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Articles by Keith Masterman
A cautionary tale about executors and clearance certificates
Keith Masterman The recent Federal Tax Court of Canada decision in Mingle vs. The Queen provides a cautionary tale for executors who distribute estate property without first obtaining a clearance certificate from the Canada Revenue Agency (CRA). The facts are straightforward. Anthony Mingle died in May 1994 leaving an extensive estate. In his will he named his sons Samuel and James as executors. However, Samuel was not a beneficiary.
Help clients claim tax credits for charitable donations
Keith Masterman Prisha and Ishaan live in Ontario. Prisha still works and has no intention of slowing down, while Ishaan is semi-retired. They support several charities in their community, donating 10% of their incomes each year. However, they have never fully understood how income tax credits for charitable donations work, and decide to do some research. The basics The first thing they realize is that the system is complex.
All about eligible medical expenses
Help your client claim these non-refundable tax credits By: Keith Masterman March 23, 2022 March 23, 2022 11:14 iStock Keith Masterman Justine and Cornell are a typical Canadian couple (invented for the purposes of this column). Each tax season they do their best to maximize the income tax deductions available to them. However, one potential deduction they never seem to use is for medical expenses.
Help your client plan for income when a spouse dies
Henry recently died after suffering a sudden heart attack. As Maureen grieves the loss of her partner and gets used to living on her own, she’s also finding that Henry’s death is having an unexpected negative effect on her finances. Her gross monthly income has fallen from about $8,000 to about $5,850 per month, or $71,000 per year, a decrease of about 25%. She now has an after-tax income of $57,120, a decrease of almost $24,000 per year.
Help your client avoid losing GRE status
Contributions and loans to a graduated rate estate can have tax consequences By: Keith Masterman September 7, 2021 September 7, 2021 14:06 iStock Keith Masterman The graduated rate estate (GRE) has become an important estate planning tool in Canada since its introduction in 2015.
Wills and power of attorney for cross-border clients
Planning for foreign assets may require multiple documents By: Keith Masterman March 18, 2021 March 18, 2021 14:00 © Michael Gray / 123RF Stock Photo Keith Masterman Whether in the sunny South or ski country, many clients have invested in holiday homes outside Canada. Property ownership often means vehicles, furniture and bank accounts are also located in the holiday jurisdiction.
Restraints to testamentary freedom when drafting a will
Help your client avoid these pitfalls By: Keith Masterman December 10, 2020 December 10, 2020 14:00 Keith Masterman A will is a cornerstone of an estate plan, and careful planning is required before drafting one. During that planning process, it’s important to consider any restraint on testamentary freedom. Restraints may be legislative, based on public policy or a result of contractual duties.
When naming minor beneficiaries causes major complications
A lack of planning can impede your client’s wishes By: Keith Masterman August 7, 2020 July 31, 2020 16:00 Keith Masterman When your client leaves assets to a minor — either as a beneficiary of the client’s will or a named beneficiary of a registered investment or insurance product — ensure that your client names a trustee and sets out the trustee’s powers to invest and administer the funds.
Help your client plan for a spendthrift beneficiary
Use these tips to protect an inheritance By: Keith Masterman April 21, 2020 April 20, 2020 15:00 © Dmitriy Shironosov / 123RF Stock Photo Keith Masterman Editor’s note: The case study below uses fictional characters. Any resemblance to real people is coincidental. Ling, a middle-aged widow, has a big concern: her daughter Kai is a poor money manager.
Time-sharing versus fractional ownership
Help your client choose a vacation property with these tips By: Keith Masterman December 18, 2019 December 17, 2019 14:00 © scanrail / 123RF Stock Photo Keith Masterman Whether it be in the sunny south or in Canada, time-sharing and fractional ownership are common alternatives to traditional cottage ownership. However, to avoid buyer’s remorse, research is important before signing on the dotted line. Time-sharing or fractional ownership?
Can your client disinherit a child?
A court decision in Nova Scotia has implications for estate planning By: Keith Masterman August 19, 2019 August 19, 2019 14:50 Keith Masterman A client who bequeaths nothing to their children now has greater certainty that their wishes will be fulfilled. In May 2019, the Nova Scotia Supreme Court handed down its judgment in Lawen Estate v Nova Scotia (Attorney General).
Estate planning and the disabled beneficiary
Consider these factors before establishing a Henson trust By: Keith Masterman May 10, 2019 May 7, 2019 14:00 Keith Masterman For thousands of Canadian families, estate planning is complicated when a loved one has a disability. Typically, the family member with the disability requires financial or money management assistance, and receives provincial disability benefits.
Helping clients sell a business
Every transaction presents unique challenges By: Mark Groulx January 17, 2019 January 17, 2019 15:00 Aleksandr Davydov / 123RF Mark Groulx When it comes to selling a business, advisors can assist clients by introducing them to mergers and acquisitions (M&A) specialists and, once the sale transaction is completed, help clients manage the proceeds. In order to be a useful sounding board, it’s important to understand the often complex process of selling a business.
Global growth is slower but not stalled: Fitch
Outlook for above-trend growth in the U.S. remains intact By: Staff January 17, 2019 January 17, 2019 15:19 © Romolo Tavani / Thinkstock Staff A series of weak economic data releases indicates that the global economic growth outlook is dimmer than previously thought, but the forecast is not yet dark, suggests a new report from Fitch Ratings Inc.
B.C. investors to partially recoup losses from fraud
The BCSC obtained money from selling the property of a former mutual fund salesperson By: Staff January 17, 2019 January 17, 2019 14:13 © Burmakin Andrey / 123RF Stock Photo Staff Investors defrauded by a former mutual fund salesperson will get some of their money back. The British Columbia Securities Commission (BCSC) has obtained money from the sale of property belonging to David Michael Michaels, as well as a cash payment from Michaels, the BCSC said Thursday in a release.
Comment period on proposed pilot study gets extended
Firms can comment to Mar. 1 on the CSA’s proposed study that would curb trading fee rebates By: Staff January 17, 2019 January 17, 2019 12:12 © Yanyong / Thinkstock Staff The Canadian Securities Administrators (CSA) is giving trading venues and investment industry firms more time to consider the possible ramifications of a planned pilot study that would curb trading fee rebates.
U.S. investors chose passive over active in 2018
Moody’s says passive funds represent superior technology for retail investors By: James Langton January 17, 2019 January 17, 2019 12:39 © erhui1979 / iStockphoto James Langton Active U.S. asset-management firms suffered record outflows in 2018 as a result of the persistent shift toward passive investment vehicles, suggests a new report from Moody’s Investors Service Inc.
Dividend payouts to reach global records: report
IHS Markit Ltd. says dividend payouts will reach US$1.81 trillion in 2019 By: James Langton January 17, 2019 January 17, 2019 10:26 14284707 - raising of dollar James Langton Dividend payouts are expected to reach record levels globally in 2019, but the forecast growth rate is slowing sharply from last year, according to a new report from IHS Markit Ltd.
IA Financial introduces virtual assistant service
Clients can access financial planning tools using Google Assistant By: Staff January 17, 2019 January 17, 2019 10:33 © Maria Dubova / 123RF Staff Quebec City-based Industrial Alliance Insurance and Financial Services Inc. (IA) announced the launch of a virtual assistant on Thursday that allows clients to connect with the firm in writing or verbally. Using Google Assistant, clients can say “OK, Google.
Founder of Vanguard, John Bogle, dies
The industry titan passes away aged 89 By: Associated Press January 16, 2019 January 16, 2019 18:42 Associated Press John C. Bogle, who simplified investing for the masses by launching the first index mutual fund and founding Vanguard Group, died Wednesday, the company said. He was 89. Bogle did not invent the index fund, but he expanded access to no-frills, low-cost investing in 1976 when Vanguard introduced the first index fund for individual investors, rather than institutional clients.
Outlook for high-yield credit
What to consider for portfolio positioning By: Michelle Schriver January 16, 2019 January 16, 2019 16:00 © SherryVSmith_Images / Thinkstock Michelle Schriver Spreads in U.S. high-yield were about 430 basis points early in December, said Nicholas Leach, vice-president of global fixed income at CIBC Asset Management, in a Dec. 6 interview. That’s the widest gap since the end of 2016 and close to the long-run medium, he said. Effective yield was more than 7% at the time, the highest since mid-2016.
Putting market volatility in perspective
Are investor fears overblown? By: Michelle Schriver January 16, 2019 January 16, 2019 15:02 © solarseven / 123RF Stock Photo Michelle Schriver Markets became more volatile last year and into the first month of 2019, but putting volatility in perspective—both historically and economically—might make the ride seem a lot less bumpy. Since 1982, the average percentage of annual trading days where the S&P 500 moved more than 1% is about 50%, says AGF ina recent blog post.
Fidelity launches equity fund
Fund focuses on opportunities in Canadian and U.S. markets By: Staff January 16, 2019 January 16, 2019 14:58 Time to Launch words on a clock face to illustrate a countdown or deadline to start or unveil a new product, company, business or service Staff Toronto-based Fidelity Investments Canada ULC announced Wednesday that it has launched an equity fund focusing on opportunities in the Canadian and U.S. markets.
Barclays Canada appoints head of financial institutions group
Jacquelyn Titus assumes the role on Jan. 21 By: Staff January 16, 2019 January 16, 2019 13:08 © erhui1979 / iStockphoto Staff Britain-based banking giant Barclays PLC has named Jacquelyn Titus as managing director and head of the financial institutions group, Canada, in Toronto, which advises Canadian banks, insurers and asset managers. She takes on the role on Jan. 21, joining Barclays from Goldman Sachs Group Inc., at which she covered the Canadian financial services industry.
Financial services firms rank among global companies committed to gender equality
Bloomberg’s Gender-Equality Index names big six banks plus Sun Life and Manulife By: Staff January 16, 2019 January 16, 2019 12:15 © ammentorp / 123RF Stock Photo Staff Canadian financial services firms were well represented on an annual global list of companies committed to gender equality and the advancement of women in the workforce.
BMO to consolidate certain ETFs
Units of these ETFs will begin trading on a post-consolidated basis on Jan. 28 By: Staff January 16, 2019 January 16, 2019 10:54 Hand writing New Way with red marker, business concept Staff Toronto-based BMO Asset Management Inc. announced on Wednesday that it will consolidate the units of certain commodities-based ETFs that trade on the Toronto Stock Exchange. The units of the following ETFs will be consolidated according to the ratios listed at the close of trading Jan.
Responsible investment organization calls for pension protection
Suggested measures include amendments to bankruptcy law and disclosure improvements By: Staff January 16, 2019 January 16, 2019 11:03 © Gunnar Pippel / 123RF Stock Photo Staff The Shareholder Association for Education and Research (SHARE), is calling on federal policymakers to adopt measures to protect workers’ retirement savings.
Foresters signs Principles for Responsible Investing
PRI currently represents more than US$82T in assets under management By: Staff January 16, 2019 January 16, 2019 11:19 © gajus / 123RF Stock Photo Staff Foresters Asset Management has signed the Principles for Responsible Investing (PRI).
EY Canada to launch centre of excellence for insurance
The centre, based in both Toronto and Quebec City, will guide insurers on regulatory change and digital transformation By: Staff January 16, 2019 January 16, 2019 11:37 Scissors cut purple silk ribbon on white background Staff Toronto-based Ersnt & Young LLP (Canada) announced on Wednesday that it will launch a bilingual “centre of excellence” for insurance and actuarial services in Toronto and Quebec City that will offer consultancy services and industry insight.
Financial services at risk from lack of disclosure on climate issues
A think-tank report calls for policy action from government, the central bank and securities regulators By: Staff January 16, 2019 January 16, 2019 11:51 © Sergey Nivens / 123RF Stock Photo Staff Insufficient disclosure about corporate action on climate change poses a growing risk to the Canadian financial services industry, suggests a new report from the International Institute for Sustainable Development (IISD), which calls on government and regulatory policymakers to take action to embrace...
Tax planning when your client receives severance
The tax implications depend on how severance is characterized By: Keith Masterman January 15, 2019 January 15, 2019 16:21 © Vadim Guzhva / 123RF Stock Photo Keith Masterman It’s likely only a matter of time before a client comes into your office with a severance package, asking for advice.
Keep estate planning documents safe
In order to probate a will or receive a Certificate of Appointment of Estate Trustee with a Will in Ontario, the deceased’s original will must be filed with the court. If a testator’s original will cannot be located, it is presumed to be revoked. This presumption is rebuttable, but fact-specific evidence must be brought to demonstrate that a will has been misplaced or inadvertently destroyed rather than revoked.
Do executors need insurance?
“There’s more estate litigation now than there was 20 years ago,” he explains. “Law has become more complex, and estates are increasingly complex. There are new tax issues; there are new legal matters that arise now. There is a whole list of things where executors can get sued for making mistakes.” Common mistakes include improperly interpreting the terms of the will, favouring some beneficiaries (or creditors) over others and not maximizing sale value on estate assets, Atin says.
Four reasons intergenerational wealth is destroyed in 3 generations
Executing a tactic is the last thing you should do, not the first. A tactic should be completed to achieve a broad set of goals that are predicated on shared values, vision and purpose. In the absence of such clarity, implementing a tactic can have unintended consequences. For instance, writing a will without incorporating the full planning picture can result in a document that actually contradicts the client’s strategic, long-term wishes.
Planning opportunities with alter ego and joint partner trusts
One of the primary motivators in setting up a trust is to minimize probate fees, which are calculated on the value of estate assets passing through the deceased’s will. Since assets held in an alter ego or joint partner trust aren’t owned by the deceased, they transfer in accordance with the terms of the trust and not through the deceased’s will. In provinces with higher probate fees, such as Ontario, B.C. and Nova Scotia, the savings can be substantial.
How spousal rights can affect your client’s estate
In Ontario, spouses are typically either married or common-law. Under the Family Law Act (FLA), if two people live common-law, they’ll be considered spouses if they’ve lived together for at least three years, or have lived in a permanent relationship and have a child together. The Supreme Court of Canada case Molodowich v Penttinen considers what qualifies as living together.
How spousal rights can affect your client’s estate
When someone dies, the surviving spouse and family usually go through a long administrative process, including tax, financial and legal steps. When the surviving spouse’s inheritance is smaller than expected, it may lead to questions about the survivor’s legal rights. Spousal rights are complex and governed by provincial law. This article examines some of Ontario’s rules, and future articles will review the laws of other provinces.
Planning opportunities with alter ego and joint partner trusts
In 2001, Canada introduced two new trusts: alter ego and joint partner trusts. Essentially, both trusts allow a settlor of an inter vivos trust to transfer capital assets into a trust on a tax-deferred basis if the following conditions are met: These trusts have a series of traps or downsides, which were discussed in a previous article. This article discusses some of the planning opportunities these trusts offer.
Avoid these traps with alter ego and joint partner trusts
In 2001, Canada introduced two unique inter vivos trusts: alter ego and joint partner trusts. Essentially, both trusts allow a settlor to transfer capital assets into the trust on a tax-deferred basis if the following conditions are met: These trusts have several advantages, including probate savings and confidentiality, which will be discussed in a subsequent article.
Let clients know about these will restrictions
When a testator makes provisions in their will, the expectation is that their wishes are absolute. Certainly, testamentary freedom grants that a testator of sound mind is free to leave their estate to whomever they wish without explanation. But what if a testator doesn’t make provisions for a dependent child? Or what if will provisions are discriminatory? In these instances, the courts may interfere with the testator’s succession plan.
Estate planning for clients’ digital assets
Digital assets are becoming increasingly important to Canadians, who have, on average, digital assets worth $1,000 to $2,000, reveals a Deloitte report. By 2020, the average Canadian will accumulate, over a lifetime, digital assets valued at more than $10,000. Yet, digital assets are rarely addressed in wills. Of Canadians aged 45 and older who say digital assets are important, 57% don’t have provisions for digital assets in their estate plans, finds BMO Wealth Institute.
3 investment rules estate trustees must know
Estate trustees are fiduciaries. As such, they owe numerous duties to both the estate and to its beneficiaries. One of those duties is the duty to invest the trust property with care. To do so, the trustee must follow three legal rules when investing. We’ll examine each of them. Often, a trust deed will contain a specific term that limits the trustee’s investment authority – whether intentionally or not.
How much power do powers of attorney really have?
Bob has made an appointment to see Maria, a financial advisor. Maria has not met Bob, but his name rings a bell. As it turns out, Bob holds the power of attorney for his Aunt Gertrude. Gertrude has been a longtime client of Maria’s. Bob tells Maria that his aunt has recently been declared incapable of managing her financial affairs and he is her attorney. When they meet, Bob provides Maria with a copy of the PoA. Bob is anxious to make changes to Gertrude’s portfolio.
What to know about investing within a trust
There have been significant changes to the taxation of testamentary trusts. As of 2016, for instance, any income produced by a trust is taxed at the highest marginal rate, unless it is a Qualified Disability Trust or part of a Graduated Rate Estate. These changes have limited the traditional tax planning reasons for creating a trust. However, trusts can still address specific family or beneficiary needs, so it’s important for trustees and advisors to understand the applicable investment rules.
Pitfalls with the Principal Residence Exemption
When a person sells her home, thanks to the Principal Residence Exemption, she isn’t usually taxed on capital gains. Similarly, if a principal residence is owned when a taxpayer dies, the residence will not attract a tax liability realized from the deemed disposition of assets. But it’s not always simple to determine a residence’s status for tax purposes. A principal residence does not have to be the place where the taxpayer normally lives.
Seg funds for estate planning: advantages and pitfalls
From an estate planning perspective, segregated funds are often seen as useful for minimizing potential estate administration fees (probate). Since a seg fund is an insurance product, where a beneficiary is named on the plan contract, the proceeds normally pass outside of the estate and probate is avoided. It’s important, however, to be aware of potential pitfalls when using seg funds as a planning tool.
Don’t let a court decide who gets deceased clients’ RRIFs
Registered accounts and life insurance are integral parts of your clients’ retirement and estate plans. Both allow a client to assign beneficiaries within the account or policy, or separately through her will, for instance. Beneficiary designations minimize probate tax since the proceeds fall outside the estate. In certain circumstances, the courts have ordered proceeds to be paid to someone other than the designated beneficiary.
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