Understanding the language of Wills

Acting as an executor can be rewarding work, however if you don’t have a solid legal background, it can be a little confusing.  You can hire experts to help you, however it is important that you understand the estate documents.

Here is some of the most common legalese terms you will come across in a will:

Issue:  All persons in the line of descent, this would be a person’s children, grandchildren and great grandchildren.

Per stirpes:  A term used to describe a method of dividing an estate; whereas the children of a deceased parent would inherit the proportional share that the parent would have received if they were still living.  For example, let’s say the deceased had three children and only two of them are living at the time of his death.  The pre-deceased child had two children living at the time of her death.  The estate would be divided into three equal parts, one part for each living child, and the third part would be equally divided between the deceased child’s off-spring.

Per capita:  Another term to describe a method used when dividing an estate; this describes when equal shares are given to a number of people.  For example, all three children are living at the time of death; the estate would be split equally three ways.

Devise:  the disposition or sale of real or personal property through a will.

Hotchpot:  The blending of property belonging to different people in order to divide it equally among beneficiaries.  It generally involves taking into consideration funds already given to children when dividing up the property of the deceased parent to ensure each child receives an equal share.

En ventre sa mere:  Refers to a child conceived but not yet born.  For the purpose of inheritance, a child is treated as having been born if they are “en ventre sa mere” at the time of the testator’s death and are subsequently born alive.

There may be other obscure words in the will that you’re unfamiliar with, but knowing these common terms should help you make sense of most parts of the will.  As always, if you need some help or direction in the area of Estate Planning, don’t hesitate to give me a call.

Have a great weekend,

Tracey

 

 

 

 

 

 

 

 

 

 

Source:  Advisor.ca 11-12-13 by staff

 

6 RRSP Mistakes

With less than two months until the 2013 RRSP deadline; you’ll want to steer clear some of these common mistakes and missed opportunities when contributing this year.

Don’t be Hasty

Avoid making rushed decisions on how to invest your money.  If you are close to the deadline; make a cash contribution and then take some time to evaluate your investment options, you want to make sure the investment you choose matches your risk tolerance and retirement goals.

Don’t Skip a Contribution because Money is Tight

If you don’t have the cash available to make a contribution consider transferring securities from another non-registered account you have.  Or you could take out an RRSP loan; however make sure you are able to pay off the loan within two years – which can be helped by applying your tax refund directly to the balance.

Don’t Over-Contribute

You will want to review your notice of assessment to determine your contribution limit, because if you contribute over the $2000 allowable over-contribution amount; a 1% per month penalty will be imposed.  If you have excess cash above your allowable amount, consider investing it into a TFSA or another non-registered savings plan.

Don’t Misunderstand

Money that is invested into your RRSP should remain there until you retire.  However, if you do need the money to purchase your first home or go back to school you can withdraw it tax free under the First Time Home Buyers and Life Long Learning Plans.  However, don’t forget under both plans you are required to pay back your RRSP within 10-15 years after the withdrawal.

Don’t Forget to Name a Beneficiary

Make sure you name a beneficiary on all of your registered assets.  By naming your spouse or partner as beneficiary of your RRSP you will avoid unnecessary estate taxes.  Your spouse or partner is usually the only person you can transfer your RRSP assets to tax free.  (You can also transfer them to an infirm child, however other restrictions apply.)  Make sure you update and review your beneficiaries regularly.

Don’t Shun Professionals

Understanding the intricacies of tax, estate and retirement planning can be a daunting task, for more complicated matters always see an estate planner or tax specialist.  And, always use the expertise of a Certified Financial Planner when making all important financial decisions; including what investments to choose for your RRSP contribution. 

Have a great weekend,

Tracey

 

 

 

 

 

 

 

 

Sources:  Original article posted on Advisor.ca 01-15-14 by staff, BMO survey mentioned in original article.

2013 - Year in Review

The past year was a rewarding one for many equity investors, as most major stock markets around the world registered surprisingly strong gains against a backdrop of an improving global economy. Prices for many fixed-income securities such as government bonds were down slightly, however, in response to the growing likelihood of higher interest rates.

In economic developments, steady improvement in the United States in areas such as employment, housing and manufacturing throughout 2013 allowed the U.S. Federal Reserve to announce a gradual withdrawal of its extraordinary stimulus measures, which have kept interest rates at historic lows and supported the economy since 2009. Elsewhere, growth remained moderate across other developed economies, with Europe emerging from recession in the second quarter of the year. Several emerging markets experienced a slowdown, though their growth rates continued to be positive. Overall, business conditions remained supportive and some of the risks that had earlier dampened the recovery began to recede.

These developments boosted investor confidence and supported the gains in share prices, particularly in the latter half of the year. Japan’s market advance was the best in the developed world, as central bank stimulus and strong profits helped to propel the Nikkei Index an incredible 57% higher for the year. The S&P 500 Index in the U.S. soared 32% to a record high and its best annual performance since 1997. The MSCI World Index added 24% and the MSCI Europe Index rose 22%, reflecting the brighter prospects for the region. Results for several emerging market bourses, however, were weighed down by the anticipation of higher interest rates and the heavy cost of structural reforms in their local economies. China’s Shanghai Index dipped 7%, and the MSCI Emerging Markets Index slid 5% for the year. (All returns are in local currency terms.)

Canadian stocks overall posted double-digit gains in 2013, but underperformed both the U.S. and world markets for the third year in a row. The benchmark S&P/TSX Composite Index rallied toward the end of 2013 to gain 13% for the 12-month period, with strong results from health care, industrials and consumer discretionary stocks and weakness in the materials and utilities sectors. The Canadian dollar, meanwhile, lost about 6.5% versus the U.S. dollar, providing an additional benefit to those with global investments.

Yields of fixed-income securities increased in 2013 in reaction to the improving U.S. economy and Fed signals that it would be reducing or “tapering” its economic stimulus policies. For example, the yield of the 10-year U.S. Treasury bond finished the year near 3.0%, up from about 1.6% in late May. The flip side of rising yields is declining prices for interest-rate sensitive securities, including government bonds, many corporate bonds, and real estate investment trusts. The DEX Universe Bond Index, which measures the value of Canadian government and investment-grade corporate bonds, was down 1.2% for the year.

While equities may not match their stellar returns of last year, many of the conditions that have supported market advances remain in place for 2014. Any rise in interest rates is widely expected to be moderate, economic growth is still positive, and inflation remains under control. A diversified portfolio that is tailored to your individual investment objectives allows you to participate in the potential for further gains while helping to protect your investments from market corrections.

As we head into a new year please remember I am just a phone call should you wish to discuss your investment portfolio in greater detail.

Have a great weekend,

Tracey

 

 

Sources:  The information in this letter is derived from various sources, including CI Investments, Signature Global Asset Management, Cambridge Global Asset Management, Globe and Mail, National Post, Bank of Montreal Economics, and Trading Economics. Index information was provided by TD Newcrest and PC Bond. Returns for the S&P/TSX and S&P 500 indexes are total returns (including dividends) while other indexes are price returns. This material is provided for general information and is subject to change without notice. Every effort has been made to compile this material from reliable sources; however, no warranty can be made as to its accuracy or completeness. Before acting on any of the above, please contact me for individual financial advice based on your personal circumstances.

 

 

Dollar Cost Averaging – Good or Bad?

Most people have heard of the strategy Dollar Cost Averaging (DCA), it is when you purchase an investment on a regularly basis with a predetermined dollar amount.  Having money deducted out of your bank account on a monthly basis and invested into your RRSP is a perfect example. 

Is it a good strategy?  That is a matter of opinion.  Here is what two experts say:

First Opinion:  Moshe A. Milevsky, a professor of Finance at the Schulich School of Business, York University, says forget DCA.

Dollar Cost Averaging is a useful financial-planning strategy; however it is not a good investment strategy.  Dollar Cost Averaging is a bet that the markets will go down.

You are buying a few units now, in hopes you will be able to buy more later when the price goes down.  Therefore, DCA is a type of market timing, and any investment strategy that tries to outguess the market is predestined to fail.

From an investment point of view, you are fooling yourself.  If a person invests slowly as opposed to all at once, he can say, “Good thing I didn’t go all in” if the markets move down.  In reality however DCA didn’t make the final outcome any safer – or provide better returns.

Believers of DCA argue that if you invest in the market gradually over time, you will reduce the risk of in your portfolio.  However, having a properly diversified portfolio from the beginning is what will lower the volatility and provide you with higher returns over time.

Second Opinion:  Peter Andreana, partner at Continuum II Inc., Burlington, Ontario argues that there still value in Dollar Cost Averaging.

DCA allows you to make saving and investing a habit.  When you purchase investments on a monthly basis you average out the purchase price, and eliminate the emotion of how much and when to invest.  If you purchase investments once a year; you risk buying based on your emotions and that can be dangerous.  Furthermore, squeezing in a lump-sum RRSP contribution in February could mean you are investing at the most expensive time of year.

DCA makes a lot of sense when the markets are volatile, it takes emotion out of the investment decision and it’s automatic.  In volatile markets, it also has the advantage of encouraging you to continue to invest through the good, bad and ugly days of the markets.  Typically when the markets are ugly people are too nervous to invest – even though they know inherently it is the best time.  DCA takes the decision of when to invest and how much out of the equation.

My Opinion:  I have always believed the best time to invest is when you have the money.  If that is on a monthly basis or at the end of the year with your company bonus then that is the right time for you.  The important thing is to invest regularly, make it a habit and save for your future.

Have a great weekend,

Tracey

Source:  Original article posted on Advisor.ca by Katie Keir, 01-06-14

Make S.M.A.R.T. Resolutions

This year more than one-third of all resolutions made will be centered on personal finances, according to a survey by BMO Wealth Institute.

Goals related to financial issues will make up 36% of this year’s New Year’s resolutions, ranking second only to the traditional favorite; health and fitness at 51%.  Financial goals were ahead of personal development and volunteerism; 31%, success in love; 19%, and career and work related issues; 17%.

Of those respondents who had made financial New Year’s resolutions in the past, 60% reported to have kept them, while only 42% of those who made health/fitness goals stayed on track.

No matter what goals you set for yourself to be successful you will need to be objective, have a realistic target in mind, know what you are trying to accomplish; and why you want it.

Making S.M.A.R.T goals

S.M.A.R.T. goals are Specific, Measurable, Attainable, Relevant, and Timely. 

Specific – A general goal would be, “Save more for retirement” But a related specific goal would be, “Set up an automatic withdrawal out of my bank account once per month and have the money go directly into my RRSP.”  A specific goal has a far greater chance of being accomplished because it has defined parameters and constraints.

Measurable – There must be a logical system for measuring the progress of a goal.  To determine if your goal is measurable, ask yourself questions like:  How much money? How much do I want to save my years end?  How will I know when the goal is accomplished?  When you measure your progress, you stay on track, reach your target dates, and experience the exhilaration of achievement that spurs you on to continued efforts required to reach your goal.

Attainable – To be attainable; the goal must be realistic; it must be something you are willing and able to work towards.  The big question here is:  How will the goal be accomplished?

Relevant – Relevance stresses the importance of choosing goals that matter.  For example, an internet entrepreneur’s goal to “Make 25 chicken sandwiches by 3:00PM.” may be Specific, Measurable, Attainable, and Timely, but lacks Relevance to an entrepreneurs overarching objective of building a profitable online business.

Timely – A goal must be grounded within a time frame, giving the goal a target date.  A commitment to a deadline helps you focus your efforts on the completion of the goal on or before the due date.  This part of the S.M.A.R.T. goal criteria is intended to prevent goals from being overtaken by daily distractions.

When you set goals that are truly important to you, you will be more motivated and figure out ways to achieve them.   You can accomplish almost any goal you set for yourself; if you plan your steps wisely and establish a time frame that allows you to carry out those steps. 

I want to take this opportunity to wish you and your family a happy and healthy 2014!

Have a great weekend,

Tracey

Sources:  Direct excerpts from blog by Marc Chernoff, of Marc and Angel Hack life – practical tips for productive living.  And Advisor.ca post by staff 12-27-13