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Retirement Planning & Income Needs
Estate Planning Strategies
Retirement Planning & Income Needs
Wealth means many things to many people. To our clients, wealth means more than monetary assets – spending time with loved ones, traveling the world, even charitable engagement may be considered wealth. But how will you get there?
Retirement Income Options
Planning your retirement involves income and it’s a fundamental pillar to living the life you want upon retirement. By effectively managing your portfolio our team can create a predictable, tax-efficient income stream for years to come thereby allowing you to retire with confidence. This income may come from the following sources:
Retirement Income Fund (RIF) –
A RIF gives you the flexibility to determine the amount of income you withdraw each year from your retirement savings. You may receive a required minimum annual amount, according to a predetermined schedule set by the federal government or opt for any figure above the minimum. You may change the income stream at any time and you only pay tax on the money you withdraw from your plan each year.
Locked-In Funds – There are a number of Locked-In funds you could access to provide the income you require. A Locked-in RSP (LRSP) or Locked-in Retirement Account (LIRA) in the form of a Life Income Fund (LIF), Locked-in Retirement Income Fund (LRIF) or Prescribed Retirement Income Fund (PRIF), depending on the governing legislation of the original pension plan.
When can I access these funds?
Your Retirement Savings Plan (RSP) can be converted to a form of retirement income at any time, however it must be done no later than the end of the calendar year in which you turn 71. At that age you have three choices:
1. Convert your RSP to a Retirement Income Fund (RIF)
2. Convert your RSP to an annuity
3. Withdraw the entire amount of your RSP in one lump sum and be taxed for the whole amount
Proper use of Tax Efficient Plans
It’s not what your investments earn, but what they earn after taxes that matters most. After factoring in federal income and capital gains taxes and local taxes, your investments’ returns in any given year may be significantly reduced.
Below are some ways to potentially help lower your tax bill. However, we recommend you call or email us should you wish to learn about more ways to lower your taxes.
Invest in Tax-Free Savings Accounts
Look for Tax-Efficient Investments
Put Losses to Work
An important consideration is whether to contribute to your RSP or TFSA
As a consequence of the decline of housing prices in the United States (U.S.) and the strength of the Canadian dollar, more Canadians are considering the purchase of a recreational residence in the U.S. Among the factors to be considered prior to doing so is the potential U.S. estate tax exposure.
Canadian residents may be subject to U.S. estate tax if they own assets in the U.S. including shares of U.S. corporations held personally or in an RRSP/RRIF, stock options granted by a U.S. corporation, or real property located in the U.S.
If the value of U.S. assets owned by a Canadian exceeds $60,000 at time of death, the estate will have liabilities with respect to the U.S. tax authorities. Certain credits may reduce the amount of U.S. estate tax payable, but as a general rule, the estate will be required to file a U.S. estate tax return. There are various ways of purchasing recreational property in the U.S. that may allow for a reduction in U.S. estate tax liability.
Some examples are provided in the full report on U.S. Real Estate Taxation. Contact us and receive your copy.
The article on U.S. Estate Taxes provides a brief, cursory overview of some of the U.S. tax implications a Canadian resident or U.S. citizen may face upon death. Due to the complexity of U.S. Estate Tax issues we recommend that you seek the advice of professional legal/tax advisors to assist you in planning for your potential U.S. Estate Tax liability. Please note that all amounts referred to in this article are in U.S. dollars. To obtain the full article please contact us.
What is the U.S. Estate Tax?
Generally, the U.S. Estate Tax is a tax applied to the fair market value of certain property that you hold upon your death, subject to certain adjustments and deductions.
Who is subject to U.S. Estate Tax?
• U.S. citizens and residents are subject to U.S. Estate Tax on the fair market value of their worldwide assets.
• Canadian residents (who are not U.S. citizens) may also be subject to U.S. Estate Tax if they hold U.S. situs assets upon their death.
What is a U.S. situs asset?
Generally U.S. situs assets are those assets that are “situated” in the U.S. This typically includes real estate property and land, tangible personal property such as artworks and jewellery, stocks of U.S. companies (held inside RRSPs (RRIFs) or outside RRSPs (RRIFs)), U.S. Pension Plans and debt obligations of U.S. persons or entities such as U.S. stock options.
What is not a U.S. situs asset?
Some assets that are not considered U.S. situs for purposes of the U.S. Estate Tax are bank accounts located in the U.S., Canadian mutual funds that invest in U.S. securities, shares of a Canadian holding company that invest in U.S. securities and Life Insurance Proceeds.
What are some typical deductions?
Typical deductions used in determining your taxable estate include:
• Funeral expenses paid out of your estate
• Debts you owed at the time of death
Protocol to the Canada/United States Tax Strategy
The fifth protocol to the Canada/U.S. Tax Treaty (Treaty) provides significant benefits to Canadian individuals and businesses. Highlights of the protocol include:
• The elimination of withholding taxes on cross-border interest payments
• Relaxing the permanent establishment rules and relieve double taxation related to cross-border commuters and short-term employee transfers
• Elimination of double taxation on emigrant’s capital gains
• Rules to address pension contributions and accrued pension benefits in cross-border employment situation
• Rules for apportioning the taxation of stock option benefits between Canada and the U.S. in cross-border situations
• A foreign tax credit for taxes imposed at death on RRSPs and RRIFs
• A process allowing taxpayers to require that certain key double tax issues be settled through arbitration
Request the complete article and read a brief explanations of several key elements of the protocol.
Tax Loss Selling
Tax loss selling is a tax strategy used to minimize capital gains from other sources. It involves the selling of an investment such as mutual funds, stocks and property (other than personal residence) like rental property that has depreciated in value to offset the capital gains from another investment.
Here is how tax loss selling works?
Assume you have an investment within your portfolio that has not done too well because of market volatility. Let’s further assume you were fortunate enough to have a second property and are looking to sell it to take advantage of the gains.
Tax Loss Selling involves the selling of the investment at a loss and use to loss to offset the some or all of the gains on the sale of the property resulting in having to pay less tax.
Tax Loss Selling required a high degree of investment knowledge as there are other factors that need to be considered. We encourage you to contact us for more information.
In Canada higher-earning individuals are taxed at a higher rate than lower-earning ones. Splitting income with a lower-earning partner or family member is attractive strategy designed to lower taxes and keep more of your hard earn money for the things that matter most.
Did you know: Someone with a taxable income of $100,000 a year pays anywhere between $7,000 to $10,000 more in personal income tax than two individuals who earn $50,000 each.
As is the case with many tax strategies proper execution is required and professional help is often recommended.
However taking advantage of Income Splitting can result in thousands of dollars in tax savings.
If you’re interested in learning more please contact us and we’d be happy to sit with you and discuss the possibilities and options available.
Proper wealth management requires organization, attention to detail and a clear understanding of what items are required to execute a financial plan. We utilize a number of checklists to drive our process forward. Some of these are available for you to use. Simply call or email us and we’d be happy to send them.
We have a number of guidelines available to assist you in managing your wealth. Contact us and we’d be happy to send you a select few and when you’re ready, we’d like to meet with you and discuss how we can help accumulate, grow and transfer your wealth.
Our Tax & Estate Planning professionals have developed an extensive Education Library providing clear and concise reports to explain many of the concepts that we utilize. Please call or email should you wish to receive more information.
Changing your address is simple. Download our template (PDF format), enter your new address and name. When ready, mail the original back to us and we will take care of the rest.
Making withdrawals from your account is easy. You may send us a Letter of Direction or download one of our templates. Simply enter any information required and once signed return the original to us.
Gain access to view your accounts online. Through Online Account Access you’ll be able to track your investments, view market data, retrieve previous statements and more. To get started please call or email us and we will be more than happy to assist you.
Electronic Funds Transfer
Send funds directly to your Richardson GMP account via online banking. You’re only required to add Richardson GMP as a payee to get started. Follow the instructions in the guide below.
Have any questions? Contact us. We will be happy to assist you.