Building Wealth

For the first 30 or so years of working, saving and investing, you’ll be first in the mode of getting out of the hole (paying down debt), and then building your net worth (that’s wealth accumulation.). But don’t forget, wealth accumulation isn’t the ultimate goal. Decumulation is! (a separate category here at the Hub).

FWB TV: The pro and cons of robo-advisers

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Screen Shot 2016-03-22 at 2.14.19 PMThe latest FWB TV video is now available here at Findependence.TV and at FWB Securities.com: If you’re not a Robo client then perhaps a Robo-Advisor is not for you.

Robo-Advice is automated portfolio management with minimal human interaction.  As the video points out, the growing popularity of robo advisors have made them one of the biggest developments in investing in recent years: they’re easy, simple and cost effective, which makes them especially appealing to younger investors.

In the 4-minute video, host Robin Powell interviews a robo-skeptic: Neil Bage of UK-based Suitable Strategies. He says investing involves a lot more than just filling out questionnaires and doing math and is concerned that if the human advice element is not present, investors may suffer if they miss out on the “seeing the whites of the eyes” type of face-to-face conversations about risk and risk tolerance.

(Mind you, American robo services are more likely NOT to have a human advice component; most robo services in Canada tend to offer at least some human interaction to complement the automated online component.) Continue Reading…

Wealthy investors dodge capital gains bullet but little else to cheer about in Budget

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motley-fool-logoHere’s my latest blog for Motley Fool Canada: Investors dodge bullet on capital gains but little else to cheer about in Budget 2016.

Note the paragraph about the the roadblocks put in the way of two strategies involving life insurance, often used by business owners. You can find more detail about this in yesterday’s Hub guest blog by Robert Kepes: Budget closes two life insurance planning strategies.

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Jamie Golombek

Little good news for the wealthy

In today’s Financial Post, CIBC Wealth’s Jamie Golombek also provides a fine overview of the Budget’s impact on the wealthy.

Continue Reading…

Budget closes two Life Insurance Tax Planning strategies

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Photo.Robert Kepes
Robert Kepes

By Robert G. Kepes, Morris Kepes Winters

Special to the Financial Independence Hub

The March 22, 2016 federal budget closed two tax-planning strategies that involved the use of life insurance and private companies. Here is the first one:

Capital Dividend Account (CDA) Planning

The death benefit from an exempt life insurance policy is tax-free, and the same principle holds true if a private company is the beneficiary of the policy. The life insurance proceeds are added to the CDA of the private company when they can later be paid as a tax-free capital dividend to the shareholder. However, if the company is both the owner and beneficiary of the policy, then the amount that goes into the CDA is only the amount in excess of the adjusted cost base (ACB) of the policy.

For example, if the death benefit is $1 million and the ACB is $100,000, then only $900,000 is available for the CDA. Only $900,000 can be paid out tax-free, while the other $100,000 would be paid as a taxable dividend to the shareholder.

It follows that if the policy owner is not also the corporate beneficiary, then there is no reduction to the beneficiary’s CDA. A common planning strategy was to have ownership of the life policy in a parent holding company with the subsidiary company the beneficiary. This was done especially if the subsidiary was operating an active business and the owner did not want the policy to be an asset of the business that could be attacked by creditors.

Upon the death of the insured, the full death benefit of $1 million would go into the subsidiary’s CDA and be available to be paid out tax-free. Continue Reading…

The Big Red “Soak the Rich” Budget

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Depositphotos_1830058_s-2015My low expectations for Budget2016 apparently weren’t low enough, with a sea of red ink projected as far as the eye can see. Spending, spending everywhere. Not that we should be surprised: the die was cast with the election, this is merely the other shoe dropping.

In this article by Garry Marr, the Financial Post aptly describes it as a “Soak the Rich” Budget. It quotes CIBC Wealth’s Jamie Golombek to the effect “the government is taking away some key tax planning vehicles that allow the wealthy to rebalance their portfolios without incurring a deemed disposition, meaning they will face immediate tax consequences.” As of October 1st, there will no longer be tax-free switches for those in corporate class mutual funds.

And the return of a 15% federal tax credit for Labor-Sponsored Investment Funds is hardly any consolation!

As expected, income splitting for couples with kids under 18 will be eliminated but fortunately, pension splitting remains intact. (sigh of relief!)

Capital gains tax inclusion rate still at 50%

As for the rumoured  sweeping changes to capital gains taxes, you’ll need to dig into the supplementary budget documents that are aimed at measures for those in the new 33% tax bracket. We will update this paragraph as it becomes more clear but based on this report today by Advisor.ca, the capital gains inclusion rate remains at 50% and won’t rise to the feared 67 or even 75%.

GIS sweetened for low-income seniors and couples living apart

Continue Reading…

Federal Budget 2016: don’t expect much relief for personal finances or retirement

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Federal finance minister Bill Morneau selects Canadian-designed shoes for upcoming federal budget

Here’s my latest column in the Financial Post, which provides a look ahead to the federal budget, which will go live at 4 pm Tuesday afternoon.

You can find the column here by clicking on this headline: Why Tuesday’s budget may not hold much good news for your personal finances. It’s also in the print edition of today’s paper.

Here is info on the media lockup, which starts at 9:30 am.

Once the floodgates open on or shortly after 4 pm Tuesday, you should be able to get access to the budget by clicking on the Department of Finance website here. We will update this site as necessary and also watch my Twitter feed @JonChevreau, as we disseminate coverage once available. This feed also shows up on the right side of the Hub’s main page.