills Development Fund over the next three years. The Skills Development Fund aims to help employers address challenges related to hiring, training or retaining workers.

Budget 2023 also includes funding to help ensure Ontario has the infrastructure it needs:

  • $27.9 billion will be spent to support highway expansion and rehabilitation project planning and construction.

  • Over the next ten years, $70.5 billion will be spent on transit, strongly emphasizing supporting GO transit and expanding the Toronto subway system.

We can help!

Wondering how the budget will impact you? Reach out to us – we’re here to answer any questions!

Get Your Corporate Dollars Doing Double Duty

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Owners of very successful private corporations are well aware of the importance of cash flow.  Many are protective of how they allocate corporate capital so that business ventures are adequately funded and investment opportunities are not missed.  

The Immediate Financing Arrangement offers an opportunity to provide life insurance coverage and accumulate wealth on a tax-advantaged basis without impairing corporate cash flow.

What is an Immediate Financing Arrangement (IFA)?

An IFA is a financial and estate planning strategy that:

  • Combines permanent, cash value life insurance with a conservative leverage program allowing the dollars allocated to the life insurance premiums to do double duty by still being available for business and investment purposes;

  • In the right circumstances and when structured properly so that all possible tax deductions are used, an improvement in cash flow could result.

Who should consider this strategy?

IFA`s are not for everyone. For those situations that best match the necessary criteria, however, significant results can be achieved. The best candidates for an IFA usually are:

  • Successful, affluent individuals who are active investors or owners of thriving privately held corporations who require permanent life insurance protection;

  • Of good health, non-smokers, and preferably under age 60;

  • Enjoying a steady cash flow exceeding lifestyle requirements;

  • Paying income tax at the highest rate and will continue to do so throughout their life.

How does it work?

  • An individual or company purchases a cash value permanent life insurance policy and contributes allowable maximum premiums;

  • The policy is assigned to a bank as collateral for a line of credit;

  • The business or individual uses the loan advances to replace cash used for insurance purchase and re-invests in business operations or to make investments to produce income.  This is done annually;

  • The borrower pays interest only and can borrow back the interest at year end;

  • At the insured’s death the proceeds of the life insurance policy retire the outstanding line of credit with the balance going to the insured’s beneficiary;

  • If corporately owned, up to the entire amount of the life insurance death benefit is available for Capital Dividend Account purposes.

Proper planning and execution is essential for the Immediate Financing Arrangement. However, if you fit the appropriate profile, you could benefit substantially from this strategy.

If you wish to investigate this strategy and whether it can be of benefit to you, please contact me and I would be happy to discuss this with you. As always, please feel free to share this article using the sharing buttons.

Copyright @ 2018 FSB – All Rights Reserved

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Retirement Planning

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Most of us understand the benefits of sensible retirement planning. Still, it doesn’t feel relatively straightforward when it comes to creating your retirement strategy and putting it into effect. The reality is that, while there are lots of variables to consider, it isn’t as challenging to create an effective plan for retirement as you may think.

Firstly, let’s consider the merits of a retirement plan. Firstly, the plan will aid you in setting clear goals for your retirement, such as the age that you want to finish work and what you want your retirement to look like in terms of lifestyle. Secondly, it will help you establish how much you need to save to have a retirement that meets your objectives. Thirdly, a plan will allow you to choose your investment options wisely.

How you know how much you need to save is a common question. This depends on three factors:

  • Your age. It makes sense that starting to save for retirement when you are younger means that you need to save less money than starting later in life.

  • Benefits available to you. There is a range of federal government benefits that you might be eligible for, such as the Canada Pension Plan or Old Age Security.

  • Your plans for your retirement will inevitably affect how much you need to save to fund it.

If you haven’t started saving for your retirement yet or have less in your retirement savings plan than you would like, take a look at our top tips to accelerate your savings.

  • Make the most of RRSPs and TFSAs to minimize your tax bill and make your money grow faster.

  • Take advantage of any pensions or savings plans that your workplace offers, as your employer’s contributions can add extra value to your fund.

  • Look at your spending habits to identify opportunities to cut back outgoings and save more.

  • Think about putting spare money into your retirement fund.

Taking steps to create an effective retirement plan is a decision that will pay off as you approach later life, allowing you to have the savings for the retirement that you deserve.

Talk to us; we can help.