A Long Weekend to Remember

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1 Newsletter Title Page 1 Office Address: Morgan Creek Corporate Centre Suite nd Avenue Check our website: August/Summer 2010 I N T H I S I S S U E A Long Weekend to Remember Critical Illness Insurance Eases Financial Burdens of Breast Cancer RRSP or TFSA: Which Account is Right for You? Contact Us A planner should finish every engagement with the knowledge that he or she would be proud of the plans in place should an accident befall the client at any time. A Long Weekend to Remember By Nelson F. Deslippe The summer long weekends are a lot of fun for a lot of Canadians, but for a few families, they can also bring disaster. Accidents happen and by definition are unexpected. Estate planning is often carried out anticipating that individuals will live to life expectancy. And many people put off any planning because it is not viewed as urgent among the many other priorities in today s world of multi-tasking. But accidents can turn the spotlight on gaps in an individual s plans and the skills of the planners engaged by the individual to ensure that up-to-date plans are in place. A planner should finish every engagement with the knowledge that he or she would be proud of the plans in place should an accident befall the client at any time. Estate planning should address some or all of the following questions: Does the current will reflect the wishes of the testator? Are bequests in place for any promises made to others? Are the bequests funded or will they reduce the residue of the estate? If a specific asset has been bequeathed, does it still exist? Are the chosen executors willing to take the role and capable of carrying out their responsibilities? Have guardians been named in the will to take care of the children should both parents be involved in an accident? Are the guardians willing to take the role? Will anyone else in the family challenge the named guardians? The individuals acting as guardians will have to be approved by the courts, but the courts will typically take direction recognizing the wishes of the parents regarding the named guardians. We help our clients achieve financial peace of mind under any circumstance.

2 Newsletter Title Page 2 Has the surviving family s ongoing financial security been considered? The most important financial consideration for the surviving family will be income. There are only three sources of income: earned income or pensions from employment, income from investments and income from government sources. Investment income can be created with the use of life insurance and the quantum is usually more important than the type. While careful advanced planning cannot reduce the emotional impact of a sudden loss, it can reduce the financial implications and remove any compound effects of a sudden accident. Have the liquidity needs of the estate been considered? Income taxes, last expenses (such as funeral costs) and debts should all be taken into account. Having the mortgage insured at the bank may eliminate the mortgage upon a premature death, but a personally owned insurance policy could give the family the choice of keeping the funds and leaving the mortgage in place, depending on the facts and economic conditions at the time of death. Spousal rollover rules may help defer some taxes that would otherwise come due upon death, but if there is no spouse surviving or if both spouses die in the accident, income taxes could cause a significant drain on the estate s liquidity position. Planning is the responsibility of the individual and the professionals he or she engages in the process. A planner should complete each engagement as if his or her plan will be reported in the local newspaper following an accident. While careful advanced planning cannot reduce the emotional impact of a sudden loss, it can reduce the financial implications and remove any compound effects of a sudden accident. *Adapted from Number 250 Issue of CLU Comment. Nelson F. Deslippe, B.COMM., CFP, CLU, CH.F.C. Financial Advisor nelson@integral-financial.com

3 Newsletter Title Page 3 The Canadian Breast Cancer Network has released a survey that firmly places breast cancer as an economic as well as health issue." Critical Illness Insurance Eases Financial Burdens of Breast Cancer By Glennis J. Deslippe In addition to the ravages of the disease, it's no secret that breast cancer patients face a gargantuan financial burden. As reported by the Vancouver Sun, May 28th, 2010, The Canadian Breast Cancer Network has released a survey that "firmly places breast cancer as an economic as well as health issue." Critical Illness insurance is a living benefit that pays out a lump sum after 30 days upon diagnosis and survival of a critical illness including breast cancer. The funds are designed to cover the cost of your treatment and any out-ofpocket expenses you may incur over the course of fighting many serious illnesses. Of the 400 women polled, 80% say they have "experienced some kind of financial hardship from the disease." These include lost income because they've had to take time off work for treatment and recovery, as well as many out-of-pocket expenses related to getting well. The network went on to characterize this unfortunate reality as a "double whammy" for the women battling the disease. Not knowing where to turn, 44% of respondents admitted they used their savings to cover the cost of the fight and 27% went into debt as a result, while some went on disability or had to quit their jobs because they were in too much pain and 16% lost their jobs outright. "I had to leave my job because I knew that physically, I would be unable to continue it," Linda Glasier, who had been a nurse for 35 years, told the Sun. Once she left the hospital, she also lost her group insurance benefits and had to resort to personal income to cover the cost. The most tragic thing about her story is that dipping into her personal savings and driving herself into debt did not have to happen. Critical Illness insurance is a living benefit that pays out a lump sum after 30 days upon diagnosis and survival of a critical illness including breast cancer. The funds are designed to cover the cost of your treatment and any outof-pocket expenses you may incur over the course of fighting many serious illnesses. As Dr. Marius Barnard, the creator of this product says, its protection for when you need it most. No one expects to have a serious illness but when it happens, it s comforting to know the expenses will be taken care of with Critical Illness insurance. *This article is adapted from LSM Insurance. Glennis J. Deslippe, BSN, RHU, GBA Living Benefits Specialist Account Manager, Group Benefits glennis@integral-financial.com

4 Newsletter Title Page 4 RRSP or TFSA: Which Account is Right for You? By Adam Graham An RRSP will net a higher, after-tax rate of return, if you are in a higher tax bracket during your contribution years; A TFSA will net a higher rate of return if you are in a higher tax bracket once you have stopped contributing to the account and are receiving funds. If you are looking at a short-term savings goal, it may be wise to invest into a TFSA over an RRSP. Many times, when I sit down to talk with people about their financial goals, I am frequently asked about Tax-Free Savings Accounts (TFSA s) vs. Registered Retirement Savings Plans (RRSP s). Most of you are familiar with what an RRSP is, but one of the first questions that I get asked is what is a TFSA? A TFSA is an account that allows your investments to grow tax-free. You can invest in the same vehicles that you can inside an RRSP and the current annual limit grows by $5,000 per person, per year. You do not receive a tax deduction, but you are not taxed when you withdraw money, like you are with an RRSP. Secondly, I am typically asked what are the differences between a TFSA and an RRSP? A general rule of thumb to remember: An RRSP will net a higher, after-tax rate of return, if you are in a higher tax bracket during your contribution years; A TFSA will net a higher rate of return if you are in a higher tax bracket once you have stopped contributing to the account and are receiving funds. When is a good time to invest into an RRSP or TFSA? If you are looking at a short-term savings goal, it may be wise to invest into a TFSA over an RRSP; remember TFSA s are not taxed when you withdraw your money and you can withdraw money at any time, without penalty. With a TFSA you also have the benefit of being able replace the capital that you previously withdrew at any time. When looking to the future, if you foresee being in a higher tax bracket, it may be wise to invest in a TFSA now in order to reduce your taxes payable in the future. Under what circumstances should I invest into an RRSP? If you are looking for a long-term investment with an annual tax-deduction. Can I have both an RRSP and a TFSA account at the same time? Yes. One strategy that I have implemented involves investing my client s money into an RRSP and then investing the tax deduction received into a TFSA. This way you are growing both long and short term accounts by using your RRSP contribution. Alternately, if you already have a TFSA and are short on cash at hand you can withdraw money tax-free from your TFSA and put it in your RRSP account. There are numerous strategies to help you achieve your short and

5 Newsletter Title Page 5 Invest into an RRSP if you are looking for a long-term investment with an annual taxdeduction. long term financial goals. I recommend contacting our office to see how we can help you achieve financial peace of mind under any circumstance. Adam Graham, BA Associate Financial Advisor adam@integral-financial.com Contact Us Please contact Nelson, Glennis or Adam to assist you with your life, investment, living benefits and group insurance needs nd Avenue Website: We help our clients achieve financial peace of mind under any circumstance.