BC Finance Minister Carole James delivered the province’s 2019 budget update on February 19, 2019. The budget anticipates a surplus of $274 million for the current year, $287 million for 2020 and $585 million in 2021.
The biggest announcements are:
- BC Child Opportunity Benefit
- Interest Free Student Loans
BC Child Opportunity Benefit
The BC Child Opportunity Benefit covers all children under 18 and can be applied for starting in October 2020. (This replaces the Early Childhood Tax Benefit where the benefit ended once a child turned six.)
Starting October 2020, families will receive a refundable tax credit per year up to:
- $1,600 with one child
- $2,600 with two children
- $3,400 with three children
Families with one child earning $97,500 or more and families with two children earning $114,500 or more will receive nothing.
Interest Free Student Loans
The provincial portion of student loans will now be interest-free effective as of February 19, 2019. The announcement covers both current and existing student loans.
Medical Services Premium
As previously announced in the last budget, effective January 1, 2020, the Medical Services Premium (MSP) will be eliminated. In last year’s budget update, MSP was reduced by 50% effective January 1, 2018.
Public Education System
The public education system will receive $550 million in additional support.
Pharmacare program will be expanded with an additional $42 million to cover more drugs, including those for diabetes, asthma and hypertension.
To learn how these changes will affect you, please don’t hesitate to contact us.
Being a new parent can be daunting, we outline the 5 things you need to do as soon as possible and how to cover your expenses in the first year. Contact us for a complimentary review.
Did you know?
- Home Insurance: 1 out of 19,000 homes in Canada gets burned.
- Auto Insurance: 1 out of 2,742 car claimed are over $3,500.
- Optional Life Insurance: 1 out of 90 people die before age 70
- Mental Illness: 1 out of 14 get Alzheimer’s due to over stress
- Critical Illness Insurance: 1 out of 2.4 people gets a critical illness
How adequate is your safety net?
As any parent of young children will know, finding a spare minute can be a hard task and taking time to draw up an estate plan for the future is something that often falls to the bottom of the priority list. However, it is important for all families to have a basic estate plan in place to provide financial security for their children in unforeseen circumstances.
Below are some key areas to consider when creating such a plan:
- Appoint guardians for your children
This is the most important reason for parents with young children drawing up an estate plan. Choosing who will raise your children if both parents were to pass away is such an important and personal decision – and one which should be made by the parents, rather than decided by the courts. Once decided, don’t forget to discuss your decision and ask the potential guardian if they would be willing.
You should also consider who is best placed to manage your children’s inheritance until they come of age. This is often the same person as the guardian but it can be somebody else of your choosing. As part of this, you could establish a trust for your children which is an effective way of managing their money and can also reduce costs.
- Draw up a will and living will
The key function of a will is to set out how your assets should be distributed when you die. It is therefore one of the most important components of the estate planning process as it outlines your wishes and how your family will be taken care of.
A living will is also an important document to have, as it gives details of your preferences for end of life medical care in the event that you become incapacitated, rather than putting such responsibility upon your loved ones at a difficult time.
- Decide upon an executor or trustee
When drawing up your will, you should detail the person who will be responsible for managing your estate when you pass away. The executor or trustee will carry out duties such as finalizing your financial affairs, distributing your assets as per your will, selling any properties etc.
- Name your beneficiaries
Although your will is, in many ways, the most important document, it is important that you also clearly specify who you want your assets to be left to in your life insurance and retirement accounts, as these documents take precedence over what is detailed in your will. Note that, if you want to leave assets to minor children, you should name the trust rather than the child directly.
- Review your life insurance needs
Ensuring that your family has the means to have a secure financial future after your death is a crucial part of estate planning. Put simply, you need life insurance if you have children who depend on you financially. Many parents find that term life insurance is surprisingly inexpensive if taken out early in life and can cover all sorts of costs, including funeral expenses, paying off debts and general living expenses for your family.
Finally, it is important to remember to review your estate plan regularly so that it reflects the changing nature of your family and personal circumstances over time. Many financial advisors suggest that at least once a year should be sufficient though, if your family has a major change such as divorce for example, you should review and amend your plans immediately.
Working with a professional to help you to make sense of your finances can be a wise move, but for this relationship to work effectively it is important that you understand what to expect from your financial advisor.
What can your financial advisor help you with?
- Defining your financial goals and creating a step by step plan or strategy to achieve them.
- Planning for the future, including for retirement, future education or housing needs.
- Choosing the mix of investments and assets that suit your goals, lifestyle, time horizon and appetite for risk.
- Building a solid estate for your family to inherit in the future.
- Choosing the most tax-efficient methods of saving and investing.
What should your financial advisor inform you of?
- The range of services that they offer and how much and by which method you will compensate them.
- Your mutual responsibilities and obligations towards each other.
- What the planning process will look like and the documents that they will provide you with.
What will your financial advisor need from you or need to ask you about?
- What your financial goals are.
- What your personal circumstances – such as your marital status, any dependents, your job, earnings and tax situation.
- Any investments or assets that you currently have – such as registered accounts, workplace pensions, property etc.
- Your appetite for risk and investment preferences.
- Information on your income and also your outgoings, including debts such as mortgages, loans or credit cards.
- Whether or not you have a will, and its contents.
- Your estate and inheritance planning situation.
If you’re looking to achieve your financial goals, talk to us. We can help.
One of the age-old financial quandaries asked of financial advisors is “shall I invest in property or funds?”. Predictably, the answer is not at all straightforward and depends on many factors, including your own financial style, personality and circumstances. Let’s take a look at the pros and cons of each choice to help you to be better informed about which could be the most lucrative option for you:
Benefits of investing in funds
It’s all too easy to go along with the generally-accepted myth that investing in property is a sure-fire way to secure your financial future. After all, house prices have appreciated in general terms for several years now and have become a very popular way for young people to invest for the future – this could also be, in part, down to the fact that their parents have benefited from the property booms of the past and made their own money this way, therefore presume the same will work for their children.
It’s fair to say, then, that investing the stock market is a much less common and popular way for people to invest their money. Despite market crashes, long term fund ownership is hands down the greatest creator of wealth in history and high quality funds generally not only increase their profits every year but also pay out increased cash dividends too.
Other advantages of fund ownership include the fact that you can diversify your portfolio easily, borrow against your funds easily and also benefit from the fact that funds are much more liquid than real estate, giving you maximum financial flexibility.
So, why do fewer people invest in funds than real estate?
It could be due to the two market crashes that have occurred since 2000, making people wary of getting involved in what they perhaps see as a complex and inherently risky way to make money. Many fail to take the long-term view of funds and the fact that, to financially benefit in the best way, you need to ride the highs and lows for a number of years to get a good return on your initial investment.
Another reason could be the fact that many people underestimate the real cost of home ownership. Additional costs such as maintenance, insurance and mortgage interest must be factored into investment calculations but are often not, making property a seemingly more attractive investment option.
Drawbacks of investing in funds
You really have to be in this game for the long term to see your money grow consistently and many people don’t have the discipline or patience to hold their nerve and keep their money in the same place for a prolonged period. This can often result in cashing in one’s funds too early and missing out on long term benefits. Similarly, because the prices of funds can fluctuate so much, many are too nervous about investing and don’t see the opportunities to purchase more funds at reduced prices to benefit them in the long term.
Benefits of investing in real estate
Many individuals in their twenties and thirties who are just starting out thinking about how best to secure their financial future feel more comfortable with investing in property and the notion of “owning one’s own home” – likely brought about by their parents’ influence, as discussed above. They perhaps feel more confident in the process, terminology and philosophy of real estate and believe that they are more likely to succeed in this area.
Another benefit could be the fact that, by purchasing a property, you feel that you own something tangible, as opposed to the money invested in funds and shares which could be said to exist only online or on paper.
Finally, many take comfort from the fact that it is potentially harder to be defrauded in relation to real estate as there are so many varied, physical checks that one can perform to verify the facts, such as property inspections, tenant background checks etc, whereas with funds, a lot of trust has to be given to the management company or auditors.
Drawbacks of investing in real estate
There are a number of hidden costs to real estate, particularly if your property is unoccupied for a period of time and you are still liable to pay taxes, maintenance etc. It’s also true that the maintenance of a property can be a time consuming as well as an expensive business, due to the requirement to deal with routine as well as emergency issues.
What’s more, it’s true that the actual value of real estate hardly ever increases in inflation-adjusted terms, therefore the returns can be healthy but the true value of the property doesn’t actually change. It’s due to this that many feel that investing in funds is a much more solid and lucrative way to receive good returns.
Talk to us, we can help you determine what works best for you.
It’s that time of year again, when many of us sit down to complete our income tax return and hope that we have done enough preparation to ensure a smooth and speedy process. Unfortunately, there are a number of complexities that can cause us problems – here are a few of the most common issues experienced by individuals when submitting their tax returns:
Expenses relating to medical expenses such as prescriptions, dentures and many more can be claimed for a non-refundable tax credit. You should also be aware that you can claim for yourself, your spouse or common law partner and any dependent children under the age of 18. You can also claim for certain other individuals whom you can clearly evidence are dependent on you (and the list of such individuals has recently been widened and can include grandparents, uncles, aunts, nieces and nephews).
You can claim tax credits for qualifying charitable donations that you made in 2017, though they are subject to an annual limit at 75% of your net income. You may also be eligible for a provisional donation tax credit. To receive such credits, you must supply a charitable donation receipt as evidence of your donation.
What’s more, there is a new formula for calculating the federal tax credit, depending on the value of donations. This is as follows:
1. 15% of the first $200 of donations
2. 33% of donations equal to the lesser of the amount of taxable income over $202,800 or the amount of donations over $200
3. 29% of total donations not included in the two stages above.
Public Transit Pass
Although this credit ended in the 2017 federal budget, it can still be claimed for the time period of January 1 – June 30, 2017. There are a range of eligible passes, including passes allowing unlimited travel within Canada, short term passes allowing unlimited travel for five days of which at least 20 days’ worth are purchased during a 28 day period and electronic payment cards.
Interest Expense and carrying charges
Interest on money borrowed to earn business or investment income is generally deductible, however interest expenses incurred on money borrowed to generate a capital gain is not tax deductible.
Carry forward information
Take note of the notice of assessment from your previous year’s tax return as it will contain important information that will apply to the submission of your current year’s return, such as your RRSP contribution limit and any carry-forward amounts.
Remember that you may be required to submit receipts alongside your electronic return at a later date, as requested by the CRA.
Child care expenses
Child care expenses include payments made to caregivers, nursery schools, day care centres and camps and other similar institutions. The deduction is usually best claimed by the lower earning spouse.
The deduction is the lesser of the following three:
· the total qualifying child care expenses which have been incurred
· $8,000 for each child under the age of 7, as well as $5,000 for each child between 6 and 16 and $11,000 for each child for whom the taxpayer has claimed the disability tax credit.
· two thirds of the income earned by the individual making the claim.
If you owe money when your income tax return is complete, the only way to delay payment is to delay the filing until the April 30th deadline. Alternatively, if CRA owes you money, then file as early as possible.
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