Ensure Family Harmony When Planning Your Estate

When you leave an inheritance to your loved ones, you intend to give each person some welcome help in meeting their financial and life goals. No one wants an inheritance to cause discord among the beneficiaries. Unfortunately, that can happen in certain situations if plans aren’t shared with beneficiaries in advance. 

By communicating your plans, you can find out if each person is comfortable with what you have in mind. If you discover that someone feels they’re not being treated fairly, or that your plans might strain the beneficiaries’ relationships, you can make changes to remedy the situation. 

Generally, three types of situations may lead to inheritance troubles:

  • When siblings’ inheritances of cash or financial investments are intended to be fair but are not equal 
  • When a property is being shared 
  • When one beneficiary receives an indivisible asset

Fair versus equal 
Some parents face a situation where they question if it’s fair to divide an inheritance equally. If one child is a well-paid chief executive officer and the other faces health issues and has often been unemployed, do they receive the same inheritance? If parents gifted one child the down payment on a home, is that amount deducted from their share? If one child left their job to care for their aging parent, does that child receive a larger inheritance? When a parent wants to give inheritances that aren’t equal, it’s best to have a discussion with children to make sure they accept the plan. 

Sharing a property
Siblings may have different ideas on what to do with an inherited property. Say that a parent handed down a vacation property that had been in the family for generations to their three children. Two of the children want to keep the property, but one wants to sell it and use the proceeds to fund their children’s education. Situations like this do arise and can lead to bitterness between siblings. If you find out in advance about your children’s wishes, you can work with your advisor to develop a solution that is acceptable to all. 

When an asset won’t be shared 
What happens when only one child will be taking over the family farm or small business, or inheriting the vacation property? You need to find a way to compensate the other child or children. If there won’t be enough cash or other assets available to equalize the inheritance, you could consider naming the other children as beneficiaries of a permanent life insurance policy on your life. Whatever solution you choose, it’s important that all children agree it’s fair to everyone.

Prepare Your Executor

Unless you prepare properly, your executor could end up feeling more like a detective. Where are receipts for the final tax return? Where’s the life insurance policy? What, there’s an old bank account from 20 years ago? The job of the executor is involved enough without having to search for information and documents that could’ve been placed at their fingertips.

Note that we’ll use the term “executor,” but the person designated to administer an estate may be called a personal representative, liquidator or estate trustee, depending on the province.

Make a directory

Whether you do it electronically or on paper, you should have a document or binder that lists all the information your executor will need. You’ll record contact information for your lawyer, advisor, accountant and beneficiaries. List the location of your will, tax returns, insurance policies and any other important documents. Record all assets, including investment accounts, real estate, valuables and private company shares. Also record mortgages, credit cards, loans and lines of credit. Provide bank account information, including bank contacts, safety deposit box location and your online passwords. Other items include online utility payments, subscriptions and digital assets. Any information your executor needs to settle your affairs should be included in this directory.

Explain your decisions

You should discuss any items in the will where you can offer insight or information that helps explain your intentions. For example, say that a nephew is to receive a substantially smaller amount than a niece. But that’s because you had helped out the nephew financially when he launched a business. That’s a piece of information that could prove helpful to the executor.

What if privacy is important? You may have personal information in the will you don’t yet want to reveal to your executor, and that’s fine. The point isn’t to share every detail – it’s to discuss your intentions regarding matters where clarification will be helpful to the executor.

Communicate funeral plans

No one looks forward to planning their own funeral, but it’s important to either make your own arrangements or communicate your wishes. If funeral and burial plans aren’t clear, the unfortunate result could be a dispute among family members. Depending on the province, the executor or family members are responsible for carrying out funeral arrangements, but either way, you should communicate your plans to the executor.

Confirm your executor’s interest

If the person you designated has not been an executor before, this process of preparation might demonstrate that executorship is more involved than they expected. Check in with the individual to make sure they remain interested. You can also consider getting help for your executor by having a corporate executor manage the more involved tasks.

Managing Your RRIF Withdrawals Effectively

Each year, you’re required to make a minimum Registered Retirement Income Fund (RRIF) withdrawal, calculated as a percentage of your RRIF assets. The percentage is based on your age, and it increases each year. Every withdrawal is taxed as regular income, but several strategies can help reduce the impact of the tax liability. 

Use your younger spouse’s age 

When you establish your RRIF, you can have your required annual withdrawal based on the age of your spouse. If your spouse is younger, you lock in a lower minimum payment that reduces your annual tax bill.

Split RRIF income 

RRIF income qualifies as eligible pension income for pension income splitting. If you’re 65 or older, you can split up to 50% of your RRIF income with your lower-income spouse to reduce your combined tax bill. 

Trigger the pension income tax credit 

You can implement this strategy at age 65 when you don’t actually need the RRIF income. To put it into practice, open a RRIF, but only transfer enough Registered Retirement Savings Plan (RRSP) funds to enable you to withdraw $2,000 from your RRIF each year from ages 65 to 71. The $2,000 withdrawal qualifies as pension income, triggering an annual 15% credit on your tax return. 

Customize withdrawal amounts 

Determining the amount of annual RRIF withdrawals that best suits your situation depends on your other income sources, age, marital status, tax situation and other factors. So it’s important to work with your advisor to plan withdrawals. One person might withdraw only the minimum required amount to keep their annual tax bill lower. Another retiree may withdraw larger amounts because the tax on the payments is less than the tax their estate would pay on those RRIF assets. 

Plan initial spousal RRIF withdrawals 

Planning is essential if you withdraw funds from a spousal RRSP or RRIF when you have contributed to the spousal RRSP in the year of the withdrawal or during the previous two calendar years. Payments up to the minimum RRIF withdrawal amount are taxable to the lower-income spouse, but any payments exceeding this amount would be taxable to the contributor. 

Use your Tax-Free Savings Account (TFSA)

If you don’t need the minimum RRIF amount to support your retirement right away, you can contribute the funds to your TFSA, provided you have contribution room. Although you pay tax on the withdrawal, the funds can now grow in a tax-free environment. 

Make in-kind withdrawals 

You also have another option beyond selling investments and withdrawing cash. You can take your withdrawal in kind, transferring the investments to a non-registered account or TFSA. This allows you to keep investments you believe hold promise.

Beware Of Fraud Targeting Seniors

This month we raise our awareness about scams in the senior community.

As we age, our social circle usually becomes smaller and the reasons for it are varied.  It leaves seniors, and many of us for that matter, in the dark about the various scams out there just because we are interacting less. Since the start of the pandemic, I have limited my exposure to the news as so much of it was negative. Couple that with less face-to-face social interaction means missing some of the warnings about recent scams.  This is relevant to all of us, and I imagine most of us have been taken for something at some point in our lives, whether online, over the phone or in person.

Scams have become so realistic in nature, that it’s very difficult to determine what’s real and what isn’t.

This month’s blog, given to us by Marci Perreault, a partner in KenMar Financial, is a reminder to keep up to date with what’s happening around us. If you suspect you may be the target of a scam report it to the police, and if you hear of one that’s circulating, make sure everyone in your circle knows about it.
We need to be vigilant about this.

Click here from more information from the Royal Canadian Mounted Police (RCMP): A senior’s guidebook for security and safety. One of the topics includes fraud and scams.

Beware of Fraud Targeting Seniors

By: Marci Perreault, a partner in KenMar Financial

A person claiming to be a lawyer phones a targeted senior with an urgent request. Their grandchild crossed the border and got into legal trouble. They need $5,000 to avoid jail and said please don’t tell mom or dad. The grandparent scam is an old one that’s now making a resurgence across Canada. And there are a dozen or more other common scams, each one victimizing a senior for hundreds or thousands of dollars.

Widespread Scams

In a telephone scam, a supposed Canada Revenue Agency (CRA) official asks for  the person’s social insurance number (SIN) and bank account details to deposit  COVID-19 benefits. 

A fraudster professing to be a contractor rings the doorbell. They noticed the  senior needs a roof, chimney or other home repair. Just pay upfront for the  supplies—no labour charge until the job is done. 

Scams involving computer messages come in many forms, some asking for  personal information from what appears to be an official source, such as Canada  Post, and others claiming the computer is infected with a virus that can be  eliminated for a fee. 

Warn your loved ones

If you have a senior parent or other seniors in your life who could be susceptible  to fraud, you may want to talk to them about fraudulent scams. Ideally, ask them  to contact you if they’re approached with any demand or offer they didn’t  request—whether it’s online, through the mail, over the phone or at the door.  And remind them not to give out any personal or financial information.

How To Minimize Tax On Retirement Income

Ah, its tax time, and in our home there is a lot of discussion around the latest rules and next steps.

This month Marci, gives us a few tips for minimizing the tax we pay on our retirement income.

These tips provide a good basis for conversation with your wealth management partner or tax specialist.

Marci Perreault is a partner at KenMar Financial Services, and is available to discuss any aspect of your portfolio.

How To Minimize Tax On Retirement Income

By: Marci Perreault

When you’re retired, you need an income strategy that balances today’s cash flow needs with an investment strategy to safeguard your ability to produce income in the future.

Tax-saving strategies

You will also want to pay as little tax as possible so that you keep more of your hard­ earned savings. Here are four ideas to help you minimize the tax on your retirement income.

Pension income splitting

This is a strategy for couples to reduce taxes by transferring pension income (for tax purposes) from the higher income earner to the lower income earner. The transferring spouse or common-law partner can give up to 50% of their eligible pension income to the receiving spouse or common-law partner. If you are 65 years of age or older, eligible sources for pension income splitting include a Registered Retirement Income Fund (RRIF), a registered pension plan and an annuity purchased with a Registered Retirement Savings Plan (RRSP). If you are under age 65, eligible income is mainly limited to registered pension plan benefits and certain payments resulting from the death of a former spouse or common-law partner. Note that residents of Quebec under 65 cannot split pension income for provincial income taxes.

Withdrawing income in the right order

The traditional rule of thumb is to withdraw first from accounts that are not tax-deferred, such as your non-registered investment accounts. The idea is to put off withdrawals from RRSPs and RRIFs, where all proceeds are taxed as income, attracting the highest rate of tax regardless of how they were earned. It also allows those investments to continue to grow tax deferred.

The truth is that this rule is simplistic and overly focused on current tax savings. Your strategy really depends on how much you have and where those assets are held. It may be that income should be drawn from a mix of sources to achieve the best tax-efficiency both in current and future years. The right order for you will also depend on a number of factors, including whether maximizing government benefits such as the Canada Pension Plan (CPP) and Old Age Security (OAS) is a goal, if you want or need to keep your portfolio growing in retirement, and if you have non-investment income such as rental income or part-time employment income. Estate planning goals may also affect your withdrawal order strategy.

T-series funds

For mutual fund investors, T-series may provide a more tax-efficient way to generate income from your investments. T-series funds are designed to provide a predictable and sustainable cash flow, often at a set percentage which helps with cash flow planning. Depending on the fund’s earnings (usually interest income, dividends and capital gains) the fund may also distribute a portion of the investor’s original investment, known as Return of Capital (ROC). ROC is usually not taxable, resulting in a more tax-efficient payout for you.

If you are not currently in T-series funds, it may be possible to transition to the T-series version from the series of the fund you currently hold without triggering a tax liability. One word of caution: when you receive an ROC distribution, you will lower the Adjusted Cost Base (ACB) of your holding, which could have tax implications later. Careful planning and monitoring are required.

TFSAs during retirement

Tax-Free Savings Accounts (TFSAs) can play a useful role after you’ve retired because of their principal benefit: money earned inside the account is not taxable – even when you withdraw it (unlike RRSPs and RRIFs). If you have retirement assets in a non-registered account, they may be better off in a TFSA (up to the contribution limits) earning income tax-free. Remember that TFSA contribution limits are cumulative and provide room of up to $81,500 as of 2022 if you’ve been eligible to contribute since 2009.

TFSAs also provide a great place to “park” money in retirement. This could include money that you have been required to withdraw from your RRIF but don’t have an immediate use for, as well as money put aside as an emergency fund for unexpected expenses. By sheltering these funds and their profits from tax, you’ll ensure you get the benefit of all your savings.

Customization is key

Every retiree’s situation is unique and there is no “out-of-the-box” solution. While obtaining tax-efficient cash flow is an important goal, so is maintaining the right asset allocation for your portfolio’s long-term health and managing risk according to your own risk tolerance. Most of all, it’s about enabling you to have an enjoyable and sustainable retirement lifestyle. Professional tax and investment advice are needed to achieve the right balance for you.

Should You Help Your Child Buy a Home?

I’ve been noticing that in the last several years, more parents and retirees are inquiring about, and making the decision to, assist their children in purchasing their first home. Perhaps you are contemplating this decision right now, and this trend resonates with you. It isn’t a decision that should be taken lightly, and it will require some research into how it will affect the health of your retirement portfolio or further, how it will affect the length of time you will need to continue working if the funds are withdrawn.

If there are questions you may have about the benefits and risks of such a decision, I am happy to discuss options with you.

Click Here to Learn More

Introducing Marci Perreault, Certified Financial Planner

This month, we introduce Marci Perreault to our Wellings blog.

We recently talked to Marci about the role she plays in helping her clients and seniors navigate the financial maze.

For over 25 years Marci has guided her clients to make informed decisions when it comes to protecting themselves.

“Knowledge is a powerful thing, and with so much false information out there, it’s important you are working with someone you can trust. Someone that understands your goals and the assets available that will get you closer to them. 

Clarity is important when making some very important choices about your wealth, your life and even your legacy.

People don’t wait days or weeks to hear from me. I am constantly upgrading my skills and knowledge to stay on top of changes to investment and insurance tax laws, government rulings, and new financial products, I will review your financial picture to take full advantage of changes while complying with changes within the financial services industry.

My experience in the financial services field has only deepened my belief that each individual needs a unique plan, one that is tailored to their personal situation. Everybody is different. Each client wants different things for retirement. There is no cookie cutter plan that fits every person.”

It would be my pleasure to take your call, answer your email, and review your goals against your current portfolio.

Specialties: Wealth Management Services, Living benefits, Income Replacement Strategies, Estate Planning, Risk Management, Group Benefits.

This months blog:

Think trusts are only for the rich and famous? You’ll see a variety of uses that show why trusts can meet the estate planning needs of just about anyone. It’s worth a second thought, and a conversation with your financial planner.


Marci Perreault, FLMI, CHS, CFP
Certified Financial Planner
KenMar Financial Services
Assante Financial Management Ltd.
Suite 300, 68 Chamberlain Ave
Ottawa ON K1S 1V9
Phone 613-231-7700 EXT 223


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