He is making a list and checking it twice....
We all know that HE makes a list and checks it twice...
Most business owners make lists too, and we tend to check them at the end of the year. This is a busy time of year for many of us. For some it is our Corporate year end, for others we are right in the middle of looking back on 2010 and visioning for 2011.
From our experience, one of the biggest checklist item that is missed pertains to the Unanimous Share Holders Agreement (USA) or sometimes known as a Buy-Sell Agreement. This year alone our office has reviewed over a dozen cases where the USA existed but were missing some of the following key points:
- Signatures
- Funding mechanisms outlined and in place
- Ownership arrangements were undefined
- Needs analysis wasn't completed
- The issue of death was addressed but not the inability to work or serious illness
- Business Valuation Methods not defined in the agreement
Make sure you've made your list and have checked it twice, or better yet, let us check it twice for you!
Expect Changes to the Insurance Landscape
Canada is adopting new International Financial Reporting Standards. These standards cover many different aspects of the Financial Services industry. One of the key areas impacted is the pricing of permanent insurance products.
One of the major Canadian insurers increased their permanent insurance rates by 10% - 15% this month and industry experts are forecasting that some companies may increase their prices by 30%! These price increases are a result of lower yields on bonds and the new regulations mentioned above. Insurance company's use bonds as their primary investment choice. Bond yields were over 6% ten years ago and they are now slightly over 3%. This reduction affects the insurance companies ability to earn income, to accumulate assets, to ultimately pay claims.
Permanent insurance provides you with insurance coverage for life, versus term insurance which provides coverage for a certain period of time.
It is a good time to be reviewing your term policies to make sure that the coverage matches current and future needs. Some of you will be hearing from us if your term insurance is within a few years of renewing.
If you have any questions regarding these changes please give our office a call.
Highlighting Tax Free Savings Accounts (TFSA's)
A TFSA is another powerful savings vehicle which allows investment growth to grow and be withdrawn TAX FREE at any time. You cannot claim a deduction for the TFSA, however if you withdraw any funds from your TFSA you have the opportunity to replace those funds. All TFSA withdrawals are added back to your unused contribution room in the following year.
Dividends and Capital Gain tax efficiencies do not benefit TFSA accounts. We suggest using them for your least tax efficient investments as well speculative or higher risk investments. Keep in mind though that capital losses are not available.
TFSA Highlights:
- $5,000 annual limit (no earning requirements)
- Carry forward your room (you won't lose it if you don't use it!) Contributions are not tax deductible
- Minimum age 18, Maximum age NONE
- You cannot deduct interest payments if you borrow to invest within a TFSA
- Withdrawals are tax-free
- Tax-free rollover to spouse as successor holder upon death (must be named on the contract for the TFSA to continue as tax-free)
- Income tested benefits such as OAS, GIC's and child tax ARE NOT impacted by TFSA assets or withdrawals.
- You can use TFSA as collateral for a loan (you cannot use RRSP's)
- TFSA's can hold the same qualified investments as RRSP's
If you'd like to learn more about investing using TFSA accounts and TFSA strategies or any of your other investment needs, please give our office a call or email me at sophie@wealthco.ca.