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Charitable Gifting with Shared Ownership Universal Life Insurance

Many individuals have realized their charitable aspirations by donating a life insurance policy to the charity of their choice.  In situations where that donation is a Universal Life policy, the use of a Shared Ownership strategy could prove to be a viable investment for the donor.

Shared Ownership refers to an arrangement involving cash value life insurance policies such as Universal Life.  Universal Life combines life insurance with an investment fund which grows tax deferred until the cash value is withdrawn.  If the cash value is paid out at death, the growth is tax free.

Under Shared Ownership, the life insurance and the cash value would have different owners and beneficiaries and would be structured as follows: Read more

Donating to Charity Using Life Insurance

If you are interested in creating a legacy at your death by making a charitable donation, you may wish to investigate using life insurance for that purpose.  There are different ways you can structure life insurance for use in philanthropy.  The most common are:

Getting an Existing Life Insurance Policy

If you currently own a life insurance policy, you can donate that policy to a charity.  The charity will become owner and beneficiary of the policy and will issue a charitable receipt for the value of the policy at the time the transfer is made, which is usually the cash surrender value of the existing policy.

There are circumstances, however, where the fair market value may be in excess of cash surrender value.  If, for example, the donor is uninsurable at the time of the transfer, or if the replacement cost of the policy would be in excess of the current premium, the value of the donation may be higher.  Under these conditions, it is advisable for the donor to have a professional valuation of the policy, done by an actuary, prior to the donation. Read more

Index Funds vs Actively Managed Funds: what are the main differences?

There are significant differences when it comes to Index Funds and Actively Managed Funds. Deciding between the two will depend on various factors including your risk appetite, the ROI you are looking to achieve and the timeframe in which you are looking to achieve this. When weighing up these factors it’s useful to know what each type of fund entails, what the main strengths are as well as some of the potential drawbacks of investing in them.

Index Funds

An index fund (also known as a Tracker Fund) is based on a particular market index and aims to track that specific index as closely as possible. The most recognized of these indices are possibly Standard & Poor’s 500 Index, consisting of 500 of the largest US companies that’s listed on the NYSE. Read more

Life Insurance and the Capital Dividend Account

Many business owners are unaware that corporate owned life insurance combined with the Capital Dividend Account (CDA) provides an opportunity to distribute corporate surplus on the death of a shareholder to the surviving shareholders or family members tax-free.

Income earned by a corporation and then distributed to a shareholder is subject to tax integration which results in the total tax paid between the two being approximately the same as if the shareholder earned the income directly. Integration also means that if a corporation is in receipt of funds which it received tax-free, then those funds should be tax free when distributed to the shareholder.

The Capital Dividend Account is a notional account which tracks these particular tax-free amounts accumulated by the corporation. It is not shown in accounting records or financial statements of the corporation.  If there is a balance in the CDA it may be shown in the notes section of the financial statements for information purposes only.

Generally, the tax-free amounts referred to, are the non-taxable portions of capital gains received by the corporation and the death benefit proceeds of life insurance policies where the corporation is the beneficiary. Read more

Why an advisor makes a difference in net returns over DIY investors

It’s a common question in recent times, especially in an age when technology and algorithms can make decisions at a fraction of the cost. Is it worth it to hire a financial advisor? Or is it better to save the fees and go for a DIY strategy?

It depends who you ask but there are many – often not so obvious – factors that could make a difference to your net returns when putting your trust in a financial advisor.

Proper financial planning goes beyond how and where you invest. Good financial planning can increase your standard of living throughout your life.

Even for a complete novice it is possible to start investing in products without the help of professionals. The problem with this option is the lack of knowledge. Knowledge is crucial when it comes to investing. Read more

Debt Is a Four-Letter Word

Debt today is so common, you might say it can’t be avoided. Most people are not in a position to purchase a house or car for cash, while those who can buy such things outright may prefer to finance and keep control of their capital.

The truth is, while most of us see debt as a bad thing, any money borrowed to generate income or increase net worth can be considered “good debt.”

If the amount borrowed is invested for an overall gain, the debt is a tool. Borrowing to further your education, for example, is good debt since an education generally increases the likelihood you will earn more in the future. Most often, too, the interest paid on this type of debt is tax deductible. Read more

ARTICLES OF INTEREST

The importance of including family caregivers in the cost of cancer

Employers must acknowledge the role of family caregivers to get a true picture of the costs of cancer care, according to a University of Alberta professor.

Janet Fast, a professor of department of human ecology at the University of Alberta, told the audience at Benefits Canada’s 2017 Employers Cancer Care Summit in February that the army of family and friends assisting patients with their everyday needs are an often-overlooked pillar of the medical system. Yet without them, the entire health system would collapse, she noted. Read more »

Whole Life: A Whole New Investment Class

The recent developments in investment markets and the volatile performance that has resulted have brought about a new appeal to an old workhorse.  For investors looking for a diversification in their investment portfolio and a more tax efficient fixed income investment alternative, a compelling argument can be made for the use of Whole Life Insurance.

Why is Whole Life Insurance a good investment?

  • The tax advantaged steady growth, combined with significant estate benefits are the primary reasons why Participating Whole Life is now being thought of as a new investment class.
  • Unlike other accumulation policies such as most Universal Life policies, mutual funds and other equity investments, the cash and dividend value of a Whole Life policy cannot decrease as long as premium payments are made.

Read more »

Replace bad financial habits

By, Carla Hindman, Director of Financial Education, Visa Canada

Most people have at least one bad financial habit. Whether it’s impulse shopping, forgetting to pay bills on time or putting off building that emergency fund balancing what you want to do and what you “should” do is never easy.

You might recognize a few of these common bad financial habits in your life:

  • Paying bills after the due date
  • Paying only the minimum required on bills
  • Ignoring bills and letting them go to collections
  • Putting off saving for retirement or a rainy day
  • Impulse shopping or “retail therapy”
  • Not keeping track of how much debt you have
  • Taking on debt to pay for something you don’t currently need.

Read more »