Hub Blogs contains fresh contributions written by Financial Independence Hub staff or contributors that have not appeared elsewhere first, or have been modified or customized for the Hub by the original blogger. In contrast, Top Blogs shows links to the best external financial blogs around the world.
Let’s examine some wise ways to apply your tax refund in 2016. There are no shortages of sound possibilities for the personal finances.
Everyone can reap value from these practices. For example, refunds can be spent, saved and invested.
First park the refund into a saving account to resist impulse, say for 30 days.It gives you time to reflect and evaluate your needs and options. Try your best to get lasting value from this worthy source of cash. Many of the allocations you make are typically not reversible.
Here are 20 sensible ideas dealing with your tax refund: Continue Reading…
During the holiday season, I wrote an article about over-consumption – the gist being that the over-consumption of credit can leave us with debt troubles and how over-consumption of the wrong foods can leave us with harmful health debt.
There’s a general consensus that it costs too much money to eat healthily all the time. While it’s true that natural food products can be quite expensive, especially if you eat gluten-free or vegan packaged foods, there are ways to stretch your dollar at the grocery store.
Meat and produce are expected to see the biggest price jump, with meat seeing a 4.5 per cent increase and fruits and vegetables rising between 4 and 4.5 per cent this year.
Robo-Advice is automated portfolio management with minimal human interaction. As the video points out, the growing popularity of robo advisors have made them one of the biggest developments in investing in recent years: they’re easy, simple and cost effective, which makes them especially appealing to younger investors.
In the 4-minute video, host Robin Powell interviews a robo-skeptic: Neil Bage of UK-based Suitable Strategies. He says investing involves a lot more than just filling out questionnaires and doing math and is concerned that if the human advice element is not present, investors may suffer if they miss out on the “seeing the whites of the eyes” type of face-to-face conversations about risk and risk tolerance.
(Mind you, American robo services are more likely NOT to have a human advice component; most robo services in Canada tend to offer at least some human interaction to complement the automated online component.) Continue Reading…
Note the paragraph about the the roadblocks put in the way of two strategies involving life insurance, often used by business owners. You can find more detail about this in yesterday’s Hub guest blog by Robert Kepes: Budget closes two life insurance planning strategies.
Jamie Golombek
Little good news for the wealthy
In today’s Financial Post, CIBC Wealth’s Jamie Golombek also provides a fine overview of the Budget’s impact on the wealthy.
The March 22, 2016 federal budget closed two tax-planning strategies that involved the use of life insurance and private companies. Here is the first one:
Capital Dividend Account (CDA) Planning
The death benefit from an exempt life insurance policy is tax-free, and the same principle holds true if a private company is the beneficiary of the policy. The life insurance proceeds are added to the CDA of the private company when they can later be paid as a tax-free capital dividend to the shareholder. However, if the company is both the owner and beneficiary of the policy, then the amount that goes into the CDA is only the amount in excess of the adjusted cost base (ACB) of the policy.
For example, if the death benefit is $1 million and the ACB is $100,000, then only $900,000 is available for the CDA. Only $900,000 can be paid out tax-free, while the other $100,000 would be paid as a taxable dividend to the shareholder.
It follows that if the policy owner is not also the corporate beneficiary, then there is no reduction to the beneficiary’s CDA. A common planning strategy was to have ownership of the life policy in a parent holding company with the subsidiary company the beneficiary. This was done especially if the subsidiary was operating an active business and the owner did not want the policy to be an asset of the business that could be attacked by creditors.
Upon the death of the insured, the full death benefit of $1 million would go into the subsidiary’s CDA and be available to be paid out tax-free. Continue Reading…
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