RRSP deadline is approaching — be prepared

There may still be time to reduce your taxes payable for 2022, depending on your situation.

It’s about more than money: Take time for gratitude

All year long, this column is about money — how to do better with what you have, how to earn more, how to reduce your taxes and other expenses, and how to maximize your returns.

Year-end planning brings benefits when calendar flips

The year 2022 will be remembered for a lot of negative things, not completely offset by Canada’s appearance in the World Cup. Maybe we can make the year a little better with our annual year-end tax planning checklist.

Finally, financial advisory title protection for consumers

Ladies and gentlemen, boys and girls, gather round. There is big news in the world of financial advice and investment management, a story which is more than three decades in the making.

Title protection is about to be proclaimed in Ontario.

“Huh?” you ask. What the heck does that mean? And why does it matter?

Well, I’m glad you asked.

Tax planning: How about a March 10 deadline?

There is a potential new tax deadline that many tax professionals are talking about, and that’s the date of the next federal budget, instead of the filing deadline of April 30.

Specifically, there are fears of an increase in the capital gains inclusion rate and the possibility of other forms of tax increases.

While we don’t know the date of the federal budget, it should be well before the end of April. What we know for sure is that the government has racked up huge deficits over the last two fiscal years, and may be looking at ways to raise revenues to address those deficits.

For the last decade or so, realized capital gains have had a 50 per cent inclusion rate. This means that half of the gain on the sale of any capital asset is included in taxable income.

It’s time to prepare for higher interest rates

Do you have any variable rate debts?

If so, you had a reprieve this week when the Bank of Canada decided to leave its overnight lending rate at 0.25 per cent, a historic low that was reached shortly after the pandemic began.

However, with the last 12 months’ inflation rate at 4.8 per cent and an estimated 75 per cent of economists calling for a rate increase, expect rates to rise in the next month or so, unless there is a significant drop in the next inflation report.

Anyone with variable-rate loans might want to look at their options for fixing the interest rate at a slightly higher level for an extended term. This will lock in today’s rates and ensure predictability of payments going forward.

A big year for tax and regulation changes

IT’S been a big year in Manitoba, including three premiers (and counting?), the elimination of fees on probating wills, PST changes and the unlocking of locked-in registered accounts.

With November being Financial Literacy Month across the country, it’s a great time to catch up on all those changes. Here’s a partial list:

Pension Benefits Act Revisions As of Oct. 1, locked-in accounts such as a LIRA (locked-in retirement account, similar to an RRSP) or LIF (life income fund, analogous to a RRIF) can now be unlocked by anyone 65 or over, and people any age (with spousal consent) suffering a list of financial hardships.

A LIRA or LIF is created when money is rolled over on a tax-deferred basis from a registered pension plan. The locking-in is a way to make sure the assets continue to support the pension member for their life expectancy.

Bill C-208 overdue but government creates uncertainty

A funny thing happened on the way to the Senate… in June the House of Commons passed a private member’s bill with bipartisan support, followed shortly thereafter by Senate approval.

The bill then received Royal Assent and became law on June 29.

Even more unusual is that this bill involved the Income Tax Act, the kind that almost always originates with the government.

Bill C-208, An Act to Amend the Income Tax Act, was the work of Larry Maguire, Conservative MP for the Brandon-Souris constituency in Manitoba. Its purpose was to “establish uniform tax treatment” for the sale of farm and fishing operations whether sold to a family member or not.

Last-minute tax tips and real estate sales alert

Well, we are halfway through April (and apparently halfway through winter) and the Canada Revenue Agency has not announced any extension to the April 30 tax filing deadline.

With the third wave of COVID-19 infections causing lockdowns in Canada’s most populous provinces, that’s a bit of a surprise. However, I guess it’s time to give up hope, stop stalling and file your 2020 tax return, if you have not already.

Herewith, we provide a convenient checklist, a list of new or improved tax benefits and credits and a reminder that you have to provide details of any real estate sale you made in 2020, even if it was a tax-free sale covered under your principal residence exemption.

Suggestions for making filing easierFirst, a reminder that you must report all of your income. Seems elementary, but this year may be more challenging, with COVID-19 benefits and other unusual amounts in 2020.

Getting excited about tax preparation

Readers and friends have teased me over the years about my unbridled enthusiasm over income tax preparation.

I’ll confess that some of that enthusiasm has been pretend, but there is one thing I do love about tax prep that I think might help get you excited as well.

What I like is tax preparation has an end. So many things in our lives these days are never-ending, like Groundhog Day, over and over again. It’s hard to find a project where you can say, “That’s done!”

On the other hand, when you sign and mail that tax return (yes, I know, you actually push “Send” on your computer or give your accountant the go-ahead to do the same), that tax return is finished. Yes, you must wait for your Notice of Assessment from CRA and they may ask for some more information, but at least your part of the job is now complete.

RRSP deadline looms for 2020 deduction

Well folks, it’s that time of year again.

No, I don’t mean the one-year anniversary of COVID-19 reaching our shores, or my own milestone birthday next week, but rather the annual ritual we sometimes call “RRSP Season.”

However, this year will be unique, as I (and actual knowledgeable people) am predicting a record amount of RRSP contributions this year. This is based on the record-setting (and I mean by warp factors) higher savings rates in 2020.

That’s right — spendthrift Canadians, who had a declining savings rate for decades, put away massive amounts into cash reserves in 2020.

It’s important to be grateful, and it doesn’t cost a thing

Have you ever taken a ski lesson, golf lesson or something similar? Usually they start out with the instructor asking about your goals for the session and what you want to get out of your lessons, that sort of thing.

In a weekend ski camp once, our coach had the four of us students stop at the top of the hill, and then pleasantly surprised us all by saying, “Before we start, take a minute now and think about three things for which you are grateful.”

That’s not a big challenge when you’re standing at the top of a mountain looking 176 km east to Mount Revelstoke and 165 km south to Big White and seeing them both.

But in the year of the pandemic, with deaths, career disruptions, job losses, separation and isolation, this might be a bigger challenge. So, let’s start out by remembering why being grateful is so important.

Year-end tax planning special in 2020

In a year of never-befores, it’s good to focus on some things that don’t change. One example is taxes, specifically capital gain and loss planning for year end. There may be some special opportunities this year for you.

Next week we will provide a list of other ways to reduce your taxes before year-end.

Tax Loss Selling

Quick review — if you sell an investment (in a non-registered account) for a profit, half of that gain is subject to tax at your marginal tax rate. That means 50 per cent of the gross gain is taxable, at a rate between 30 per cent and 50 per cent for most taxpayers.

A financial plan is especially important in scary times

Many people are worried about their financial situation during this scary time. Some of those people have good reason to be worried, but others don’t.

This article will hopefully help you determine in which category you belong and, more importantly, give you some steps to move from vague worry to some level of reassurance.

November is Financial Literacy Month in Canada and next week is Financial Planning Week. But what makes this really timely is current information from a study conducted in September. This survey revealed that 30 per cent of Canadians are concerned that they will not financially recover from the pandemic. This figure rises to 36 per cent for people in the age range of 45 to 54.

That’s startling. It suggests a high level of stress is being felt by average Canadians. And this survey was conducted before stronger lockdowns were imposed in many jurisdictions.

Which pandemic benefits are taxable?

For those of us who had started to be able to recognize and memorize all the different acronyms for government programs, 2020 came as a relief. Here, we have a whole new alphabet soup to try and untangle.

More challenging yet, how do we do tax planning around the CERB, CRB, CRSB, CRCB, CESB, EI, rent and debt abatement and the one-time extra payments on some existing programs?

The main thing to remember is to put money away for taxes, because most of these income sources are taxable.

The most common was the Canada Emergency Response Benefit (CERB), which was replaced last week by the Canada Recovery Benefit (CRB). The CRB differs in that these payments have 10 per cent tax withheld, versus nothing for CERB and other programs.

How’s your portfolio looking?

Where to start today? There is so much going on in financial, economic, political and health news that it’s hard to know where to begin. But I think we should first talk about the stock markets.

The second quarter of 2020 marked the strongest upward movement on the stock markets in decades. However, as always with such dramatic moves, they come from a low point, this one marked in late March.

The pandemic had just caused the quickest bear market in history, but the strength and continued duration of the rebound has surprised many market watchers.

July has been positive on the markets as well, especially in Canadian resources and in large cap technology companies.

Home-office expense claims will be interesting

Have you incurred extra work-related expenses as a result of working from home?

If so, you will likely want to deduct those expenses from your taxable income and reduce your income taxes.

This may be possible, but the Income Tax Act has significant limitations to such claims. It will be interesting to see how the federal government and the Canada Revenue Agency possibly relax some of the rules for 2020, to accommodate this unprecedented situation.

The following is for guidance only and any claims you make should be at the advice of your own tax professional. With that caveat, here are some general guidelines and updates.

Holding off collecting CPP comes with benefits

Let’s talk about the decision of when to take your Canada Pension Plan benefit, and the easier decision, when to take Old Age Security.

This decision shouldn’t have anything to do with COVID-19. Unless:

• the pandemic has radically affected your job and its future;

• you are reconsidering your retirement age and plan;

A tale of two markets

Today we are going to talk about “the stock market” and explain a few fundamentals like the fact that there is no one single stock market, even though we tend to refer to it as such.

In this quest, I will do my best to pretend to know what I’m talking about, with the caveat that nothing contained herein is a prediction of any sort and none of this constitutes personalized advice for you.

(My recent advice to measure your asset mix and rebalance your portfolio between the components of cash, fixed income, equities and alternatives still stands.)

What we will find recently is that there’s something in common across the different markets, and that’s really a tale of two markets. More on that in a second, but first some fundamentals.

Feeling unbalanced? Fix that today

Stop me if you’ve heard this one…

Actually, no, don’t stop me. If you’ve been reading this column for any of the last 25-plus years, you’ve heard me deliver this message about balancing your investment portfolio several times.

Today, I would suggest this message and your immediate response are more urgent than ever before.

As you know, every investment portfolio can be analyzed in terms of its percentage exposure to:

A May Day to remember

Happy May Day and International Workers Day. Sort of…

Many workers have nothing to celebrate, as we enter week seven of our COVID-19 lockdown. But, on this day, I want to add my voice to the chorus thanking everyone who is out there serving on the “front lines,” providing goods and services to the rest of us.

Exhausted medical professionals; stressed out grocery, drugstore and retail employees; truck drivers and supply chain workers; sanitation engineers and everyone else who is keeping things going have my undying gratitude and respect.

At the same time, there are no words to express my concern for people who have lost their jobs and are in dire financial straits.

Making sense of emergency response benefit

The COVID-19 crisis is causing huge financial stress and loss of income for millions of Canadians. All of us know people who have been negatively affected.

Here is a summary of the latest federal government programs, as of March 26, to support affected workers and small businesses.

The main program for workers is the Canadian Emergency Response Benefit. The structure is different than the prime minister announced a week ago, simpler and more generous.

The benefit will provide $2,000 per month ($1,800 after tax withholding) for up to four months for workers whose incomes have dropped to zero. This includes employees “furloughed” as opposed to laid off, which means employers can keep people technically employed, even if unable to pay them.

Stay calm, stay healthy and use common sense

These are extraordinary times. Socially, financially and personally, we are all seeing and experiencing things we thought only happened in movies.

In anxious times like this, the most important thing is to stay healthy. That means obviously following the guidelines set out by healthcare officials and your own common sense. But many other personal measures can be taken.

Staying healthy also means staying physically active, exercising at least as much as before and recognizing when you are getting too anxious.

I’ve been reminded a lot lately that I’ve had a long career as a financial and life coach, and steward of people’s financial and investment lives. It turns out that I have been through several unprecedented events. All of these felt extremely dire at the time and like uncharted territory, which they were.

Filing tax return may be more fun than ever this year

Do you prepare your own taxes?

Drop me an email and let me know, with “Tax filing confessions” in the subject line. What has been your experience?

I am of two minds here. First, I am always pleased when someone tells me they prepare their own returns, as it means they are much more likely to understand the inner workings of the tax system and how the gears turn and affect their amounts owing.

Self-filers tend to understand the difference between credits and deductions, and things like the medical expense threshold amount and how donations reduce taxes.

RRSP deadline brings interesting choices

Well, it’s been an interesting week on the financial markets. But today we will focus on the Monday, March 2 deadline for RRSP contributions deductible on your 2019 tax return.

First, let’s talk about that old “to RRSP or not to RRSP” question.

If you deposit money into an RRSP (within the limit shown on your 2018 Notice of Assessment and RRSP Limit Statement), you will reduce your taxable income by the amount of your contribution.

Reducing your taxable income will reduce your taxes by the contribution amount, multiplied by your MTR — your marginal tax rate.

Take full advantage of TFSA magic

Overheard at a cocktail party: “I have been saving money for the last 11 years in an account, and I now have $85,000 there that earns investment income tax free. And I can spend that money, give it away or leave it to my estate, all without a penny of tax to pay.”

Did that person have one too many drinks, or could they have been telling the truth?

I ask because, if they had been saving in an RRSP, they could easily have that much money, but every withdrawal would be taxable. The same would be true if the investing was done through a registered pension plan, which would also not have the flexibility of which they spoke.

What about a regular non-registered investment account, bank account or GIC?

A time for gratitude

I hope you will be able to take some extra time off over the holidays, thanks to that long-celebrated pagan ritual many of us participate in each December.

My real hope is that you can take some of that time for yourself to reflect on what is good in your life. We have all undergone hardships and even tragedies this past year, but there is still so much for which to be thankful, living where we do.

You’ve heard me say this many times before — after all, this is year 27 of Dollars and Sense! — that literally counting your blessings will lead to higher levels of happiness, satisfaction and even achievement.

By “literally”, I mean writing down daily three things for which you’re grateful.

Halting deferred sales charge commissions long overdue

It appears clear that there will soon be no more deferred sales charges (DSC) on mutual funds and no trailing commissions paid to discount brokers, or other trade execution entities who do not provide actual advice to their clients.

This is an initiative that’s been in the works for some time and appeared to be stalled, but an announcement on Thursday revealed it’s moving ahead.

The Canadian Securities Administrators (CSA), the national group of securities commissions across the country, has announced Staff Notice 81.332, Next Steps on Proposals to Prohibit Certain Investment Fund Embedded Commissions, committing to steps that will take place in 2020 in every jurisdiction except Ontario.

A deferred sales charge mechanism is where a mutual fund company pays a commission to a dealer and its representative (the financial adviser) for the sale of a mutual fund. The “deferred” aspect is that the client is not charged directly, unless and until they pull out of the mutual fund, in which case there is a redemption fee assessed on a declining scale.

Let’s reduce your 2019 taxes

In my many (many) years on this planet, I’ve only met one or two people who claim to be proud and happy about the amount of income taxes they pay. So, let’s see if we can try and reduce your taxes for 2019, with some things you can do before year-end.

Investors: we talked last week about realizing capital losses to offset taxable capital gains and trying to avoid year-end distributions on mutual funds, private trusts or ETFs.

If you have an investment portfolio, be sure to consult that article.

The Three D’s of tax planning: tax planning starts with remembering to defer, divide and deduct.

Net realized capital gains are the ticket to tax season

December must be approaching, as we are busy reviewing our client accounts for opportunities to reduce taxes in 2019.

The things we look at are net realized capital gains during the year on sales of investments and anticipated distributions on any private trusts, ETFs or mutual funds. We then scour accounts for any opportunities to offset those taxable amounts by realizing capital losses on securities that have declined in value.

Note that this is only relevant for non-registered accounts. All investment income earned within a TFSA, RRSP, RRIF or any other registered account is immune from tax during the year.

Here is an example of what I mean, simplified a bit by rounding off the pennies and ignoring commission costs, if any:

Financial Literacy Month creates education opportunities

November is Financial Literacy Month in Canada.

Do we need such a month to help raise awareness of the need for financial education in Canada?

Yep, you’re darn tootin’ we do.

Recent studies continue to reveal scary statistics about the state of Canadians’ finances and, by implication, our knowledge of what affects our financial futures. Other research has shown that money worries and stress can lead to poor health, poor relationships and a lower quality of life. We need to do something.

Social media fertile ground for fraudsters

I have to admit the results of recent research on scams and frauds did not surprise me. The good news is that we can learn from this, to decrease our chances of becoming a victim of fraud.

According to a study called Exposed to Scams: What Separates Victims from Non-Victims, social media approaches are much more successful for fraudsters than telephone or mail approaches.

Specifically, 91 per cent of people who have been approached by a fraudster on social media engaged with the perpetrator, and 54 per cent of those lost money. Similarly, 81 per cent approached on a website engaged and 50 per cent lost money.

These numbers compare to only 40 per cent who engaged with a fraudster when approached by mail or email, and 39 per cent by phone.

Getting rid of the confusion around book value

In a short time, you will be receiving your September investment statements. Or, more likely, you view them online — but hopefully not every day!

Certain types of investments, especially the very common mutual fund trust, will usually be shown with a “book value” and “market value.” Book value is sometimes referred to as Adjusted Cost Base or ACB.

It’s easy to be confused by this when trying to figure out if you’ve made money or not on that investment.

Most statements do not show the original invested amount, leaving you to conclude that book value is the same thing.

Good estate plan includes closing social media feeds

Chances are you have some kind of online presence, whether through Facebook, Instagram, Twitter, LinkedIn or any one of a dozen other online social media platforms.

No doubt you also use online banking, access your investment accounts through the internet or use other web-based financial tools. Billions of people also subscribe to services like Spotify, iTunes, Netflix, gaming sites and countless others.

What happens to all of this when you die? If I had died yesterday, with all my passwords only in my head and well protected as they should be, all of these accounts would remain. Should I be concerned?

Yes, as digital criminals have found ways to exploit “dead” accounts, which are sometimes inadvertently identified by relatives posting Facebook requests for help with what to do with the account of a deceased person (talk about putting out the welcome mat to cybercriminals).

New tax rules gradually becoming clearer

When the government gives us a whole new set of tax rules and regulations no one wants and then gives these rules the acronym “TOSI,” it’s hard to avoid puns.

The obvious starting point is, “Let’s TOSI them out!”

However, the new Tax On Split Income regime is here to stay, for the owners of small businesses and private corporations.

To jump to the bottom line before explaining all this, I have some good news for accountants and business owners.

The time to think about travel insurance is right now

I know, I know... August has barely begun and there is still lots of summer left. However, August is also the time for deadlines on discounts for travel insurance from many suppliers.

If you spend the winter somewhere warm, you have to be aware that medical costs may be very high, especially in the United States. A minor injury or illness can easily cost in the tens of thousands of dollars, and a surgery or extended hospital stay would likely exceed $100,000.

Even a short trip out of the country requires emergency travel medical insurance. Many people who are employed and members of a group insurance plan have such coverage included, but not always. Be sure to check your coverage before travelling.

The bigger issue is for retired folks, and especially that rare animal we call the “Canadian snowbird.” Thousands of Canadians spend part or all of their winter in the U.S., where health-care costs are exorbitant. Other popular spots, like Mexico, have much more reasonable health-care costs, more in line with Canadian rates, so in the past, government reimbursements have covered much of these costs.

Right now is a great time to check your asset mix

Adding more proof to the old adage, “The more things change, the more they stay the same,” the advice in today’s column will mirror what I said in one of my first-ever Dollars and Sense articles.

(Just don’t tell anyone that was some 28 years ago!)

The bottom-line advice is to take advantage of the current near-record highs in the stock markets to make any required adjustments to your investment asset mix.

My thesis, which I will try to prove in the next three minutes, is that no one can predict what will happen tomorrow, so your personal responsibility as an investor is to always be prepared for the unexpected.

Avoid this big tax mistake when selling your house

We had an interesting discussion last night during a sailboat race. My friend was telling me about his neighbour who was about to sell his house and move into his rental property, and in the process make a big tax mistake.

It turns out there’s still a lot of misunderstanding about the principal residence exemption (PRE), under which real estate sales are tax-free, and how you can lose that exemption. Let’s clarify.

Here is the situation: a fellow we’ll call Bob has owned and lived in his house for 20 years. He has also owned a rental property nearby for 10 years.

For round numbers, the house in which he lived was purchased for $100,000 and is currently worth $300,000, called the fair market value (FMV).

Busting a few myths and getting facts right

The purpose of today’s article is to bust a few myths and provide some accurate information on recent returns of the stock and bond markets.

None of this information is in any way a suggestion to buy or sell investments, to change your investment strategy or do anything else, other than, hopefully, be enlightened.

In the past few weeks, I have spoken with many bright, informed people who have a completely inaccurate impression of how the investment markets have performed in the past year.

A number of these people completely missed the major correction in December, and just think stock prices have continued to rise unabated.

June 15 filing deadline looming for snowbirds

Many thousands of Canadians follow a migratory route each year down to the Excited States of America. We generally call these creatures “snowbirds” as they flock off each fall.

Perhaps, it’s the welcoming access to free health care, the open and inclusive government and political climate, or the all-you-can-eat buffets that draw these coveys to crowd into airplanes and automobiles.

More likely it’s the weather that’s the attraction.

At any rate, the Canadian snowbird must be aware that there are limits to the amount of time that such an “alien” can spend in the U.S., and as those limits are approached, the Internal Revenue Service wants to hear from you, or it will decide that you must start filing U.S. tax returns.

How to make the best use of your income tax refund

OK, so you’ve filed your income tax return on time. Now what? Now, we start planning to make you more money over the next year.

If you owed money on filing your return, congratulations! That means that you kept your money working for you to the maximum extent possible, rather than loaning it interest-free to the government.

Getting a refund means the opposite. A tax refund means that you did your patriotic duty by loaning the government money without interest for parts of the past year.

At the other extreme, however, is owing money because you failed to pay all your required quarterly tax instalments on time. This is even more expensive, due to the penalties and interest applied to late instalments, when you must pay on filing.

Tax changes to know about in 2019 federal budget

This is the time of year when my job gets particularly tricky.

Everyone is getting ready to file their 2018 income tax returns, collecting those last recalcitrant T3 slips and T5013s. At our office, our days are currently being taken up by calls and emails from accountants who have misplaced the income tax slips and other reports that we so conscientiously sent to them in February and early March. The good news is that they’re too busy right now to read my article this week, so I can get away with saying things like that, on behalf of investment advisers everywhere.

But that’s accounting for last year, not planning for the future.

At the same time, the federal government’s recent budgets introduced a series of small changes for the future, which can help low-income earners and news readers, penalize executives of large companies and reward folks who can donate important cultural property.

Possible good news for U.S. tax filers, but bad news on TFSA reporting

I’m so excited! My first T-slip arrived yesterday — a beautifully wrapped T5 for interest earned on my bank account, along with one of my last remaining donation receipts.

This means income tax season has begun in earnest.

I realize that no one else gets as excited about this as I do, but please heed my advice to organize yourself now, with a checklist of information you expect from your employer, pension provider, financial institution and investment firm.

Knowing what to expect, confirming it’s all arrived well before the tax deadline and organizing everything as it comes in will make that annual filing chore much easier.

Resolve to save on taxes

Happy New Year! Almost two weeks into 2019, and I can see resolutions are being fulfilled, people are enjoying the weather, the flowers are blooming and, best of all, tax season is here!

Reducing your taxes payable starts with understanding how the system works, and how much you can save by accessing a deduction, like an RRSP contribution.

Here’s the lay of the land:

CPP premiums

Time to start preparing for year-end deadlines

Happy November, congratulations to the Bombers for storming into the playoffs and welcome to year-end tax planning.

Yes, it’s time once again to take advantage of any planning opportunities that have a Dec. 31 deadline. Everything we talk about today has that deadline, unless otherwise mentioned.

The first step, as it may take the most time, is estimating your capital gains for the year and looking at opportunities to offset the tax effect of those gains by crystallizing capital losses. Ask for a report from your investment adviser or dealer.

This is only relevant to non-registered investment accounts (not RRSPs or RRIFs). If some of your investments gained value over any period of time AND they were sold during 2018, then they will have given rise to capital gains. If your total capital gains for the year exceed your total capital losses, then half of that overall net gain is taxable, at your marginal tax rate.

Should you withdraw your RRSP early?

The recent weather and the teases of snow told me last week that year-end is coming into sight. That means we have to talk about year-end tax planning. We will look at a variety of topics over the next two months, but right now let’s talk about early withdrawal of RRSPs.

Taking money out of your RRSP will likely mean paying taxes sooner rather than later, and may also incur penalties on government tax credits and even OAS benefits. With those potential downsides, why even think about taking RRSPs out early?

Well, for some people, paying a little extra tax now will save paying a lot more down the road. Those folks should take a look at the pros and cons of withdrawing some money from RRSPs, before being forced by the government at age 71 to convert to a RRIF or annuity.

To be clear, we only recommend this strategy sparingly, because to me, deferring tax is almost always better than paying it now. But let’s take the example of someone who is 60, has stopped working but is not yet drawing a pension, CPP or OAS. Therefore, their taxable income is very low.

Getting more value from your adviser

Today’s column is about investment adviser fees and value, with the goal of helping you refine the things that are most important for you in your investment advisory relationship.

A recent study by PriceMetrix shows that there has been a mild trend for fee-based investment advisers to reduce fees. However, the study points out that the cuts are being made by advisers who do not provide as much value to clients, suggesting that there is a segment of the adviser community that is reducing fees as a way to compete with advisers that provide more value.

OK, that’s a lot of info. Let’s see if we can “unpack it,” as broadcasters like to say these days.

“Investment adviser” (IA) is the regulated term applied to people who provide advice to clients about their investments. An IA makes suggestions and recommendations, but can only act on a client’s specific instructions.

Is your TFSA designed for you?

Over my years of advising people on their money and their lives, a very common question is, “How am I doing?”

We always make sure that we provide an answer in the context of a person’s goals. They really want to know “Am I on track?” or “Will I get where I want to go?” and it’s our job to give them those answers, consistently and clearly.

But sometimes the question is about a very specific issue, or along the lines of, “What are other people doing?”

A recent example is the TFSA. Now that we have been able to contribute for 10 years, it’s legitimate to evaluate the growth and performance, as long as it’s done in the context of your goals and intentions for your TFSA.

Hey, snowbirds, it’s time to check in with Uncle Sam

Do you spend time in the U.S. each winter (or summer)? If so, read on.

There is a June 15 deadline for a form that you may want to file with the Internal Revenue Service (IRS) in order to save yourself a lot of potential grief down the road.

Each year, Canadian Snowbirds have an obligation to file a form with the U.S. government, if they have established a “substantial presence” in the U.S. The current filing refers to the amount of time spent in the U.S. in 2017, 2016 and 2015.

IRS Form 8840 — the “Closer Connection Exception Statement for Aliens” — allows you to avoid a possible demand from the IRS to file a U.S. tax return, something you want to avoid. Fun Fact — Canadians who visit the U.S. casually do so under a B-2 Visa, which is for “tourism, vacation and pleasure visitors.” Although we (and our money) are welcomed, our ability to visit the U.S. is considered a privilege, not a right.

Many changes in tax filing for 2017 returns

If you file your own tax return over the next two months, you may see a number of changes in your deep and meaningful relationship with the Canada Revenue Agency (CRA). (These are not related to the Feb. 27 federal budget proposals, which will take effect next year.)

The CRA has made many improvements to the ways you can file, while the federal government has eliminated a number of tax credits, but streamlined some others.

Anyone who filed a 2016 tax return on paper (not electronically) will automatically receive the 2017 Tax Guide and forms in the mail.

Forms can also be ordered from the website Canada.ca/get-cra-forms, or self-printed instead.

Revenue agency doubling prescribed interest rate

Since April 1, 2009, taxpayers have been able to take advantage of a historically low Canada Revenue Agency (CRA) “prescribed” interest rate of one per cent. We have set up many prescribed rate loans for clients since 2009, and they have worked wonderfully.

But the CRA has announced that on April 1, this rate will rise to two per cent.

What does all this mean? Glad you asked.

The prescribed rate is the interest that must be charged when one spouse (the higher tax rate taxpayer) loans money to the low tax rate spouse, for the purpose of investing. The obvious advantage is less tax on the investment income earned on this capital, in the hands of the lower tax bracket spouse. This strategy also works with loans to children, with some caveats.

Figuring out how to plan your finances from scratch

As I see media coverage on 2018 predictions, financial literacy, investment tips, budgeting, RRSPs and TFSAs — not to mention U.S. and world politics — I think, “No wonder people are confused.”

With all of this “stuff” out there pointing you in all directions, it is necessary to review the basics, and provide a context and framework into which all of these tactics, rules and vehicles fit. You may find this review useful, no matter how financially sophisticated you are.

The most basic tenet of financial planning is that you save money now into one or more savings vehicles, make that investment capital grow, and when the income you can generate from that future capital is adequate to support you, your financial independence has been achieved. This is when your money is working, instead of you.

To do this, you MUST consistently spend less than you make and invest the difference. The only alternatives are to start a successful business, inherit money or win a lottery.

Donating to charity will improve your life

Recent statements by local and national charities say that donations are down significantly since last year. Many of these organizations are critical to the community at this time of year, like Winnipeg Harvest, the Christmas Cheer Board and many others.

What’s happening? At the same time, a recent poll by the Angus Reid Institute showed that 30 per cent of Canadians say they don’t donate as much money to charity as they would like to. Hmm. So, what holds us back?

As you know from reading my column over the last 25 years, I am a big fan of gratitude — of feeling grateful, showing gratitude and being truly thankful for all that we have. My belief is that feeling and displaying gratitude not only makes you feel better, but makes you more productive, effective and successful in all aspects of your life.

These principles work equally well all year round, but it’s hard not to make it seasonal in late December.

Time to think about reducing your taxes

When I washed my car on Wednesday at the coin-op, the remaining surface water was frozen by the time I made it to the office. That must mean it is time to review our year-end tax planning and see if we can reduce taxes for 2017. Here are a few things to think about.

Donations

Gifts to registered charities create a combined federal and provincial credit of about 45 per cent, after your first $200 of annual donations. (The first $200 receives credit at a lower rate.)

Dec. 31 is the deadline to receive a tax credit on your 2017 return.

If turning 71, consider last RRSP contribution

We generally think of the RRSP deadline as the end of February. Technically, it is 60 days after year-end, so three years out of four it’s March 1.

However, for people who turning 71 in 2017, your deadline is actually Dec. 31.

Now, this only applies to people who have RRSP contribution room, which would arise either from a carryforward of unused contribution room from previous years, or from having “earned income” in 2016. Remember that everyone’s RRSP contribution room is based on their earned income the previous year(s), not the current year. Check your Notice of Assessment from 2016 for your carryforward amounts and your total 2017 RRSP room.

We will explain “earned income” in a second. The reason Dec. 31 is the deadline for people turning 71 is that they will be prohibited from contributing in January, February or any other month in 2018, since it’s the year they will turn 72.

Looking for a little bit of clarity on tax proposals

By now, I think everyone is aware that in July the federal government issued a “consultation paper” called Tax Planning Using Private Corporations. The consultation period ended Oct. 2.

Although they asked for feedback on the proposals, I think it’s safe to say that the government was not ready for the angry, well-informed and ultimately organized response and outrage from the public.

Even some members of Prime Minister Justin Trudeau’s own caucus expressed dismay and disagreement after doing their own research and talking to their constituents.

Finance Minister Bill Morneau also seemed to have not expected to find out that the bureaucrats in the Department of Finance (who have guaranteed salaries and pension plans, unlike the subjects of their proposals) had not properly considered all of the ramifications, side effects and collateral damage that would be caused by implementing these draconian measures in the name of “tax fairness.”

What can your tax assessment tell you?

I know most of you have filed your 2016 tax returns, and you have likely received your notice of assessment and perhaps a refund.

In a moment, we will talk about the info your assessment can provide, why you might not have received one, and some things you can do with your refund.

First, though, let’s look at some of the tax deadlines presented by the magic date of June 15.

For self-employed people, or anyone with self-employment income, June 15 is the deadline for filing your tax return. Many people in this situation still use April 30 as their deadline, because this is the date on which any income taxes owing must be paid.

Executor an honour, but not one to die for

If someone named you as his or her executor, you would likely feel honoured — and for good reason. That person is nominating you as his or her personal representative, to put yourself in their place and to use your judgment when they have died.

It is likely not a job to get excited about. Being an executor involves a lot of responsibility and it will likely be very time consuming or even frustrating. An executor can even be held personally liable for things such as distributing assets to beneficiaries before taxes or debts have been paid, though most modern wills absolve executors for actions taken in good faith, with proper care.

An executor might also have to cope with impatient or unreasonable beneficiaries — or even family in-fighting.

When you are selecting a person to act as your executor, keep these things in mind. Sometimes this is a job best left to a professional executor such as a trust company, which has the expertise and experience — as well as the ability — to act as an impartial third party.

Regulation of planners on way?

As a regular reader of this column, you will recall there is no regulation of financial planning in Canada, except in Quebec.

That means that anyone can use the terms “financial planner” or “financial planning,” just as anyone can use the term “financial adviser” and a variety of other similar terms. This is not the fault of real financial planners.

On the contrary, the two professional bodies that are committed to enforcing financial planning standards and practices have been trying literally for 30 years to convince the securities commissions across the country to allow them to restrict the use of “financial planning” to practitioners with the proper education, qualifications and designations, along with written commitments to ethics. Approved planners would also agree to subject themselves to the enforcement of professional standards.

Sounds sensible, does it not?

Reports need more info

If you have investments such as mutual funds or individual shares, then you have had a month or so to review your new CRM2 reports that were added to the regular year-end statement you received in January.

These new reports are the Investment Performance Report and the Annual Fees and Compensation Report.

The goal is to give consumers of investment products better information to use to value the advice and services they are receiving from their investment providers, and educate them on performance and fees.

Because the investment industry has spent many millions of dollars putting these reports together in order to comply with new regulations, we should pay attention to them. The reports can be helpful, but there are a few things missing.

New and old rules for principal-residence sales

When you sell your principal residence, the gain is probably tax-free, under the principal residence exemption (PRE).

But what if you sell your cottage? Your farmhouse? Or your park trailer located in Arizona?

With the rapid appreciation in housing prices over the last several years, these questions have become critical, and we will answer them today.

However, let’s first look at some brand-new rules that came into effect with your upcoming 2016 tax filing.

Some major tax changes coming for new year

Happy New Year, happy Friday the 13th and happy longer days as we see the end of winter on the horizon. (Honest, it is just the other side of that huge snowbank. Really.)

While we are talking about good news, let’s talk taxes, first the changes for 2017 and then an update on CRA services that may affect your 2016 tax filing.

Actually, the only good news this year is for families with children under 18. The Canada child benefit began last July and makes up for the elimination of the family income splitting introduced under the previous government.

What families must remember about the child benefit is tax returns must be filed every year by both spouses (or one for single parents) in order to claim, even if there is no income.

Invest only in what brings you joy

Happy holidays! I truly hope you have been able to take some extra time off, spend time with loved ones and ponder what is most important to you in your future. Over the past 24 years, it has been my wish to help empower you readers to design and build the life you want.

At this time of year, I have traditionally talked about the process and techniques of setting goals. Instead, I am going to ask a more basic question: is it going to bring you joy?

It’s a great question to ask before buying something, signing up for something or making any important decision.

More deeply, will it bring you lasting joy? (Or at least utility.)

Mortgage-qualification rules may affect local markets

On Oct. 3, the federal government introduced new mortgage-qualification rules that take effect Monday. If you or someone you know is a potential homebuyer, you should read on — quickly.

I think everyone knows the housing markets in Vancouver, Toronto and, to a lesser extent Victoria, are overheated.

Both the previous and current federal governments have been increasingly anxious to cool these markets down before interest rates rise and cause a major house-price collapse when it becomes obvious many homebuyers could not afford the home they purchased with borrowed money at record-low interest rates.

The next phase of these rule changes takes place Monday. While these are aimed primarily at those very hot markets and will have the greatest effect there, don’t be surprised if some potential homebuyers in Manitoba suddenly find themselves disqualified from homes they had their eyes on.

How to get more happiness from your money

OK, I think we can all agree money can’t buy happiness.

Or can we?

Scientific research released recently suggests we can at least get more happiness per dollar spent if we make some smart decisions. Poor decisions about spending choices can lead to less happiness per dollar and even cause negative feelings that are worse than not spending at all.

A study called Money Buys Happiness When Spending Fits Our Personality (published online Sept. 8 in the U.K. journal Psychological Science) described a University of Cambridge study of 76,000 U.K. bank transactions of 625 people.

Financial planning for back to school

It always hurts to think about going back to school, even for those of us who are not students. Painfully, it suggests the end to our too-short summer.

If you have children heading to university, you may need to know about registered education savings plans (RESPs) and the rules that pertain to withdrawals and university funding. Winnipeg Free Press colleague Joel Schlesinger had a great, comprehensive article about RESPs on Aug. 13. I suggest you check that out.

Briefly, here are three things to remember about RESP withdrawals.

The student needs to be enrolled in post-secondary education and must ask the institution for a form or letter called Proof of Enrolment. A tuition receipt is not adequate.

Getting organized now makes tax time easier

OK, last weekend’s brilliant spring weather is behind us, and this week’s snow makes this weekend the perfect time for organizing your 2015 taxes, if you have not done that already.

True, your T3, T5013 and a few other slips won’t be mailed until the end of March, but your T4s, T5s, capital gain/loss reports, trading summaries, investment-income reports and other info should all be received by now. Getting a head start on organizing and comparing your slips to last year will make filing so much easier. This is true whether you prepare your own return, or use a professional.

I read last week 25 per cent of self-filers prepare their return in the very last week before the April 30 deadline. Don’t be one of those, as it radically increases your likelihood of mistakes and may even increase your prospects for audit.

Start by reviewing your 2014 return and making a list of information slips to use as your check that all have been received this year. You can then follow up on any missing slips before getting fully engaged in the preparation process.

Fix coming for new trust tax rule

There was some good news last week on the tax front. On Friday, some much-needed draft legislation was introduced to correct serious mistakes made when the previous government sought to tighten up tax rules on trusts. Poor drafting resulted in unintended tax consequences.

The biggest revisions come in the area of life interest trusts, or LITs. This is any trust you can transfer property into on a tax-deferred basis, then is subject to tax on the death of the life beneficiary. They are commonly used as an estate-planning tool to provide a surviving spouse with income while preserving capital for the ultimate beneficiaries.

I am not going to try to explain the problems with the current legislation, but I want to alert accountants, lawyers and anyone who has a type of testamentary trust (created by a will after a person died) that this draft legislation will change things. This is very complicated stuff and new to most practitioners, so seek good advice.

The current legislation is part of an initiative announced in 2013 and passed into law in 2014, taking effect Jan. 1. In addition to the intended effect of eliminating the favourable graduated tax treatment of testamentary trusts, the changes also had some incredibly negative and unintended effects on LITs.

Amid the holiday bustle, reflect on what’s important

Money is tight. We read that in the paper almost every day. Take-home pay is shrinking, and the gap between rich and poor is widening. Food inflation is high and the Canadian dollar is low.

Markets have had a lousy year, dragged down by the collapse of oil prices, while guaranteed deposit investments pay virtually nothing.

So, I'm going to suggest you count your blessings and list the things for which you are grateful.

Yup, it's that time of year when I stop to remember there is so much more to life than money, and pass that epiphany on to you. We all have such a long list of things for which to be grateful, and research has shown grateful people are happier and more productive than others. (Check out my YouTube video Be Grateful -- It's Free and Priceless.)

Taxing decisions to be made in light of new federal measures

As a shareholder of a private corporation or beneficiary of a testamentary trust, you have enjoyed some tax advantages. However, what you may not know is a perfect storm is headed your way.

Measures in the 2015 federal budget (released by the Conservatives) will begin to take effect in 2016. Colliding with those measures are key tax initiatives from the Liberal party. All signs point to rising personal tax rates in 2016 and future years.

So what can you do in 2015 to help ease the tax burden?

Owners of private corporations:

Year-end tax planning can save you plenty

Winnipeg is getting excited about the Grey Cup being here, so that means year-end can't be far away. It's time to review your year-end tax planning.

Capital-loss harvesting:

To ease the sting of declines in energy and other resource investments (or if you bought Valeant in August), you may be able to sell investments in order to realize capital losses. These losses can offset gains on other investments on which you would otherwise have to pay tax.

If your total realized losses exceed your realized gains, then you have net losses you can carry back to offset gains on which you paid tax in any of the last three tax years. (Or you can carry these forward to offset future gains.)

Beware of changing tax rules

Owners of corporations have always had many choices to make in order to try to minimize their total tax burden. Salary versus dividends, RRSP contributions versus retained earnings and income splitting with family members are just a few of the decision points.

Integration is the tax concept that whether a business owner incorporates and pays corporate tax (then individual tax on dividends to get the money out of the corporation), or earns all of the income personally, taxes should be similar.

Depending on changing tax rules, there are times when one method has worked better. Planning has gone full circle over the past 10 or so years, and now the federal election results will make planning even more challenging. We are here to help.

A reminder, though, all such planning and decision-making should be made in discussion with your tax advisers before you make decisions or write cheques. My comments here will help you understand the concepts and considerations, but please don't take this as advice for your situation.

Understanding rules on residence exemption

In years of advising clients who own cottages and vacation properties as well as their houses, we have done a lot of research on the principal residence exemption (PRE). Proper understanding of sometimes complex rules can save thousands of tax dollars when a property is sold.

Failure to understand or follow the rules can put you in hot water with the CRA.

The PRE allows the tax-free sale of a residential property that is "ordinarily inhabited" by the taxpayer, spouse (or former spouse), common-law partner or children of the taxpayer who is claiming the exemption. A trust or estate that owns such a property can also claim the PRE. However, the exemption does not apply to properties that are being rented out.

If you sell your cottage, can you claim that as your PR? Yes. Even a mobile home or houseboat can qualify, as long as you have slept there, basically. There is no time limit imposed on how often it was "ordinarily inhabited." Foreign vacation property may also be claimed.

Little lesson on RESPs

Wow! The sudden change in temperature this week dramatically announced back-to-school time.

This column is aimed mostly at post-secondary students and their parents, starting with RESP withdrawals.

My first suggestion for young people heading to university is to try to quickly make up a budget of anticipated expenditures. This will get refined over the next few months, but the sooner you start, the quicker you will lower your stress level. Having enough money will seem like an insurmountable task, but putting a number on it will help contain that monster.

People with university-aged kids may be thinking now about registered education savings plan (RESP) withdrawals.

Tax changes in 2015 let you defer some income

If you are between the ages of 71 and 94, and taking minimum withdrawals from your RRIF (registered retirement income fund) or LIF (life income fund), then this article will be of special interest to you.

In Budget 2015, the federal government made a couple of important changes geared to allowing some people to reduce their income taxes.

Specifically, the required minimum RRIF and LIF withdrawal amount has been decreased. This means people who do not require all of their withdrawals for living expenses can decrease these withdrawals, and therefore, defer tax to later years.

Recall that if you are age 71 or over, any money you had in an RRSP (registered retirement savings plan) had to be converted into an RRIF. In the case of former pension money, the conversion is from a LIRA (locked-in retirement account, which is known as a locked-in RRSP for monies that have transferred from a federally regulated pension, as opposed to provincially regulated) to a LIF.

Financial jargon can be confusing for investors

If you own investments, you will receive periodic statements with the value of your holdings, the details and perhaps performance. Statements might appear monthly or quarterly in the mail, or you might have converted everything to online access only.

Either way, do you have questions about what some of the terms mean? Every week I meet someone who isn't clear on the industry jargon that is unfortunately still used on many of these statements. Let's try to clarify a few of those.

Account type -- the terms used could include Cash, Margin, RRSP, RRIF, LIF, TFSA and a few others. Cash means non-registered or open, which means it is not an RRSP, TFSA or similar, and the investment income is taxable each year. It does not mean all of the money is sitting in cash, but rather it is invested. Each account description will usually identify Canadian or US dollars, the currency in which that account is invested.

The terms Balance or Cash (yes, the same word but in a different context) denote the amount of actual cash balance in that account at month end.

Considerations for RESPs in estate planning

It's a good time to be reviewing your estate plans. No, I don't mean that summer is the right time, necessarily, but recent changes to the tax rules on testamentary trusts and estates that take effect Jan. 1 mean 2015 is the year to review strategies.

Next month, we will review those strategies and how they have changed. Today, we will tackle one of the biggest challenges in estate planning, and that is successfully passing on registered education savings plans.

Other registered plans, such as RRSPs, RRIFs and TFSAs, allow a plan owner to name a beneficiary. That's the person or people who would receive the assets in the plan on the death of the owner, who is called the "annuitant" in the case of RRSPs and RRIFs.

Prepare yourself, investor, there will be a test

Are you prepared to fully appraise the value you receive from your financial-advisory or investment relationship?

If not, then get ready, as your friendly financial regulators are going to make you do this soon. Or, more correctly, they are forcing your investment suppliers to give you the tools to more accurately make such an evaluation.

Three points I need to make at the outset:

1. The new disclosure rules are a good thing for consumers of investment advice and products, as they will show you how much you are paying.

Address probate before it’s too late

If you own shares in a private corporation or you have private business interests, this article will be of interest to you. We will talk about ways you may decrease the amount of probate fees you pay to the provincial government on your demise.

You will also be interested in the federal government's promise in the 2015 budget to gradually decrease the rate of tax charged on the first $500,000 of profit each year on active business income, earned by Canadian small business corporations.

The current federal rate is 11 per cent (and zero in Manitoba, on the first $400,000 of such profits). The federal government is proposing to decrease this to 10.5 per cent starting Jan. 1, 2016, going down by one half of one per cent each year until bottoming out at nine per cent, effective 2019 and beyond.

Let's get back to decreasing probate fees on your estate. Recall that your executor will take your last will and testament to the provincial court, in order to prove this is the valid will. The court will provide a Grant of Probate, which provides assurance to financial institutions or other parties with whom you do business they can rely on the validity of this will and not be subject to possible liability.

Tax change helps families with children under 18

On top of the usual unbridled excitement you likely feel at tax time, this year we have some actual tax changes and the opportunity for many families to pay significantly less income tax than in past years.

The biggest change is the new income-splitting opportunity called the family tax cut. Although you have likely heard about this, a recent survey conducted for H&R Block Canada showed only 15 per cent of Canadians expect this to have any effect on their tax return.

It will be interesting to see the results after tax season is complete.

Only families with at least one child under the age of 18 qualify. The greatest advantage is bestowed upon families where one spouse earns all of the income. However, according to H&R Block, "even a small disparity in income between two spouses could result in a few hundred dollars of savings... "

Time to organize for income taxes

Well folks, it's time again to start thinking about filing your 2014 tax return. My job is to make the process as painless as possible for you, whether you file yourself or use a professional tax preparer.

(We are also approaching the RRSP contribution deadline. I recommend you review Joel Schlesinger's great column Another February, another RRSP deadline. This will tell you everything you need to know to help you make the right RRSP decision for you.)

My big, profound tax-preparation tip is to start early and get organized. Right now, review last year's return and list of information slips. Copy that list of slips to use as your initial checklist for making sure you have all the paper you need before starting. This way, you can follow up on any missing slips before getting fully engaged in the process.

I am a big fan of using a professional accountant if you have a complicated situation, or if taxes are simply not your thing. Better if you focus on what you do best.

Insurance policy can be sold to corporation

So, three weeks into our trial separation, how are you feeling? I admit I've missed you, but must also admit there are benefits to my new freedom. (I have switched to a once-a-month format for Dollars and Sense. Let me know what you think.)

Today's column focuses on a fairly narrow niche, which is people who have a corporation and who also have a personally owned life insurance policy. If you are in that situation, or you are a professional adviser, lawyer or accountant, this will be of particular interest to you.

One of the benefits I have at my firm is that we have a team of professionals working with us, including an insurance specialist, tax accountant and estate-planning lawyer. It's impressive the things you can absorb hanging out with such smart people.

Last week, I was reminded that a personally owned life insurance policy may be a valuable asset that can be sold to a corporation, to take out cash. This policy has to be sold at verified fair market value, but such a transaction can allow the corporation to pay cash to the shareholder, without tax. Otherwise, this money would have to be paid out as a dividend or salary.

Achieving your big dreams easy as…

There is an amazing phenomenon I heard about years ago -- but I was skeptical. However, having now experienced this many times myself, I have become a convert.

I'm talking about the amazing occurrence of deciding on something specific you want in your life, writing down a description of that desired outcome, and then -- sometimes miraculously -- having an opportunity to achieve that outcome.

We are not necessarily talking about material things. Let's move your thinking past the Boxing Day sales (although a big sale might have been your means to reaching a goal).

If you are clear and articulate (and perhaps vocal) on what you want, and then open yourself to different possibilities and to what the world has to offer you, those things you truly desire will come your way.

A time to reflect on all our blessings

Thank you!

I can't think of a better way to start this second-last column of the year. Thank you for letting me into your home through the newspaper, and now the Winnipeg Free Press website, for over 21 years.

It has been a great run, and given me the opportunity to learn so much, and to hear from so many great readers.

Today's article on gratitude is especially poignant for me. I am retiring from the weekly challenge of producing a fresh piece of wisdom every seven days, to devote more time to family and clients, and to just smelling the many roses with which I have been blessed.

Setting priorities, time still the key

Cash flow is the engine of your financial machine. It's the energy, the driver. If you can harness that energy and run a more efficient machine, you can make your money go much further.

I know you think I probably just came up with the most profound statement ever there, but we have actually been saying this in seminars and consultations since the 1980s.

It obviously makes a lot of sense to get more life out of your money. But can it be done?

Well, let's see. We all know people who always seem to have enough time to do things they really want to do, right? My guess (because I'm not one of them) is they give some thought to the things most important to them, and then set aside the time to accomplish them first.

Year-end tax planning could pay off

Well, the weather sure says "December," as does the calendar. That must mean it's time to review your year-end tax planning.

If you do nothing else, be sure to make any planned donations in time to get a receipt for this year. Gifts to registered charities create a combined federal and provincial credit of about 45 per cent (after your first $200 of annual donations), so give generously.

Remember if you donate investments such as shares, flow-through shares or mutual funds that have capital gains, this will get you the donation credit, while exempting the capital gain from tax. So if you have such appreciated shares, consider donating them while retaining your cash.

Another reminder is to consult your tax adviser now if you have complex issues or potential opportunities, especially with corporations. Heed the deadline.

CRA looks to put a value on goodwill

The Canada Revenue Agency has had a busy week, hasn't it? In a moment, we will talk about some possible tax changes that may increase significantly the tax cost for selling a corporation, but first let's touch on two events in CRA news.

On Wednesday, the CRA announced a formal agreement with the Chartered Professional Accountants (CPA) of Canada. Under this framework agreement, the two organizations will set up seven committees to increase communication and co-operation in tax compliance, administration and red tape.

This is a first-ever event and could be historic in setting up a formal framework between the rule makers and the professionals who must help taxpayers comply with those rules.

Kudos to the minister of National Revenue and CPA Canada, which now represents 80 per cent of professional accountants in Canada, for making this happen.

Be creative this Christmas to avoid credit card debt

It was Financial Planning Week in Canada this week, just as seasonal shopping starts to pick up big time.

I hope you can use some of the important research released this week by the Financial Planning Standards Council of Canada, combined with the tips in this article, to significantly decrease your permanent stress about money, and get through the holiday season unscathed.

Let me tell you about the best Christmas our family ever had. (These concepts apply to all other seasonal celebrations that include giving gifts.)

My brilliant wife told our adult kids last November all gifts given must:

Protect yourself: always be paranoid

Last week my daughter received a welcome email from the Canada Revenue agency (CRA) letting her know that thanks to a reassessment, she was going to receive a $545 refund.

All she had to do was click a link in the email to confirm her banking information, and the money would be transferred electronically.

The email addresses on the message were looked accurate and used the root "gc.ca"

Luckily, she sent this to me before clicking and asked, "Does this look legit?"

Good news regarding disability tax credit

There was good news this week out of Ottawa.

No, I'm not referring to the "family tax cut." However, that announced partial income splitting for families with children under 18, the increase to the universal child care benefit, its extension to children between ages six and 18, the increased deduction limit for child care expenses and the children's Fitness tax credit are obviously good news for people with children under 18.

But the good news I refer to is the announcement by the Minister of Revenue to open public consultations on the disability tax credit (DTC) application process.

The minister has a stated goal of, among other things, investigating, "...how we can simplify the disability tax credit process to better meet the needs of persons with disabilities and those who care for them."

Financial literacy: Make it a priority

This week's weather makes it clear fall is here. Who would've expected that?

November is financial-literacy month, with some worthwhile opportunities for you to access advice.

The federal government recently named Jane Rooney as Canada's first leader of financial literacy.

The FCAC website has a variety of tools, including calculators, advice and statements of your rights as a consumer.

Income splitting reduces tax burden

A headline this week announced the Conservative government might be backing down on a 2011 promise to reduce the income-tax burden on families by allowing income splitting with children.

The Tories had been saying they would start reducing income taxes next year, once they had a confirmed budget surplus. Some of this reduction would be through a concept called income splitting. However, a report this week suggests the government may back down on this promise, since income splitting would mostly benefit high-income families. It might do very little for the middle class, which coincidently has more votes.

What is income splitting, and can you use the concept to reduce your income taxes under the current rules?

Let's explain, and see how thinking along these lines might help your tax return.

Common online investor mistakes easily avoidable

This week, I was asked the question, "What are the most common mistakes investors make when investing online?

Let me start by saying the mistakes online investors make are simply a turbocharged version of the mistakes all of us make as investors.

This list is not meant to be all-inclusive or all-encompassing, and I welcome your comments on the many things I've missed. However, I think this is a good start...

1. Having no overall planIt's my belief that greater success can be achieved in less time when people take the time to get clear on their highest-priority goals and objectives. When specific dates and amounts are put on those goals, a detailed financial plan can be developed to achieve them.

Finding purpose is worth far more than money

A funny thing happened to me last week. Several colleagues and I were invited to lunch to get pitched on donating money to a worthy cause. You know, the free lunch that may end up costing you a month's pay.

Many of us have known each other since we were in our 20s, and had gone through endless business and personal challenges and triumphs together over the last three-plus decades. When you are in your 20s and working too hard, you also tend to play hard. You know, The Wolf of Wall Street sort of shenanigans (ha, I could only dream).

So it was interesting to realize we had grown up. The tone of the conversation, while still laced with in-jokes and references only we would get, quickly turned more serious, focused on social causes and how it's now time for us to give back to the community in a really meaningful way.

A compelling case was made to support this cause, with articulate presentations made by our colleagues, who were the proponents. In spite of their obvious passion and great reasons for supporting this cause, they were equally adamant it's our time to give to many causes, not necessarily theirs. Thanks to our community and the opportunities it offered, we had all done well, and it was our time to give back, not just in the regular ways we do each year by making donations to charities, but by getting together, reaching deep and combining resources to really make a difference.

Time to evaluate progress in 2014

“HAPPY New Year” may sound a little funny with no snow on the ground, but a lot of people consider September the start of a new year, or at least a new season.

After what was hopefully a slower pace through the summer, allowing time for reflection and contemplation, September is a great time to review your goals for the year and modify wherever indicated.

As well, with four months left to year end, this is the home stretch, and the time to make sure you and your behaviour are aimed at your personal bull's eye.

Over the next few weeks, we will be helping you in various areas, including overall wealth creation strategies, tips for young people in areas of financial literacy, spending control and debt elimination, structures for business owners or those who aspire to be a business owner, year-end tax planning and even the proven secrets to achieving happiness. Stay tuned.

Ups and downs of dividends

Would you agree a big reason to buy a business is so it can provide you with regular income, in the form of a share of profits?

Now, what if you could buy a business that would pay you this regular cash, but you didn't have to actually work in it?

As a bonus, you could sell your share of the business any time. It all sounds pretty good.

Those are some of the benefits you get when you purchase shares of a mature business that pays regular dividends on its shares. Dividends are the cash payments the company has decided to pay, which represent a portion of the after-tax profits. Since the company has paid tax, you get a tax break on the dividends paid to you by Canadian corporations.

Replacing TFSA money too early will cost you

The tax-free savings account (TFSA) has become a very, very popular savings vehicle for Canadian taxpayers with over 10 million accounts open at the end of 2013.

As you know, there is no tax deduction or immediate benefit for putting money into a TFSA. However, any investment income (interest, dividends and capital gains) earned within the TFSA is tax-free. This has saved taxpayers over $1 billion since 2009, says CRA.

As well, all withdrawals are tax- free. These characteristics make the TFSA an ideal shelter for long-term retirement savings, as the future withdrawals have no negative effect on taxes, income-tested tax credits or other social benefits.

However, TFSAs are not without potential costs imposed by CRA, as we were reminded last week when CRA announced 54,700 taxpayers received warnings they may face penalties for TFSA over-contributions.

Be on guard for bogus iTunes Store receipts

Over the past while, I purchased some music from the Apple iTunes Store, as have millions of other people around the world.

As you likely know, Apple sends you an email with your purchase receipt and confirmation. This is nice a reminder of what you purchased and the amount that will show up on your credit card.

However, this good practice has also provided a great opportunity for Internet swindlers. One of the most popular scams this summer appears to be fake iTunes Store receipts, encouraging people to click on a link to correct the mistakes they have purposely put in the email.

Since many people are used to getting these receipts, nothing looks out of the ordinary, except it is a purchase that was not actually made. When I received a receipt telling me I had paid $35 for the audiobook The Rise and Fall of the Third Reich, my immediate impulse was to click on the link to report the error.

Want to save cash on gas? Here is what you should do

I broke my record this week. That's cause for celebration, on many fronts.

What record? The number of minutes I was able to glide with my foot completely off the accelerator on my morning drive to work. Lexie and I glided almost five minutes out of 14, using virtually no gas, and travelled another three minutes with a very light foot, just maintaining speed.

Yes, I know, small things amuse small minds, etc. But hear me out, as I suggest a guaranteed way to save money every day you drive, reduce wear and tear on your car and arrive at your destination in a much better mood than if you race from red light to red light.

With gas prices hovering near record highs, it's time to repeat some tips I provided in 2008, when gas prices first went over $1 per litre, and some new ones I've learned since.

Some rare good news from CRA

In this summer of rain and floods, it was great to get some good news for a change from our friends at the Canada Revenue Agency. Or at least limited good news.

This is in the form of a partial simplification of form T1135, Foreign Income Verification Statement, which had unfortunately become very complicated and unwieldy due to changes made in 2013.

Actually, these complications were proposed and a new form had been created, but was then delayed, thanks to a huge backlash from tax preparers and taxpayers. CRA granted an extension on filing this form until July 31, 2014 (for 2013 tax returns) and allowed a summary instead of the agonizing level of detail proposed.

In the first week of July, CRA announced some of this simplification will become permanent. However, items that could previously be left off the form must now be detailed.

Interesting to watch as securities world evolves

This week, we saw federal Finance Minister Joe Oliver announce he is resurrecting Jim Flaherty's initiative to develop a single securities regulator in Canada.

Currently, there are 13 securities commissions across the provinces and territories. Issuers of stocks and other investment vehicles needing to raise capital to make the economy grow must therefore have approval from up to 13 entities to legally market their wares everywhere in Canada.

This is the only such system in the developed world. All other countries have a national securities regulator. On the face of it, our system sounds ridiculous, but it's not as bad as it sounds.

The provincial securities commissions and the Canadian Securities Administrators (the CSA) have worked hard over the last 20 years or so to streamline this process as much as possible.

Halftime report on markets

It seems there are always a lot of misconceptions about stock-market performance, its connection with the economy and the general health of the markets. Just last week I heard a couple of people mention all markets were "not doing well." Let's correct that misconception.

The fact is 2014 has been a pretty good year so far for the stock and bond markets and not a bad one for the Canadian dollar.

The Canadian stock market is healthy, finally reaching the levels it hit in 2008. The S&P/TSX index closed out June 30 at 15,146 points, up about 11.6 per cent from its Dec. 31, 2013, close of 13,622.

A big difference between now and 2008 is total corporate profits are much higher now. These profits are supporting the stock prices much more solidly than was the hollowness of unfounded optimism and false profit claims back in 2008.

Sacrifice now; live better later

We all know more university and college students are graduating with large amounts of debt. They borrow money to pay rising tuition and other education costs and just to live while going to school.

For many, summer is the one opportunity to earn some money, put something away for the fall and hopefully, reduce a bit of debt incurred during the year.

We have some solid suggestions today, but first we have to acknowledge the obstacles. It’s tough to find a job and not everyone has been successful yet, lots of summer jobs are very low-paying, and a person still has to live.

Now let’s try to figure out how to overcome those obstacles.

Snowbirds on deadline to clarify tax status

Have you heard the one about the Perimeter Security and Economic Competitiveness Plan? Yeah, the one with the new Entry/Exit Initiative?

Far from being the name of the very creative joke, it's a new agreement between the Canadian and American governments to share information on all entries and exits from both countries.

Among other things, it means both countries will know how long any particular snowbird has been visiting in the U.S. under their B-2 visitor visa. This will allow the U.S. government to enforce the six-month annual time limit allowed for visitors and to be aware of any Canadians who have a "substantial presence" in the U.S.

In rough terms, which I will explain later in detail, substantial presence means more than 121 or 122 days per year in the U.S. on average for the last three years. Any Canadian with that much time in U.S. must file Form 8840 with the U.S. government, to show a "closer connection" to Canada than the U.S., and the right to file only a Canadian tax return. Otherwise, the IRS will come looking for U.S. income taxes.

Barter: Don’t forget taxman

From time to time, it is my unwelcome role to be the bearer of bad news. I have had to do this in the past, with things such as reminding business people that golf green fees and memberships are not tax deductible, even when incurred to entertain customers.

Today, my wet blanket extends to barter transactions. Bartering is arranging one of those wonderful agreements between people or organizations, to provide the service of one for those of another, rather than conducting the transaction with cash.

For example, let's say a lawn- care company approaches me to look after my yard. I like the idea, but I'm cheap, so I offer to provide the company owner with financial- planning services instead of a payment in cash.

It turns out he's in the market for advice, and we strike a deal. My lawn gets cut and fertilized all summer, and I provide an agreed number of hours of advice.

Budget expands charitable giving

The federal government budget of 2014 ended up having a potentially large effect on people's tax returns when they die and shortly afterwards.

We have previously talked about the elimination of the preferential graduated income tax rates for testamentary trusts after Dec. 31, 2015. Estates will still be allowed the graduated tax rate for 36 months following the date of death, but then will be subject to the top tax rate on any investment income earned.

(This does not mean inheritances have become taxable or Canada has instituted a U.S.-style estate tax, so don't panic about that.)

On the potentially positive side, the same budget has allowed deceased people (or at least their representatives) to make larger charitable donations through their wills and estates.

Philanthropy is about more than tax credits

We usually talk about philanthropy and charitable donations in December, as the income tax deadline for the charitable-donation tax credit approaches.

However, a few things have compelled me lately to provide a mid-year reminder that, although Dollars and Sense talks about money all year long, it's not the money that's important, it's what it can do for you, your family and your community.

We had the honour and pleasure of attending a dinner this week at the new Canadian Museum for Human Rights, the house local and national philanthropy built. The event was held to present an international humanitarian award to Moe Levy, executive director of the Asper Foundation and one of the two people (with Gail Asper) most responsible for the museum dream becoming a reality.

This is the first Canadian national museum ever built outside of the National Capital Region, and the first national museum built in 45 years. It is impossible to overstate this accomplishment, and it has been achieved here in Winnipeg. That's no coincidence.

Know how your investments are taxed

A recent study shows less than half of Canadian taxpayers understand how their investments are taxed. While I know that this statistic is much too low when it comes to you well-informed Dollars and Sense readers, perhaps a quick review is still in order.

Here are the basics for investment income earned on non-registered investment accounts. This is money outside of RRSP, RRIF, TFSA or other registered accounts.

Interest income is paid on savings and deposit accounts, GICs, bonds and other fixed-income investments. It will also be paid to you by the Canada Revenue Agency (CRA) on your tax refund, if they take as long to process as they have mine.

Interest is taxed at your top marginal tax rate (MTR). For example, if your taxable income is between roughly $31,000 and $43,000 after deductions, your MTR is 27.75 per cent in Manitoba. The MTR gets higher as your taxable income rises, maxing out at 46.4 per cent on taxable income above $136,000.

In retirement, be the ant, not the grasshopper

There's a simmering and occasionally vociferous debate about how to solve what some see as a looming retirement crisis in Canada.

You see, a lot of us aging baby boomers have not saved enough money for retirement. As a result, many people will depend heavily on government programs, exacerbating the inevitable demographic tilt toward fewer workers trying to support more retirees.

To oversimplify, there are two extreme sides of the debate and two opinions on possible solutions.

One side believes the government has to look after people by making sure they participate in mandatory retirement programs, such as an expanded CPP or mandatory corporate pension plans.

Tax-preparing software turns a good time into a great time

Just for fun, I redid some family tax returns last weekend in order to try out some different software packages.

I know that's not everyone's idea of fun, but hey, it was a long weekend!

Which brings us to this coming weekend, normally the last one you have to complete your income tax return if you haven't already filed. However, this year, the filing deadline has been extended to May 5, from the usual April 30. Penalties and interest begin after midnight, May 5.

Please, don't leave it till the last minute. Pretend your deadline is still April 30, and you may avoid a lot of headaches.

Even with no income, it’s worth filing taxes

If you have no income to report to the Canada Revenue Agency, or you have a small amount of income and no income tax owing, you are not required to file an income tax return.

However, I strongly urge you to file a return anyway. Here's why.

There are a number of tax credits and government benefits that are based on tax returns. Refundable tax credits could put cash in your pocket.

These include the GST tax credit, paid quarterly to low-income Canadians, and related provincial programs.

A guide to trustee-beneficiary relationships

A trust is a legal arrangement where trustees hold legal ownership to property on behalf of beneficiaries, who have the actual beneficial interest in the property.

Trusts are used for a large number of purposes, and they can be extremely effective for asset protection, management for inexperienced or unreliable beneficiaries and tax planning.

This article is especially intended for professional advisers (investment, financial planning, even legal and accounting) and trustees or beneficiaries of trusts. If you are not in that category, then you might find it interesting, but not personally relevant.

Please keep in mind I am not a lawyer or accountant. They are the specialists you need to consult if any of this applies to you.

Couple with differing incomes can use tax rules to advantage

As you review your income tax return this coming month, you might notice you and your spouse have very different amounts of taxable income. If one of you is below $43,000 taxable and the other is above $87,000 taxable, then read on.

In a situation like this, the lower-income spouse, we'll call him Bob, is paying a much lower rate on investment income. Bob's combined federal and provincial tax rate is zero to 28 per cent on interest income while only zero to 6.5 per cent on eligible dividends paid on any company shares he owns.

On the other hand, Bob's high-income wife, Sally, is paying 43.4 per cent to 46.4 per cent on interest income and 28 per cent to 32 per cent on eligible dividends.

Obvious answer? Claim all the investment income earned by either of them on Bob's tax return.

Primer on disability credit

When a client received a cheque for $10,300 after our suggestion to apply for the disability tax credit (DTC), I was reminded it is time for us to review the rules and regulations governing the DTC application process.

The second hint to me was an excellent article by Peter Manastyrski in the Senior Scope newspaper on the same topic. Peter is a DTC consultant with A Step Beyond, who helps with applications.

In spite of previous reminders, I believe there are still many people who qualify for the DTC but have never applied and some who may have been wrongly denied.

The rules and the application form (T2201) are complicated. A person can be working full time and still qualify, while others could be collecting disability income from an insurance company and possibly not qualify.

Tax refund burning a hole in your pocket? Put it to use

Before I begin my lecture about making maximum use of your income tax refund, let me relate some trivia.

These are courtesy of CRA, Statistics Canada, CBC and the Knowledge Bureau, from the 2012 tax year.

About 17 million taxpayers will receive refunds this year, with the average about $1,600. That's an amount that is worth investing, reducing debt, or otherwise putting to good use.

CRA collects some $120 billion in personal income taxes from the 25.5 million people who file. (Remember, even though you got a refund, you probably still paid income taxes.)

Don’t forget your tax-time paperwork

Last week, we reminded you of the penalties for filing your tax return late and also the significant penalties for omitting information slips or failing to disclose all sources of income. This includes capital gains on investments that were sold during the year.

A number of people have asked me, "What is the difference between a T3, T5 and T5013 slip, and what about the other paper received from my investment company?"

A T3 slip is an information return issued by a trust. Most common are T3s issued by mutual funds, most of which are legally trusts. On the other hand, mutual fund corporations issue T5s. Less common are T5013 slips, issued by limited partnerships to owners of partnership units.

Unfortunately, the CRA mailing deadline for T3s and T5013s is March 31, which can hold up your application for refund.

Don’t slip up when it comes to your tax slips

As you can tell by the balmy weather, spring is almost here. (Yeah, right).

Nevertheless, the time to prepare your tax return is upon us. Most Canadians use professional tax preparers for their returns, and this is a very good idea, especially if you have any complicated filing issues. However, I strongly encourage you to personally become more knowledgeable about your return, and how each line or filing decision (if you have any) affects your bottom line.

As you know, the deadline for filing is midnight on April 30. If you have self-employment income, you can delay filing until June 15, but you still have to pay any taxes owing by April 30. Interest on unpaid balances is compounded daily at the prescribed rate.

There are also penalties for filing late if you owe money on your return. The penalty for late filing is five per cent of your 2013 balance owing, plus one per cent of your balance for each full month your return is late, to a maximum of 12 months or 12 per cent.

Column on managing money produces inspiring responses

Wow, does Dollars and Sense ever have an amazing, caring and engaged readership! While I always believed that to be true, it was proven in spades.

Two weeks ago, I suggested the best way we can change people's financial planning behaviours in a positive way is to apply positive peer pressure and social motivation.

I offered a free copy of my book Managing the Bull to the first five readers who told me an authentic story of how they have motivated a friend or family member to act to improve their financial situation.

The first response was received at 5:48 a.m. the same morning, the next coming seven minutes later. By noon, we had given away 15 books, as it's hard to say no to enthusiasm.

Bad news on trust taxation

Finance Minister Jim Flaherty delivered his 10th, and likely last, federal budget on Tuesday. In spite of the gold rush from our Olympic athletes threatening to drown out this news, he still got lots of attention.

On the personal tax front, there are some tinkering improvements that affect limited numbers of people, which I will list later.

However, most of us in the tax and advisory community were hoping for good news on the taxation of testamentary trusts. What we got was clarity, but bad news.

From now on, any income earned within testamentary trusts will be taxed at the top tax rate rather than at the graduated tax rates that have applied until now. This top rate will also apply to estates after their first 36 months of existence and to "grandfathered" inter vivos trusts. (Don't worry -- if you have one, you know it.)

Canadians need evangelists for financial-planning gospel

Darn... another week and another poll showing Canadians are woefully under-saving toward retirement and appear to be in complete denial about the realities.

The latest is the annual RRSP survey by BMO Financial Group showing one-third of respondents will "rely heavily" on their monthly CPP benefits for their retirement. Average benefits are in the range of $600 a month, not much to live on.

Polls each year by each of the banks suggest sometimes 50 per cent of Canadians say they intend to contribute to an RRSP or that saving for retirement is their top priority, but only about 26 per cent actually make the contributions.

Last year, 31 per cent of respondents said they did not plan on contributing to either their RRSP or TFSA, and that number is likely higher this year.

TFSA a great way to insulate gains from the tax department’s clutches

In the last few weeks, I've had some delightful conversations with people about tax-free savings accounts (TFSAs).

There has been one consistent theme: Nobody knows all the rules, and a small lack of knowledge could mean missing out on some big opportunities. So let's do a quick TFSA review.

(Besides, talking about TFSAs prevents me from bragging about our team being named by Wealth Professional magazine as one of Canada's top 50 financial advisers, and mentioning that would just be gauche.)

TFSAs are a special type of account registered with the government. They were introduced in 2009 and can be held at a bank or credit union, investment dealer, discount broker, mutual fund company or life insurance company.

Let’s get moving on those RRSPs and TFSAs

It is hard to believe, but we are now almost to the midpoint of what we have traditionally called "RRSP season." This was so named because, incredibly, past generations used to actually procrastinate on their RRSP contributions until close to the deadline.

Yes, it's hard to believe. I know you have completed your contributions for the 2014 tax year, to get your investments into the tax-sheltered environment of the RRSP as soon as possible.

However, in case you are still thinking about your 2013 contribution, the deadline is 60 days after the year end, in order to deduct your deposit on the previous year's income tax return. That usually takes us to March 1, but that's a Saturday this year, so the official deadline is midnight on March 3.

(I can just picture the consternation among financial services workers as a result of me letting that cat out of the bag, so please consider your personal deadline to be Feb. 28, to limit my list of enemies.)

A primer on basic strategies of tax planning, deferral

Retirement planning can seem extremely complex, with scores of complicated terms and acronyms.

But like most things that are complicated when you first look at them, they can become pretty straightforward once you understand the concepts.

This column will explain some basic concepts of tax planning and deferral, then get into the extra choices business owners (and ex-business owners) have to make. Over the next several weeks, we will take a look at specific RRSP and TFSA considerations, but today will focus on overall strategies.

Certain retirement income is fully taxable, including OAS, CPP, pension income, RRSP, RRIF and LIF withdrawals and any ongoing employment or net self-employment and rental income.

Pensions on solid ground

Since the financial crisis of 2008, a disturbing number of Canadian defined-benefit pension plans have been underfunded and in a deficit situation. This means their expected liabilities for the next 20 to 30 years -- the benefits they have to pay out to their members -- exceed the expected amount of future assets.

In very simple terms, the assets of a pension plan include the current amount of money in the plan, the expected future contributions by active members and the expected investment returns on that total amount of money.

Actuaries are the professionals who make these calculations. (They are an exciting bunch, much like accountants but without that quirky sense of humour.) They make long-term assumptions about interest rates and investment returns and then customize these valuations for each pension plan, based on factors such as the ratio of active to retired plan members and average member age, to help determine an accurate estimate of the future assets and liabilities.

When the rate of return used in the long-term projections is low, the calculation of assets is decreased significantly. This has been a problem since 2008, exacerbated by several years of low actual returns on investment portfolios.

Your future is in your hands

There are a lot of factors that influence human behaviour. One thing we know is most people who accomplish what they want have usually decided ahead of time what it is they want to accomplish.

It makes sense, doesn't it?

But the connection is incredibly powerful. In my book Managing the Bull, I cite some research that is astounding. If you have not yet purchased a copy, then just take my word for it for now.

Another established fact is that people who write down specific, measurable goals, and then create a written plan to go from where they are to where they want to be, are even more likely to reach those goals.

Time to give back (and collect the tax credit)

There exists a young woman for whom I have the most respect, both for her talent and character. Among other things, she is generally very aware -- and usually ahead -- of any meaningful current trends.

Therefore, it was a slight curiosity that for years she had no tattoos, unlike most trendy young women in their 20s these days. But it turned out the delay was due to very patiently waiting for the right idea.

The right message turned out to be a very subtly applied single word -- Gratitude.

Her decision proved to me again that she is wise beyond her years. But I tell this story as we approach year-end and the holiday season, as I think that gratitude is the one word that will help each of us fully appreciate what we have. It can also instil in us the generosity and kindness of spirit that will make us feel as good as we possibly can at this time of year and throughout the year.

Keys to financial success always stay the same

OK, we're approaching the end of the year. Let's take stock of where we stand, economically and financially.

The Toronto Stock Exchange 300 Composite Index is trading at 4,255. The Dow Jones is at 3,908, while The S&P 500 is at 459.

Oops... that was 20 years ago, when we started writing Dollars and Sense. It was a different world then, and a million things have changed. But we still have the same name on this personal finance column.

Back then, the term "sub-prime" described a cheap cut of steak. The bank rate was around 12 per cent and long-term Government of Canada bonds could yield 11 per cent, guaranteed for 30 years. My personal computer cost $3,300, down from $5,500 five years earlier. It could calculate almost as fast as your current handheld calculator, but nowhere nearly as fast as the smartphone in your pocket.

Take 20 minutes today to save untold tax dollars

Boy, it seems like the year-end is suddenly coming at us like a runaway train.

We are busy reviewing all of our client accounts and CRA records, with an eye to uncovering opportunities to offset gains or recover taxes paid on gains in past years.

This is all while we also plan for their Dec. 31 annual reports and the annual update on their financial plan and retirement income projections. It's a busy time, as my team will tell you (and someone mentioned there's a big holiday coming up that needs preparation, as well).

So how do you reduce your taxes for 2013?

Don’t let yourself get hooked in a phishing scam

Surprising, fascinating, often insulting and more than a little scary.

That describes the daily emails that come into my old email address, which no longer has an operational spam filter. Without the junk mail screener, I wade through some 40 to 50 unsolicited emails per day. Many are quite rude, though occasionally hilarious.

More than half of them are offering to increase the size of my manhood, which is an offer I am trying not to take personally. I can also very easily lower my blood pressure and flatten my abs. If only self-improvement were so easy...

But there is a very scary element to all this. The dangerous part is the large number of legitimate-looking emails that talk to me about my recently received payment, my ATM card, my account with my bank or even my recent rental car.

Your personality key to investing

Here is something interesting... If we headlined this article, "Knowing your investor personality can make you money," it would appeal to different people than if we called it, "Knowing your investor personality can avoid losses."

Some folks are risk-averse and more highly motivated to avoid losses than seek gains. Their behaviour and decisions are more often influenced by fear.

Some investors are the opposite, where greed is more often the dominant motivator.

Knowing your own investor personality can therefore be critically important. But here's the kicker, and the real reason you need to know about these things:

Investing in bonds — not as simple as you think

So, let's say I am a conservative investor with a primary goal of capital preservation. As a result, I invested 70 per cent of my RRSP into a number of government bonds because I did not want to take any risks.

So, imagine my surprise when I looked at my June 30 investment statement and found my portfolio was down four per cent on the quarter. How the heck did my government bonds with guaranteed maturities decline so much?

A full explanation is coming, but first be assured if you own those bonds directly and hold them to their guaranteed maturity date, you will receive the full value and the yield-to-maturity you were promised.

However, if you own those bonds indirectly, such as through a mutual fund or ETF, you have no such individual guarantee on the maturity value. Instead, you own units of a pool that owns a group of such bonds. In this case, you are dependent on the bond prices recovering, or the manager holding to maturity. Bond funds, balanced funds and bond ETFs suffered similar declines in May and June.

Selling businesses a taxing situation

All of the great fortunes in history -- other than those of kings, queens and conquerors -- have been made by building great businesses.

In our semi-regular series on businesses and their structures, today we will focus on the succession options for businesses, and the tax considerations. There is an old saying that every business is built to be sold, so let's make sure your sale happens in the most tax-effective fashion.

We talked about the business structures available, those being sole proprietorship, partnership and incorporation. There are subgroups of each you can discuss with your accounting and legal advisers, but these categories capture the main differences in tax treatment.

As a business operates each year, proprietorships and partnerships show their gross income, expenses and net profit on the personal tax return of the owner, as we detailed on Oct. 18. This can be advantageous in the early years of the business, as net business losses can reduce taxes from other sources of income.

A little lesson on taking cash from RESPs

Today's column is about the complicated business of withdrawing money from registered education savings plans.

While many parents will have completed this task for the current term, I have found in recent conversations many do not really understand what they did or why.

Still others have delayed the withdrawal decision because they have been unable to grasp the whole concept.

If you are in that category, do not feel bad. There is an entire book available called How to Withdraw Money from Your RESP Account Whether Your Child Goes to School or Not, by Mike Holman.

What you should know when forming a corporation

LAST week, we talked about the different options available to people who are starting or running a business. These included sole proprietorship and partnership, where the owner(s) and the business are the same entity for tax purposes. Profit or loss of the business appear directly on the individual personal tax returns of the owner(s).

Corporation is the third option, and the one generally chosen by businesses that are larger or longer established.

A corporation is a separate entity from the shareholder (or president, director or manager). The corporation files its own tax return and pays tax on any positive net income at the corporate rate that applies to that corporation.

A non-tax advantage to operating a business through a corporation is that the shareholders -- the actual owners of the entity -- are shielded from direct liability for the debts of the corporation or claims against it. While the corporate directors can be held liable for unpaid tax withholdings and certain other statutory items (and they would normally be named in lawsuits against the corporation), generally the corporation itself is the only entity liable for debts or obligations incurred in its name.

Different tax structures for different businesses

Now that we have dodged another economic bullet in the U.S., with the gun once again loaded by the dysfunctional American legislative situation, we can now turn back to financial-planning fundamentals.

Today -- and over the next couple of weeks -- we will focus on the area of the Canadian economy responsible for the overwhelming majority of new jobs in the last decade. This is small and medium-sized businesses and startup enterprises.

The emphasis today will be on the basics of business structure and the options available to someone starting a commercial operation with an expectation of profit. (By the way, that's pretty close to the Canada Revenue Agency definition of a business).

In the next few weeks, we will talk about the taxation of different business structures and then succession, retirement and estate planning for business owners.

Washington’s financial drama reason to assess your position

For those who are addicted to U.S. news networks and TV shows, it's a stressful time.

My personal theory is one of the worst things you can do for your health is follow these shows on CNN, Fox and CNBC. I've visited relatives who have this stuff on all day. For the first hour or so, I feel very informed, but after a day or two I go berserk. Literally.

When times are good and there are no big issues to worry about, these networks create them and provide a steady stream of "experts" who contradict each other, leaving the viewer not knowing whether to buy or sell in that particular minute or day, which is the time period in which they trade.

The only good news about that is the majority of investors end up doing nothing -- usually their best strategy.

Advanced planning reduces taxes on estate

Last week, we talked about the two recommended approaches to estate planning. One is to simplify the estate process by using beneficiary elections and joint ownership, but with great care and thought.

The goal of that approach is to reduce probate fees, simplify and speed up the estate-settlement process and possibly even avoid probate altogether.

The other approach is to write a will with a lawyer who specializes in tax-effective estate planning and have that will describe testamentary trusts through which the beneficiaries will receive their assets. This strategy usually requires maximizing the size of the estate and the resulting funding of the trusts.

This means higher probate fees, but these are only 0.7 per cent in Manitoba. The long-term benefit could be significant tax savings each year for each beneficiary. However, the Department of Finance has introduced a proposal to limit this benefit to 36 months after death.

Simplify your will and make life easier for beneficiaries

When planning for the timely and tax-efficient disposition of an estate, there are two main approaches to take.

Whoops, apparently there are three. The third approach, taken by somewhere between 40 per cent and 50 per cent of Canadians, is to not bother with a plan and not even create a simple will. This approach has variously been called unwise, inefficient, expensive and stupid. All of those terms could apply.

In other words, do yourself and your family a favour and at least create a simple will that names an executor and outlines your wishes as to who gets your stuff. Without that, your family will have a ton of legal, investment and tax hassles to deal with, layered on top of their grief.

Now, back to the two wise approaches. One is to simplify the estate as much as possible by making use of beneficiary elections where available, and possibly joint ownership of bank and investment accounts and properties. When done with care, this is an excellent strategy.

Confused by adviser pay? Help is on the way

Today, we have some good news and bad news -- and a call to action -- for both investment advisers and investors.

The news comes from a survey just released by the investment industry magazine Advisers Edge (advisor.ca) on investment adviser compensation. One thousand consumers of investment services were asked a series of questions about their knowledge and satisfaction levels with how their advisers are paid.

The release of these results this week was perfect timing for me, as I was writing about the new client relationship model (CRM) being instituted by the investment industry regulators, and how the CRM could result in advisers knowing more about their clients, consumers knowing more about how they pay for investment services and what those services entail.

Back to the recent survey. The good news for both consumers and service providers is the majority of investors think advisers are worth what they're paid, with 63 per cent rating their advisers' value provided as very good or excellent and another 21 per cent as good.

A family loan for investment can save money at tax time

Since April 2009, there has been a tremendous opportunity available for tax strategies that involve loans between family members for investment purposes. The great deal is these parties could avoid attribution of taxable income when loaning money to each other at the bargain-basement rate of one per cent.

This one per cent rate is the "prescribed rate" published quarterly by the Canada Revenue Agency. Loans between spouses at this rate are essentially considered market-rate loans instead of gifts, exempting the investment income earned on the loaned capital from tax attribution to the loaner.

We will explain more about the strategies in a moment, but the immediate alert here is it is becoming a concern of the tax community that this one per cent rate may increase to two per cent at the Sept. 30 update.

Although this week the Bank of Canada again kept its key policy rate at the one per cent it has been for three years, the 90-day treasury bill rates on which the prescribed rate is based have been inching up.

Fighting debt by rebranding cash

A debt analysis report released Aug. 28 by credit bureau TransUnion shows consumer debt is again on the rise. This reverses a one-time decrease last quarter.

TransUnion's forecast is for debt to soon exceed the previous record set in 2012 suggesting, in their words, the first-quarter positive trend may have been a one-time event. That's bad news.

This report refers to non-mortgage debt only, but that category is also near record highs. This latest report showed a decrease in line-of-credit balances, but an increase in credit card, instalment and auto loan debts.

At first blush, the average consumer debt of $27,131 per person might not sound that scary, but consider that likely one-third of Canadians have no debt, and then increase proportionately the net balance for those who are actually in debt.

Fact versus fiction on the disability tax credit

THIS article is on the disability tax credit, and it has been simmering in my mind for some time.

A full-page colour newspaper ad last week, promising people "government refunds" of up to $50,000 if they have a health impairment, prompted me to action.

Here's my dilemma. I don't know all of the answers, or the whole truth, about the reported problems with this issue. That makes it tough to write about it in a definitive way. However, I do feel there are some concerns that need to be put on the table and looked at by Canada Revenue Agency staff and their political masters. It's my hope this article will help.

Here's what I think I know. There is a problem with the ability of some people with legitimate disability claims to have the CRA approve those claims. These claimants depend on medical practitioners learning how to fill out complicated CRA forms in just the right way, in order to get approval. They also depend on those medical practitioners to fill out additional forms in answer to additional requests from the CRA, which are accompanied by very unsubtle reminders that any mistake could constitute fraud.

Online tool a snazzy little resource

You probably have a good list of favourite websites and other online resources that provide you with the information you want on a regular basis. And, we can't forget there's an app for that.

However, if you're like me, you regularly discover things you wish you found a long time ago.

That happened to me this week when I found a great wealth of financial resources and information on -- of all things -- a Canadian government website.

In fairness, the federal government has some terrific websites and resources for its own programs, as do the provinces.

Benefits of testamentary trust

When my father passed away 21/2 years ago, he left my inheritance in the form of a testamentary trust. This means the trust did not exist while he was alive, but it was only created in his last will and testament, and only came into existence after his passing.

He had received some good estate-planning advice, which was really for my benefit. The advantages of this trust for me were the assets in it are protected from my creditors, they are not part of my marital property if my marriage broke up (so it would be maintained for my children) and the trust is a separate taxpayer from me.

In my case, it is the separate taxpayer status and the benefit of the graduated tax rates that provide me with the most benefit. (I don't plan on having either creditor problems or a marriage breakdown, though I suppose people never plan for either.)

The graduated tax rate means any interest, dividends or capital gains earned by the investments in this trust are taxed at the low tax bracket first, then the medium brackets and only at the top tax bracket if the annual investment income exceeds $135,000.

Know what your adviser earns? If not, you will soon enough

Most people who invest their money with an investment adviser know how much they pay for the service. All costs are required to be disclosed for things such as mutual funds and purchases of shares.

However, not all investors pay attention or take the time to explore these costs. There's only so much the investment industry can do about those people. But I strongly encourage you to be a nosy consumer and investor, and ask any and all questions of your adviser, to make sure you fully understand your situation.

As I've written in this column many times over the years, you need to be clear with your adviser about your expectations, the range of services to be provided, the frequency of contact and the costs. As in a marriage, the more things that are on the table and in the open, the more potential satisfaction in the relationship.

Though there is full disclosure required of costs paid by investors, there remains the opportunity to obscure things. For example, when a person purchases a bond from either a discount or a full-service broker, there is no disclosure of the price markup assessed by the dealer on that bond.

What about your debt if interest rates rise?

For the last two years, Finance Minister Jim Flaherty and former Bank of Canada governor Mark Carney have repeatedly warned Canadian consumers about our high debt levels. Their biggest fears are that people won't be able to support their debt payments when interest rates go up.

This could collapse the housing market as a result of higher mortgage rates and generally reduce consumers' ability to spend and support the economy.

Are Canadian consumers really a basket case? More importantly what can you do to protect against any dangers that lurk out there?

First, let's look at how much debt Canadians owe.

Rising rates can be big hit in the pocketbook

Interest rates are rising. At the same moment most people will tell you they don't see interest rates rising any time in the near future, rates have actually been on the rise since early May.

What does this mean to you?

And what does it mean for the broader economy and all of the borrowers the minister of finance and the former governor of the Bank of Canada have been warning us about for the last two years?

First, I should explain what I mean by rate rising, since the last interest rate announcement by the Bank of Canada said they would keep interest rates where they are, with no increase in sight.

With OAS, ‘bird in the hand’ is often best

A few weeks ago, we reviewed the recent changes in the Canada Pension Plan rules and how they affected choices people might make about taking their CPP early, or deferring to after 65. These choices have always been available with CPP, but the penalties and rewards for advancing and delaying now make it more lucrative to delay.

Today's article is about Old Age Security (OAS) and changes introduced in the 2012 Federal Budget, which now give you similar choices for OAS.

I would be remiss not to mention that some OAS changes are being imposed upon us. For people born after April 1958, the normal start age for OAS will gradually be pushed back, to age 67 by 2023. More information on this can be found at www.servicecanada.gc.ca.

The "new" choice people get to make is to defer their OAS even longer in return for a higher benefit for the rest of their lives. The maximum OAS benefit for a person age 65 in the first quarter of 2013 is $546.07 per month.

Snowbirds: It’s that time of year again

This is our annual reminder to Canadians who spend significant amounts of time in the United States each winter.

Snowbirds have an obligation to file a Form 8840 with the U.S. government, if they have established a "substantial presence" in the U.S. The filing deadline is June 15.

Most folks don't realize it, but all Canadians who visit the U.S. casually do so under a B-2 Visa, which is for "tourism, vacation and pleasure visitors." Our ability to visit and spend our money in the U.S. is a privilege, not a right.

For 2012 (and the current June 15 filing deadline), a Canadian has established a "substantial presence" in the U.S. by spending 31 days or more in the U.S. in 2012 and a total of 183 days during 2012, 2011 and 2010, counting all of the days of physical presence in 2012, one-third of the days of presence in 2011 and one-sixth the number of days in 2010.

Changes to CPP rules worth looking into

In 2012, big changes were made to the Canada Pension Plan rules, with some additional evolutionary updates happening this year. It's time to review the rules to make sure your CPP plans and decisions are still optimal for you.

The maximum benefit available in 2013 to a 65-year-old is $1,012 per month. To receive the maximum, a person must have paid the maximum premium in 85 per cent of their eligible years from age 18 to age 65.

Looked at a different way, a person can pay in less than the maximum in up to eight years before suffering a reduction from the maximum available. Less than the maximum contribution is made if a person earns less than $51,100, the Yearly Maximum Pensionable Earnings amount.

Here's the effect of this: The average benefit for a 65-year old in 2013 is $535 per month, according to the Service Canada website.

Will, power of attorney are different documents

"If you forget where you left your car keys, that's normal. If you forget what your keys are for, you had better pay attention."

That may be the most useful paragraph I've ever read to help me understand the effect of aging and other factors on cognition and mental functions. This was in a pamphlet produced by the Alzheimer's Society of Manitoba, which is a great source of info and support for people with family members showing potential signs of dementia.

But this is not a health column, so today is about making the proper arrangements before diminished capacity becomes a financial management issue for you.

We have seen the costs and complications that arise when people fail to make proper arrangements for the management of their affairs, in the event they become incapacitated.

Is it too late to diversify investments outside Canada?

Last week, we talked about offshore bank and investment accounts, how some people attempt to use these to hide income from Canada Revenue, and how this practice is illegal.

Today, we will look at something completely different -- diversifying investments outside Canada. For most people, this is done through their investment accounts with Canadian institutions, and that's what we'll talk about here.

Canada has become a very popular place in which to invest over the last 10 or so years, because from roughly 2000 to 2010, our stock market outperformed most of the other major stock markets.

The bulk of our stock market -- financial stocks -- fell less than most other countries in 2008 and recovered more quickly. As well, the first decade of this millennium saw huge growth in demand by developing countries for Canada's resources, and a resulting surge in resource prices, albeit with several significant interruptions.

Hiding money offshore isn’t easy and is usually illegal

Twice in the last week I've heard radio reports on financial issues dealing with offshore accounts and "hiding" money from the tax man.

As usual with financial matters on the radio, the summary was quite misleading, reminding me it's good to periodically review the rules to keep everyone on track.

So, today we will talk about Canadian rules on tax residency, what may really be going on with foreign bank and investment accounts, and the steps you need to take to legally pay no more Canadian tax.

First, let's review who has to pay taxes in Canada. Anyone who is a resident of Canada for tax purposes must pay tax on his or her worldwide income.

Make wise use of that valuable tax refund

MANY of the Canadians who file their tax returns by next Tuesday will be receiving refunds. Many have received them already.

As a financial adviser, this always disturbs me slightly. Those people have provided an interest- free loan to the government since the money was either withheld from their regular paycheques, through other withholdings, or sent to the government as quarterly instalments.

In theory, that money could have been used more profitably by the taxpayer through the year. If the person owes money on credit cards or consumer loans, those tax withholdings might have been reduced and those tax dollars used to save interest costs, if it is clear a refund is going to be produced. But the practical adviser in me knows many people prefer a refund to a balance owing, and the extra income tax withholdings really act as a forced savings plan, accumulating money that would likely be squandered if only received in small amounts through the year.

So, today’s column has two purposes — to encourage you to make the very best use of any refund you are receiving, and to also consider how you might improve your financial situation more by keeping your chips on your side of the table longer, by putting them to work for you throughout the year.

Quick, tax-filing deadline is just around the corner…

I'm truly sorry. I did not want to do this, but I fear I must.

Since it is April 19, and somewhere between 50 per cent and 80 per cent of the Canadians who prepare their own tax returns will finally get to that task during the next two weekends, it is my sworn obligation as your trusty personal finance scribe to review the rules, and remind you of some ways you can reduce your taxes and make the task of filing as easy as possible.

(That is officially the longest sentence I've ever used in my 19-plus years writing this column.)

(And speaking of history, I happen to come across that headline this morning from my coverage of the 2000 Manitoba budget. The headline read, Manitoba budget reduces tax. Ah, those were the days.)

American beneficiaries require special estate plan

If you have children or other people living in the United States who might be beneficiaries of your estate, read on. I meet more and more Canadians who are in this position, whose children have moved to America and may inherit a large amount of money someday.

We will also review the rules on Canadian testamentary trusts, and the possibility of tax changes over the next few years.

Please keep in mind this column is not providing legal or tax advice, and you need to get any such advice from your own professional advisers.

So, back to the basics of estate planning -- you need to have a will. In that will, you can leave your estate outright to people. This means the "residue" of your estate (after paying off debts, taxes and other costs) is transferred by your executor to the people to whom you leave your property. These are your beneficiaries, or your heirs.

New budget has significant tax-planning impact

Although pundits described the March 21, 2013, federal budget as a "sleeper," there are actually a lot of measures aimed at people who do effective tax planning.

If any of these items rings a bell with your situation, do a bit more investigation or talk to your professional advisers. These provisions are not law until the budget passes Parliament and the Senate, but nevertheless many took effect March 21, pending such passage.

Life insurance

Policy arrangements that involve borrowing, either to fund a stand-alone policy or an insured annuity (called a "triple back-to-back" annuity) have tax benefits, primarily a deduction for interest expense on the loans, and tax sheltering of the accrual or growth earned by the cash values.

Take advantage of changes to OAS and CPP

Pop quiz -- are you aware of the recent changes to Canada's government retirement systems, and how those changes might affect you?

In January 2012, a new set of rules became effective for the Canada Pension Plan (CPP) and these can change your best strategy for the timing of your application for benefits.

Starting July 1, 2013, Canadians turning 65 will have the option of delaying their old age security (OAS) benefits and receiving a higher monthly benefit at a later age.

This can be advantageous for someone still working and in a high tax bracket, or above the OAS clawback threshold, which starts at $70,494 of net income. Some benefits are still received until net income reaches $104,640, at which time it has all been clawed back.

Remember your online life after death

Roberto -- not his real name -- passed away four weeks ago.

His family is still trying to figure out who will get his access to Netflix account for free movies, how to get back the money left in his PayPal accounts, how to unlock his Facebook page so they can shut it down, and how to track down his Flickr, Smug Mug and Picasa accounts to find the stored pictures from the last few family get-togethers.

They need to find the records for his online bank and investment accounts, but do not have any paper statements in the house.

Having accessed Roberto's smartphone, the family was shocked, and ultimately pleased, to find out he was having a torrid online affair with a woman in Oklahoma.

Do-it-yourself tax return an educational experience

In spite of a fire March 2 at the Winnipeg regional taxation office, the Canada Revenue Agency is ready and willing to accept your tax return as soon as you have it completed.

Believe it or not, a survey last month by Thomson Reuters, the makers of UFile tax-return software, showed 41 per cent of Canadians say they "enjoyed" preparing their income tax returns. For my part, I can say I enjoy when they are "done."

More disturbingly, the UFile press release showed about 55 per cent of Canadians are not aware of the CRA initiative to reduce and gradually eliminate paper filing of returns. This is something we should talk about, as it may affect you directly.

The CRA has a goal of moving almost all taxpayers to their Netfile system (www.netfile.gc.ca) within the next couple of years. In 2014, the agency will no longer provide paper return packages at post offices, as they have done forever.

Headlines aren’t a stock-market guide

As I make my occasional trips to the men's comfort station, I pass through our waiting room. Thanks to the generosity of my colleague, David, and his support for the publishing industry, I get to regularly see what the popular press is saying.

Imagine my shock when I saw the latest Maclean's cover, with a headline screaming, The stock market -- BUY!

My first thought was this was totally irresponsible. When I grabbed the magazine to accompany me on my intended journey, my first impression was reinforced, as each subheading pulled harder at the dangling strings of people's greed (even though the article confused buy and sell signals into an almost unrestrained "buy" message).

My real concern, and why I find such sensational, bombastic "journalism" so scary, is nowhere in the article are there any guidelines to help a person temper the message to their own situation. There is no acknowledgement that investing a substantial amount in shares might be appropriate for some people but totally inappropriate for others. Instead, it was just an appeal to greed, perhaps compelling enough to encourage some people to do things they ought not do.

Why not make EI work for everyone?

It's not very often I openly accuse the federal government of breaking the law... but I've had a tough week, so what the heck.

Actually, it's a tough claim to make stick, since the government writes the law. So let me modify that statement to say the law and regulations that govern employment insurance are immoral and unfair and should be illegal, as they pertain to family businesses.

In a nutshell, the EI regime makes all family members involved in a business pay EI premiums, unless they are a 40 per cent or larger voting shareholder in the business.

However, when those people lose their jobs, they are routinely turned down for EI benefits.

Sharing some lessons learned about the PRE

It is always pleasing to go to a professional education session and learn some valuable things, especially when it is a subject about which you thought you "knew it all."

In helping out clients over the years who own cottages and vacation properties, as well as their houses, we have done a lot of research on the principal residence exemption (PRE) and have been able to save them thousands of tax dollars as a result.

The PRE allows the tax-free sale of a residential property that is "ordinarily inhabited" by the taxpayer, spouse (or former spouse), common-law partner or children of the taxpayer claiming the exemption. You can also claim a trust or estate.

If you sell your cottage, can you claim that as your principal residence (PR)? Yes, you can. Even a mobile home or houseboat can qualify, as long as you have slept there, basically. There is no time limit imposed on how often it was "ordinarily inhabited." Foreign vacation property may also be claimed.