All posts by Financial Independence Hub

Reassessing your Retirement plans in the COVID-19 era

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By Scott Evans

Special to the Financial Independence Hub  

Living through a global pandemic magnifies the importance of being prepared for the unexpected in your financial future. In light of upcoming months of potential economic instability, whether you have only begun to think about retirement or already have a comprehensive plan, now is the time re-assess your retirement strategy.

The COVID-19 pandemic has added a new level of uncertainty and fear to many retirement portfolios. There is the potential for more volatility or declines in retirement assets resulting in the need to save more prior to retirement, or work longer than originally planned. With that being said, now is not the time to panic. Now is the time to take the time to re-assess, and if necessary, adjust your plans so that your retirement goals stay on track.

Reassessing your plans

A comprehensive financial plan should do a lot more than just forecast returns on your investment assets.  Your retirement plan should have a solid foundation that starts with being prepared for the unexpected. For example, having an emergency fund of three to six months income should provide you with a buffer if you lose your job or face a major expense. Life and disability insurance can protect your family from unexpected health issues that would otherwise derail retirement plans. And creating a will ensures the assets you’ve built up will go to the right people.

Once you’ve got your foundation you can turn to your retirement plan. To get started, you should be considering your future cash flow requirements during retirement, and the assets and sources of income that will be available to you. These may include your personal retirement savings, real estate, as well as pensions and government benefits.

Securing your retirement investments

A well diversified investment portfolio is key to battling uncertain times, both now and in the future. Below are some tips to keep in mind to handle volatility:

  • Your asset allocation should be based on your own retirement goals and your own risk tolerance. The recent market volatility is a good time to reassess your comfort level with your current allocation. If you have been losing sleep at night over the market volatility be sure to share that with your advisor. Continue Reading…

Cross-border death: an administrative nightmare for survivors

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By Elena Hanson

Special to the Financial Independence Hub

How can the estate of your American aunt, who lived in the United States and visited Canada only three times, be considered a resident of Canada? And how can the Canada Revenue Agency tax her estate income while the IRS may or may not be able to collect tax on anything? It gets even more interesting if she held her assets in a living trust or held majority ownership in a private corporation.

I came across this exact scenario and it shows what can happen when moving a trust across the border.

In 2003, Tom and his wife Rose settled their trust. They were both U.S. citizens and residents as well as the beneficiaries and trustees of their trust. Both passed away within months of each other in 2017. Tom died first.

When Rose died, their trust was the beneficiary of annuities and an Individual Retirement Account (IRA), and also consisted of

  • investments in marketable securities,
  • a corporation owning 50% of a condo,
  • the other 50% of the same condo,
  • and some personal property.

Prior to their deaths, Tom and Rose resigned as Trustee, and their niece Anne became the sole Trustee of the U.S. Trust. She also became one of four beneficiaries of the estate upon their passing. Nothing too complex, so far. Right? Except that Anne and the three other beneficiaries happen to be Canadian citizens and residents who never lived in the U.S. or filed U.S. taxes.

What exactly does this mean? Are there tax implications of the trust moving to Canada? The short answer is, yes. Let’s have a quick look at what those implications might be.

First, from the perspective of the Internal Revenue Code (IRC), when Anne became Trustee of the trust in February 2017, the trust moved to Canada but retained something known as “grantor trust status in the U.S.” When Rose died in May 2017, the trust then became a non-resident and no longer held grantor trust status for U.S. tax purposes.

What’s so great about grantor trust status? Typically, moving a trust from the U.S. to Canada would result in U.S. tax on the appreciation of trust assets. Because the trust maintained its grantor status after it was moved to Canada, the trust assets were not treated as sold.

That’s the good news, but here’s the straight goods on how the U.S. tax regime treats the disposed assets held within the trust:
Continue Reading…

What will the Post-Covid world look like?

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By Amit Ummat

Special to the Financial Independence Hub

We’re all talking about how the world will change because of COVID-19 and are already seeing things like more cooking and less takeout, lower profits for more stability, and electronic voting. But what about taxes and tax policy? The global economy is undergoing drastic change, but what will be the repercussions of these changes for tax authorities? We can expect three things: more state involvement, reduced globalization, and universal basic income. Let’s have a look at each of them.

1.) More State Involvement

Governments will be more involved in the economies of their nations and this is where new approaches to tax policy come into play. National governments will no longer tolerate tax minimization by large corporations (including airlines) and then acquiesce to requests for taxpayer-funded bailouts.

Denmark and Poland recently made it policy to exclude tax-haven companies from COVID-19 relief schemes. So, if a corporation fails to pay its fair share of tax and thereby fails to finance public goods and services, it cannot expect state-sponsored loans or wage-subsidy programs. The government of Denmark said companies which pay out dividends, buy back their own shares, or register in offshore tax jurisdictions, will not be eligible for aid programs from the state.

Expect more of this. It means income inequality will be tolerated much less by governments and society, prompting action by tax authorities to ensure that all taxpayers pay their fair share. This is already happening.

We hear echoes from every corner of the world that the share of revenues going to labour and producers are grossly out of whack. In 1960 labour expenses were roughly equal to profits, but now there is incredible disparity with the lion’s share of revenues going to capital owners and only a small fraction going to labour, and that fraction hasn’t even kept pace with inflation.

Don’t expect a Marxist-type revolution where the means of production are usurped by the working class, but there will be an expectation for income allocation to be more equalized between capital and labour.

2.) Reduced Globalization and Stronger Domestic Supply Chains

With this pandemic we have seen what happens when nations aren’t able to control supply chains for essential goods (i.e., ventilators and other PPE). The United States is a perfect example. Globally, we will see supply chains repatriated by nations, and technology allowing for this through AI (Artificial Intelligence), portable manufacturing equipment, and more accessible communications. This will make it easier to impose tax on corporations since much of the activity will take place in a single geographic jurisdiction.

While globalization has produced a myriad of benefits, including a huge reduction of poverty in the world, it’s no coincidence that the growth of the globalized economy has spawned incredible growth to the middle class, such as in China and India. But this has also led to the loss of manufacturing jobs in Western countries. One can argue that globalization is why Western nations have become almost entirely service-based. Continue Reading…

5 tips for finding a Real Estate Agent online

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By Curtis Brown

Special to the Financial Independence Hub

For many of us, the decision to buy or sell property has far reaching financial implications, which is why among other things, we need advice from an experienced real estate agent to help make the process smoother. But how does one go about finding a good agent?

Once you get your mortgage pre-approved, you can start getting serious about hiring a real estate agent. You will find them on the internet, on local papers, yard signs, maybe even through email marketing. Real estate agents are sales professionals whose job is to connect you to a buyer or seller – and they can access a Multiple Listing Service (MLS), which tells them which properties are on the market, and which ones have already sold.

How Do I Find the Best Agent?

Most people hire them online, but to make sure that you find the most qualified person for the job, follow these five expert tips:

1.) Contract somebody you can trust

You’re probably not looking at personality differences when hiring a real estate agent, but keeping in mind that home selling takes weeks, you’re going to spend a lot of time with your new agent. Make sure that you are comfortable with each other, and that you get along. Having knowledge of the market is one thing, but it won’t help things if you end up fighting with your real estate agent.

To help with this, you should conduct interviews with your top candidates to ensure you get the best person to work with.

2.) Get referrals from your own networks

Speak to family and friends about finding a good agent, and maybe get this information from someone who has recently bought or sold a property. Find out what experiences they had and if they liked their real estate agent.

Remember, you want to work with an agent who has experience with clients that are similar to you. So if this is a first time purchase, then your agent must have a lot of experience with first time buyers.

Ideally, your real estate agent should tick the following relevant boxes:

  • Be a Realtor with a capital: This makes them a member of the National Association of Realtors and bides them to their ethics and code of conduct.
  • Certified Residential Specialist (CRS): It shows the agent has undergone additional training in residential real estate.
  • Accredited Buyer’s Representative (ABR): Indicates that the agent has had additional training to help represent buyers in transactions.
  • Seniors Real Estate Specialist (SRES): Has had training for handling transactions for clients aged over 50.

If you decide to contact the agent, ask them as many questions as you need to, about your own transaction.

3.) Search your preferred candidates online

You can learn a lot about them by checking their online presence. Examine their social media accounts and websites as well. If they don’t have a strong digital presence, that might not be a good indication of their skills.  Reviews are another source of information, and this you can get from third party websites. One or two bad reviews is fine in most cases; but if they constantly get bad reviews from every independent reviewer online, move on to another agent.

Also check with your state licensing board to see if an agent you want to hire is licensed or has had disciplinary action taken against them in the past. You can get this information from your local Better Business Bureau.

4.) Meet at least three real estate agents

This is your chance to get a sense of the person you’re trying to hire. Continue Reading…

11 ways Millennials can eliminate Credit-card debt

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Many people find themselves struggling with credit card debt. If you happen to be one of them, replace your stress with an action plan. Becoming debt-free is a liberating experience, but it takes discipline to get there. 

Below, 11 business executives share their take on the best way to rid yourself of credit card debt. Plus, they reveal their own practices when it comes to credit cards.

Treat Credit Cards like Debit Cards

I have no credit card debt at 27! I haven’t used a debit card in over 8 years. I currently have 5 credit cards – Discover IT, Alaska, Delta, Costco, and Target. Each card provides a different benefit and allows me to maximize the rewards and discounts I receive. I have always treated credit cards like a debit account, ensuring I don’t spend more than I have. I don’t make large purchases on credit cards that cannot be paid off at each billing cycle. — Megan Chiamos, Cannabis ERP Software 

Pay off the smallest balance first

Intentionally paying it off with the smallest balance first.  Now with the current situation things are a little different as I need to be mindful to keep some of that money I would have used to double up payments. — Leeanne Gardner, Unbridle It

Understand where every Dollar is going

We have lines of credit that have credit cards attached to them. The balances vary depending on the situation. Cash flow is one of the most challenging aspects of being a small business and I believe it is wise to leverage good credit to cover those gaps. It is extremely important to be aggressive about paying down that debt and knowing where every dollar is going. — Lukas Ruebbelke, BrieBug

It doesn’t matter how broke you are

Before we were married, my wife worked for Sears credit central. Her job was to turn down people with bad credit. As a result of her experience, we have never carried credit card debt during our entire marriage, no matter how broke we were. Makes for both great finances and a happy marriage! — Rick DeBruhl, RickDeBruhl.com

Think of the benefits of being Debt-Free

I don’t have any credit card debt, and to the best of my ability I never will. The interest rates on credit cards are fairly high, so I do my best to pay down my balance every month. If you do this, you’ll rack up all kinds of free points and have a great credit score on top of it. Win-win. — Michael Norris, Youtech

Try Debt Consolidation products

debt consolidation products have been helpful to me in reducing that debt. You have to be very careful though & diligent. That is a solution that only works if you change your habits too. — Emily Beattie, Recruiting Manager Continue Reading…