Why it is good to name a contingent beneficiary?

In the world of financial planning, there are two topics no one likes to talk about: death and taxes. Today we are going to tackle both subjects when it comes to RRSP accounts, with a little help from the best lawyer I know, Louise Kim, LLB. I asked her:

Q: Louise, what happens when a person passes away?

A: When a person passes away, the Executor must pay the government a tax called probate fees. The amount paid is based on the value of the estate (for estates exceeding $25,000). However, this tax does not apply to all assets owned by the deceased person. The deceased can structure his or her affairs so that assets flow to named beneficiaries outside of the deceased’s estate so as to avoid payment of probate fees for those assets. For example, let’s say a person names a beneficiary for his or her RRSPs, and then that person passes away; provided the beneficiary is alive, the beneficiary will be entitled to those funds in the RRSP, and no probate fees will be charged to the estate relating to those RRSPs. The same rule applies to TFSAs, life insurance policies and pension plans. It is good idea to also name a contingent beneficiary just in case the first named beneficiary is not alive when the person passes away.

Here are the rules about how probate fees are calculated:

(a) $6 for every $1,000 or part of $1,000 by which the value of the estate exceeds $25,000 but is not more than $50,000, plus

(b) $14 for every $1,000 or part of $1,000 by which the value of the estate exceeds $50,000.

If you or someone you care about would like to increase the probability of achieving your life goals and objectives, then do yourself a favour and make a date with a CFP® who is planning focused, not product driven. Success is simply following a repeatable sequence of predictable actions that can change a known undesirable condition into a predictable, more desirable one.

Our goal is to make sure we address our clients most pressing concerns and to make certain that we do not overlook the details when it comes to your big picture thinking!

Until next time, continue to live for today, but plan for tomorrow!

Cheers

AF

 

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Why Are Good Bikers Also Good Investors?

Flow

Well summer has finally arrived and brought with it a fair amount of volatility in the markets! Summer is also mountain biking season, and so I ‘m keeping pretty busy with both of my passions.

As many of you know, I love to ride road bikes, but I am a mountain biker at heart. I’d like to share a little of my most recent riding adventure with you because something out of the ordinary almost always seems to happen when I go riding with “The Usual Suspects”.

It’s day 1 of our annual mountain biking adventure at Silver Star Mountain last weekend, and we’re hitting the trails early. My good friend, JM, likes to ride fast, whereas I am a little more conservative. The trails on this mountain are some of the buffest trails I have ever ridden. One of the big advantages of a sanctioned ‘bike park’ over just trails on some mountain is that in the park the danger spots (jumps, gaps, stunts, rollers etc) are all well marked… at least, they’re supposed to be marked (this is called foreshadowing.)

We were flying down the trail when suddenly we hit some rollers that were unmarked (rollers being small rolling bumps, essentially mounds of dirt that you ride over, approx. 6 feet apart). The challenge in this case was that JM decided to treat them as small jumps, (three in a row) which lead to a little ‘volatility’ in his riding. This would normally be OK except he immediately had to ride over a rather large, well-marked DROP (which, for the uninitiated, is a type of jump that drops off down a hill) and he was a little ‘off balance’ as he soared through the air. This unexpected volatility meant that when he landed he lost control and crashed (which was actually quite entertaining given I was behind him). I later asked him what happened and he said the rollers took him by surprise. I was riding a little slower than JM and the same rollers also surprised me, but I was prepared and was able to stop suddenly to avoid the big drop! What’s my point? There are a number of them in this story but for the sake of time I will provide two:

1. We must always be prepared for the unexpected. JM was fine, other than a slightly bruised ego, thanks to his protective gear and years of riding experience In the world of downhill mountain biking that means always wearing body armour and not drifting from your discipline! It’s counterpart in the investment world is called Diversification. The best way to achieve this is by having your money managed by experienced professional money managers. Remember, we do not invest in science experiments!

2. A little bit of volatility is not the end of the world. Yes, JM got jolted, thrown and bruised (and teased), but he got back on his bike and continued on. He could have thrown in the towel, but instead he learned from that experience. No one else from our group crashed in that spot again the entire weekend. At this point in our lives, we are still able to take these risks, but only because our bodies will allow us to recover; as we age we will have to adjust our riding objectives and style of riding to better suit our changing bodies – bodies that might not recover as quickly! The same holds true in the investment world. There may be some unforeseen rollers and jumps out there, and if you hit them too fast you can get thrown off course. But, if you are properly diversified and are focused on what you’re doing, you will come through just fine. Investing without a plan is like riding down a mountain without your protective body armour!

So what should you do at this time given all of the volatility and noise in the markets? Here are 4 things for your ‘to do’ list:

1. Focus on your plan. If you can’t remember why you are doing what you are doing then it’s time for us to meet to revisit your financial plan for the future. Send me an email and we will arrange a time to do so.

2. Use only proven money managers. Experienced money managers can help investors take advantage of the unique opportunities that volatile markets present. They also understand the long-term benefits of sticking with a proven investment approach and fundamentals such as diversification. As you know, I do not recommend money managers who gamble, I only trust those who plan.

3. Stay invested. Staying invested by contributing fixed amounts regularly allows you to purchase more units or shares when prices fall. When markets bounce back, you’ll be that much further ahead. It’s the Costco theory of investing. If it’s automatic it will happen, if it’s sporadic those contributions may fall through the cracks thanks to emotion.

4. Talk to me. As your advisor, I’m always happy to provide advice and offer second opinions, no matter what’s happening in the markets or in your life! No questions are dumb questions so please don’t be shy. I even bought a couch for my office if you really need to “talk”!

In closing, the uncertainty about the pace of global growth, together with government debt levels in Europe, on top of leftover 2011 market volatility means it will likely take longer than many people expect for these issues to be resolved. However, it is also important to keep a sense of perspective. The challenges have also created opportunities. Market weakness has caused stock valuations to fall to levels that are substantially below their long-term average – and this has created an environment in which quality stocks can be purchased at attractive prices. I cannot stress enough how important it is that investors are best served by staying invested through a diversified portfolio that matches their risk tolerance and is actively managed by experienced investment professionals.

If you or someone you care about would like to increase the probability of achieving your life goals and objectives, then do yourself a favour and make a date with a CFP® who is planning focused, not product driven. Success is simply following a repeatable sequence of predictable actions that can change a known undesirable condition into a predictable, more desirable one.

Our goal is to make sure we address our clients most pressing concerns and to make certain that we do not overlook the details when it comes to your big picture thinking!

Until next time, continue to live for today, but plan for tomorrow!

AF

 

 

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7 Key Things Successful Retirees Do To Maximize Their Retirement Income

People who are financially secure in their retirement don’t get there by accident; it’s the result of a number of good decisions they made in their past. Without further preamble, I present:

7 KEY THINGS SUCCESSFUL RETIREES DO TO MAXIMIZE THEIR RETIREMENT INCOME

  1. They define their goals and objectives, so they can formulate a strategy to achieve them.
  2. When they have a plan, they take action and implement it.
  3. They understand their investment strategy and the role of fixed income/equity investments.
  4. They understand taxation rules and how they can impact their financial progress, both favorably and unfavorably.
  5. They make efficient use of our sources of retirement income.
  6. They believe time is their most valuable asset so they take action.
  7. They work with a qualified professional to establish, implement and monitor their financial strategies over the long term.

If you would like to increase the probability of achieving your life goals and objectives, then do yourself a favour and make a date with a CFP® who is planning focused, not product driven. Success is simply following a repeatable sequence of predictable actions that can change a known undesirable condition into a predictable, more desirable one.

Our goal is to make sure we address our clients most pressing concerns and to make certain that we do not overlook the details when it comes to your big picture thinking!

Until next time, continue to live for today, but plan for tomorrow!

Cheers

AF

 

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604.531.0022


Aaron Fransen   CFP® , CHS, CPCA   |   CERTIFIED FINANCIAL PLANNER®, Investment Advisor   |   Suite 203 - 15350 34th Avenue, South Surrey, BC V3S 0X7   |   Tel: 604.531.0022