Experience is an important consideration in choosing any professional

Inquire about the experience a financial planner has in dealing with people in similar situations to yours

Things to Ask Your Advisor

What experience do you have?

Experience is an important consideration in choosing any professional. Ask how long the planner has been in practice, the number and types of firms with which he has been associated, and how his work experience relates to his current practice. Inquire about what experience the planner has in dealing with people in similar situations to yours and whether he has any specialized training. Choose a financial planner who has at least two years experience counseling individuals on their financial needs.

What services do you offer?

The services a financial planner offers will vary and depend on her credentials, registration, areas of expertise and the organization for which she works. Some planners offer financial planning advice on a range of topics but do not sell financial products. Others may provide advice only in specific areas such as estate planning or taxation. Those who sell financial products such as insurance, stocks, bonds and mutual funds, or who give investment advice, must be registered with provincial regulatory authorities and may have specialized designations in these areas of expertise.

What is your approach to financial planning?

The types of services a financial planner will provide vary from organization to organization. Some planners prefer to develop detailed financial plans encompassing all of a client’s financial goals. Others choose to work in specific areas such as taxation, estate planning, insurance and investments. Ask whether the individual deals only with clients with specific net worth and income levels, and whether the planner will help you implement the plan she develops or refer you to others who will do so.

Will you be the only person working with me?

It is quite common for a financial planner to work with others in his organization to develop and implement financial planning recommendations. Financial planners often work with other professionals, like lawyers and accountants. You may want to meet everyone who will be working with you.

How will I pay for your services?

Your planner should disclose in writing how she will be paid for the services she will provide. Planners can be paid in several ways:

  • Commission: The planner is compensated if you purchase financial products to implement a financial planning recommendation. In some cases, the commission is paid by the suppliers of financial products such as an insurance company. In other cases, you pay the commission, for example, if you buy shares of a publicly traded company. Commissions are usually a percentage of the amount you invest in a product.
  • Salary: The company for which the planner works pays the planner a salary. The planner’s employer may get its revenues from fees paid by clients such as yourself or in commissions paid by clients making a purchase, or by the suppliers of financial products.
  • Fee-for-service: Planners paid on a fee-for-service basis may charge an hourly rate, set a flat rate for a specific service or be paid a fee based on a percentage of assets or income. In some cases, compensation would be a mix of fee and commission. You should also ask if the planner or organization receives any benefit other than commission, such as advertising and promotion subsidies, from suppliers of financial products.

How much do you typically charge?

Although the amount you pay the planner depends on your particular needs, the financial planner should be able to provide you with an estimate of possible costs based on the work to be performed. Such costs would include the planner’s hourly rates or flat fees, or the percentage he would receive as commission on products you may purchase as part of the financial planning recommendations.

Should anyone besides me benefit from your recommendations?

Ask the planner to provide you with a description of her conflicts of interest in writing, for instance, any business relationship with the companies or ownership interest in any company that supplies financial products sold by the planner and the planner’s employer.

Are you regulated by any organization?

Financial planners who sell financial products such as securities and insurance or who provide investment advice are regulated by provincial regulatory authorities and may also subscribe to a code of ethics through a professional association. Individuals in the accounting and legal professions are usually members of professional bodies that govern their fields. Planners who hold CFP certification are subject to disciplinary proceedings of Financial Planners Standards Council, the body that enforces that CFP Code of Ethics.
It’s a fair question to ask if he has ever been the subject of disciplinary action by any regulatory body or industry association. You can verify the answer by contacting the relevant organization; some organizations have a searchable function on their websites, such as the Check a CFP Professional tool on this website.
Ask the financial planner whether he subscribes to a professional code of ethics such as the CFP Code of Ethics.

Can I have it in writing?

Ask the planner to provide you with a written agreement that details the services that will be provided. Keep this document in a secure place, for future reference.

Education

What are the Probate fees in Ontario?

$5 on each $1,000 for the first $50,000 and $15 per thousand thereafter.

Minimizing Probate The following items are excluded in determining the value of the estate for purposes of probate:

i.) assets held in joint tenancy with right of survival (when one person dies, the asset is automatically owned by the surviving joint tenants)).

ii.) assets with named beneficiaries such as life insurance policies or RRSPs.

iii.) Thus, probate fees can be minimized if registered assets (including vehicles) are held in joint names with right of survival, and if insurance policies and RRSPs are left to named beneficiaries, not to the estate.

It is necessary to use caution when naming beneficiaries to your RRSPs, because income tax will be payable by the estate on the market value of the RRSP at the time of death, unless the beneficiary is the spouse or common-law partner, financially dependent child or grandchild under 18 years of age, or financially dependent mentally or physically infirm child or grandchild of any age.

Any assets that are held in joint names with right of survival are usually not affected by any instructions in the will. Normally, if the will has instructions to divide estate assets equally between two or more beneficiaries, but an asset such as a savings account is held in joint names with only one of the beneficiaries, then the other beneficiaries will not receive any part of the savings account. The remaining assets which are not in joint names with right of survival will be divided among all the beneficiaries.

Please ask us at Arc Financial Planning Group about how we can assist you in minimizing your Probate fees.

Buyouts

At Arc Financial Planning Group, we have helped clients from various companies, to invest their pension buyouts & assist with benefit transfers.

The following are some things to take into consideration and research when deciding to take a buyout:

  • What quality of retirement do you want? Will you have enough set aside to live a comfortable retirement?
  • How much is CPP and OAS? When are you entitled to receive it?
  • Should you roll all of your pension money into a Registered Retirement Savings Plan? What are the tax implications if you do not?
  • How will rolling this money into an RRSP affect your marginal tax rate when you retire?
  • What happens if you do not have enough RRSP contribution room to roll all of your buyout money into your RRSP? What are the tax implications?
  • Will you have adequate health and dental benefits and life insurance coverage once you leave your job?
  • What strategies can be applied to your situation to reduce your tax situation? (Please note that if you receive a full pension, have RRSP income and CPP income, you may have your OAS clawed back partially or completely, depending on your tax bracket at retirement).

Income Tax Rates

It is absolutely imperative that you talk with an experienced financial advisor before you take a buyout to ensure you’ve got all of your bases covered.

Income Tax Rates

Federal
Tax Rate Tax Bracket
15.00% $0 – $41,544
22.00% $41,544- $83,088
26.00% $83,088- $128,800
29.00% $128,801 and over
Ontario
Tax Rate Tax Bracket
5.05% $0 – $37,774
9.15% $37,776 – $75,550
11.16% $75,551 and over
2010($)
Tax Bracket Thresholds
Taxable income above which the 22% bracket begins 40,970 40,726
Taxable income above which the 26% bracket begins 81,941 81,452
Taxable income above which the 29% bracket begins 127,021 126,264
Amounts relating to non-refundable tax credits
Basic personal amount (See footnote below) 10,382 10,320
Age amount 6,446 6,408
Net income threshold 32,506 32,312
Spouse or common-law partner amount (maximum) (See footnote below) 10,382 10,320
Amount for an eligible dependant (maximum) (See footnote below) 10,382 10,320
Amount for children under age 18 (maximum per child) 2,101 2,089
Canada employment amount (maximum) 1,051 1,044
Infirm dependant amount (maximum per dependant) 4,223 4,198
Net income threshold 5,992 5,956
Caregiver amount (maximum per dependant) 4,223 4,198
Net income threshold 14,422 14,336
Disability amount 7,239 7,196
Supplement for children with disabilities (maximum) 4,223 4,198
Threshold relating to allowable child care and attendant care expenses 2,473 2,459
Adoption expenses (maximum per adoption) 10,975 10,909
Medical expense tax credit—3% of net income ceiling 2,024 2,011
Refundable medical expense supplement
Maximum supplement 1,074 1,067
Minimum earnings threshold 3,135 3,116
Family net income threshold 23,775 23,633
Old Age Security repayment threshold 66,733 66,335
Certain board and lodging allowances paid to players on sports teams or members of recreation programs
Income exclusion (maximum per month) 315 313
Tradesperson’s tools deduction
Threshold amount relating to cost of eligible tools 1,051 1,044
Goods and Services Tax Credit
Adult maximum 250 248
Child maximum 131 130
Single supplement 131 130
Phase-in threshold for the single supplement 8,096 8,047
Family net income at which credit begins to phase out 32,506 32,312
Canada Child Tax Benefit
Base benefit 1,348 1,340
Additional benefit for third child 94 93
Family net income at which base benefit begins to phase out 40,970 40,726
National Child Benefit (NCB) Supplement
First child 2,088 2,076
Second child 1,848 1,837
Third child 1,758 1,747
Family net income at which NCB supplement begins to phase out 23,855 23,710
Family net income at which NCB supplement phase-out is complete 40,970 40,726
Child Disability Benefit (CDB)
Maximum benefit 2,470 2,455
Family net income at which CDB supplement begins to phase out 40,970 40,726
Children’s Special Allowances (CSA)
CSA base amount 3,436 3,416

CPP

Retirement Planning

At Arc Financial Planning Group, we believe in a taking a holistic approach to financial planning. One of the biggest aspects of your financial plan is planning for retirement. The following table indicates the current Canada Pension Plan (CPP) Payments available to Canadians.

Canada Pension Plan Payment Rates
Type of benefit Average monthly benefit
(December 2010)
Maximum monthly
benefit
(2011)
Disability benefit $809.50 $1153.37
Retirement pension (at age 65) $504.88 $960.00
Survivors benefit (under age 65) $364.53 $529.09
Survivors benefit (age 65 and over) $297.39 $576.00
Children of disabled contributors benefit $214.85 $218.50
Children of deceased contributors benefit $214.85 $218.50
Combined survivors & retirement benefit (pension at age 65) $681.79 $960.00
Combined survivors & disability benefit $938.97 $1153.37
Death benefit (max lumpsum) $2273.30 Maximum one-time payment
$2500.00

Please note – Pensioners with an individual net income above $63,511 must repay part or the entire maximum Old Age Security pension amount. The repayment amounts are normally deducted from their monthly payments before they are issued. The full OAS pension is eliminated when a pensioner’s net income is $102,865 or above.

Old Age

Retirement Planning

Old Age Security Benefit Payment Rates
July – December 2010
Type of Benefit Recipient Average monthly benefit
(December 2010)
Maximum Monthly
Benefit
Maximum
Annual
Income
Old Age
Security Pension
All recipients $493.34 $526.85 See note
Guaranteed
Income
Supplement
Single person $455.46 $665.00 $15,960
Spouse of pensioner $288.16 $439.13 $21,120
Spouse of non-pensioner $430.50 $665.00 $38,256
Spouse of Allowance recipient $375.77 $439.13 $38,256*
Allowance All recipients $392.17 $965.98 $29,568
Allowance for the survivor All recipients $586.29 $1070.78 $21,504

*For Spouse of Allowance recipient, the Allowance stops being paid at $29,568 while the GIS stops being paid at $38,256.

Note – Pensioners with an individual net income above $66,733 must repay part or all of the maximum Old Age Security pension amount. The repayment amounts are normally deducted from their monthly payments before they are issued. The full OAS pension is eliminated when a pensioner’s net income is $108,214 or above.

Wills

What are the advantages of having a will?

i) You will be the one to choose the guardian of your children.

ii) You will choose how your assets are distributed. However, your will can be challenged in certain circumstances.

iii) You will choose your executor.

iv) Your estate will be settled more easily, quickly and cheaply than if you die intestate (without a will).

How are RRSPs and RRIFs taxed at death?

The general rule for an RRSP or RRIF is that the value of the RRSP or RRIF at the date of death is included in the income of the deceased for the tax return for the year of death. However, income tax may be deferred if the beneficiary of the RRSP, RRIF, or estate is:

a.) the spouse or common-law partner

b.) a financially dependent child or grandchild under 18 years of age, or

c.) financially dependent mentally or physically infirm child or grandchild of any age.

In order for the tax to be deferred, the RRSP or RRIF must be transferred to the RRSP, RRIF, or eligible annuity of the beneficiary before December 31st of the year following the year of death. Other conditions also apply.