Understanding Tax Credits, Income Splitting and Estate Planning for People with Dementia

Transcription

1 Understanding Tax Credits, Income Splitting and Estate Planning for People with Dementia with special guest: Catherine Laird Catherine Laird, CHRP, CFP Financial Consultant Certified Financial Planning professional Jan Robson Provincial Coordinator of Programs and Services 1

2 This presentation Trademarks, including Investors Group, are owned by IGM Financial Inc. and licensed to its subsidiary corporations. This is a general source of information only. It is not intended to provide personalized tax, legal or investment advice, and is not intended as a solicitation to purchase securities. Catherine Laird is solely responsible for its content. For more information on this topic or any other financial matter, please contact an Investors Group Consultant. Insurance products and services distributed through I.G. Insurance Services Inc. Insurance license sponsored by The Great-West Life Assurance Company. Banking products and services are distributed through Solutions BankingTM. Solutions Banking products and services are provided by National Bank of Canada. TMSolutions Banking is a trademark of Power Financial Corporation. National Bank of Canada is a licensed user of these trademarks. The Investors Group Charitable Giving Program is offered together with the Strategic Charitable Giving Foundation, which operates independently from Investors Group. Donations are irrevocable and vest with the Foundation. This information is general in nature and not intended to be professional tax advice. Please read the Program Guide for complete details, including fees and expenses. The Canada Disability Savings Grantand the Canada Disability Savings Bondare provided by the Government of Canada. Eligibility depends on family income levels. 4 Featured Speaker Introduction Insert 1st Consultant s Photo Here Format size to 1.5 high More than 20 years of professional experience in Finance, Health & Human Resources. Holds the Certified Financial Planner & Certified Human Resource Professional designations with a Bachelors Degree in Health Sciences & Graduate Certificate in Human Resource Management. Member of the Elder Friendly Community Network focusing on risk management and working with persons with disabilities. Catherine Laird, CFP, CHRP, BHSc Certified Financial Planner professional and Financial Consultant Investors Group Financial Services Inc. Victoria, BC CFP certification provides assurance that the planner is committed to internationallyrecognized professional standards of competence, ethics and practice as set and enforced in Canada by FPSC. 5 Overview Getting started by having the conversation Understanding and applying for relevant tax credits Risk management Estate planning Trusts & income splitting Fraud & risk management Case studies Questions 6 2

3 Have the conversation a.k.a. making decisions while you still can! Make a file or binder with all important financial documents & professional advisors. Discuss and record future care, end of life, and funeral wishes. Getting Started

4 10 11 Asset succession planning: The four pillars Making decisions while you still can Wills, POAs & Trusts Tax considerations Protecting your assets 12 4

5 Checklist Early stages Get tested & get a diagnosis Talk to your health care professional & qualified financial advisor. Choose a trusted & experienced POA with a backup & consider appointing an auditor. Now you have a disability Have your doctor complete a T2201. Submit it to CRA and wait for the approval. When approved, apply to past and future tax years as per date stated by doctor. If not approved?? 13 Disability Tax Credit - definition Markedly Restricted (90%) Significantly Restricted (90%) With one or more basic activities of daily living. With Alzheimer s or other types of dementia usually Mental functions necessary for everyday life. With two or more basic activities of daily living: Speaking Hearing Walking Elimination(bladder & bowel) Feeding Dressing Mental functions necessary for everyday life

6 T Other Tax Credits that may be available to you: #1 -Disability Tax Credit. Medical Expenses > 3% Net income. Travel expenses for medical. Caregiver Amount. Family Caregiver Amt (new in 2012). BC Senior s Home Renovation Tax Credit. 17 Financial Risk Management Wills Legislation varies between provinces. Void on marriage unless made in anticipation of marriage. Wills variation act of BC. Upcoming changes in BC March Estate Planning If you the caregiver predeceases the person living with dementia. Charitable gift giving. 18 6

7 Investments Tax reduction strategies (tax preferred income & tax credits ). Income reduction techniques (deferred income). Income splitting (CPP & Pension). Asset protection (Trusts) Creditor (& fraud) protection (Trusts & Insurance). Cash flow management. 19 Income assessments in BC LT Residential Care LT Residential Care Up to 80% after tax income Minimums $959/mo. (S) & $710/mo. (D) Maximums $3059/mo. Assisted Living Assisted Living 70% after tax income 20 Choosing a POA A back up POA Enduring Powers of Attorney Things to consider (residence/competence) Bank POA (accessing bank accts & SD box) vs. Enduring POA (handling all matters) Review will, executors, trustees Review beneficiaries of life insurance, RRSPs, RIFs, TFSAs, pensions

8 The right planning can save you $$$, stress & costly mistakes Different Types of Investments Income producing Tax preferred income Deferred income Income splitting Pension splitting (CPP & Private pensions) 22 Income Splitting Scenario #1 Scenario # 2 Partner # 1 Partner in care OAS $6,500 OAS $6,500 CPP $3,600 CPP $7,200 Investment $40,000 Pension $50,000 RRIF $12,000 Partner # 1 Partner in care OAS $6,500 OAS $6,500 CPP $5,400 CPP $5,400 Investment $40,000 Pension $25,000 Pension $25,000 Total $62,100 Total $63,700 RRIF $12,000 Total $88,900 Total $36,900 Potential difference in cost of subsidized care $21, Trusts Scenario # 1 Scenario # 2 Partner # 1 Partner in care OAS $6,500 OAS $6,500 CPP $11,520 CPP $11,520 Investment $50,000 Pension $50,000 House jointly owned $500,000 Total Income $136,040 Combined Tax ($30,200) After tax income $105,840 Potential decrease in after-tax income $27,050 Partner # 1 Partner in care $0 OAS $6,500 CPP $11,520 Pension $50,000 Investment $50,000 Plus House $500,000 Total Income $118,020 Combined Tax & Repayment OAS ($39,230) After tax income $78,

9 Trusts Scenario # 2 Scenario # 3 Partner # 1 Partner in care $0 OAS $6,500 CPP $11,520 Pension $50,000 Investment $50,000 Plus House $500,000 Total Income $118,020 Combined Tax & Repayment OAS ($39,230) After tax income $78,790 Trust Investment $50,000 Partner in care OAS $6,500 CPP $11,520 House $500,000 Pension $50,000 Total Income $118,020 Combined Tax & Repayment OAS ($25781) After tax income $92,239 Potential Tax Savings $13, And of course get expert help Insurance needs. Rate of withdrawal. Estate planning. Charitable gift planning. Relocation for health, care or access. Making the right investment choices. "Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes. Judge Learned Hand 26 Every situation is different Simple CPP/OAS Income RRSP/RIF Income Pension Income Personal Residence All situations considered & planned for Complex Blended families Multiple marriages Multiple properties: cottage, secondary residences, rental Business owner Non-registered assets Minor children Protection of assets No planning or documents in place 27 9

10 RDSP Registered Disability Savings Plans Tax deferred to age 59. Must be eligible for DTC. Maximum Lifetime contributions = $200, Grants of up to 300% of contributions are available. 28 Risk Management Recognizing frauds or scams (phone, online, mail or in person) Reporting Vulnerability - facts Credit Cards Bank Accts Gambling Watch for inconsistency Monitor bank and credit card statements monthly Call display with history Lower credit & debit limits Keep minimum balances Internet safety 29 Case Study #1 Home Renovation Scam Situation Family reluctant to initiate POA. Senior withdrew $7500 to pay for roof replacement. Told FP that he had hired the person before. Neighbours called family with concerns about new roof

11 Case Study #2 Internet Safety Situation Ability to understand/practice internet safety is compromised. Gave out personal information & credit card # on questionable sites. Consequences. 31 Case Study #3 Investment Fraud Situation Promised unusually high returns on investments. Requested to make cheque out directly to individual. Sure thing. High risk investment. Working with a nonreputable organization, person. 32 Considerations to keep in mind Your situation is unique. Working with a Certified Financial Planner professional: Helps you to design a plan to meet your needs. Helps you take advantage of tax credits available to you. Helps you plan for the future. Helps you to optimize your income and assets to protect your future and to maximize benefits that may be available to you

12 Programs & Services Alzheimer Resource Centres for information, education, support and referrals. Dementia Helpline (Lower Mainland) Monday to Friday 9 a.m. to 4 p.m. supportline@alzheimerbc.org Education Healthy Brain Getting to Know Dementia Shaping the Journey Family Caregiver Series Additional Workshops Tele-Workshops Support Groups for people with early symptoms for caregivers 34 Newsletter & Bulletins Contact and econtact Provide general information about brain health, upcoming events, and other news. In Touch Educational bulletin for caregivers Insight Educational bulletin for and by people with dementia To subscribe, visit: Or call or (toll free) Provincial Office (to order handouts/bulletins) or Website Dementia Helpline