Long-Term Market Projections Offer a Light at the End of the Tunnel

Clients and friends,

No storm lasts forever. And, while the knee-jerk reaction to abandon your long-term portfolio strategy is natural, it can prove problematic. As a reminder, the best market strategy is built with an eye on the horizon; weathering the ups and downs of the present with a focus on the future leads to better chances of positive returns over the long-term.

A recent article in The Globe and Mail highlights a number of unbiased financial guidelines as released annually by the Financial Planning (FP) Canada Standards Council. Some notable commentary to keep in mind when considering future investment planning and expectations for returns includes:

  • Slowed inflation during the second half of the year, with a return to a pre-Covid-19 rate in the long-term;
  • A peak, followed by easing of bond rates;
  • A boost in annual returns from emerging market stocks over 10+ years (which is something to consider if you are tolerant of some added risk in your long-term portfolio);
  • The resume of mid-single-digit returns for balanced portfolios;
  • And more.

To read the piece in its entirety, please click here.

If you have questions as to how these projections relate to your portfolio more specifically, please let us know. It’s what we’re here for.

Pete

As the Market Falls, Consider these Creative Tax Tips

Clients and friends,

The recent market drops are an understandable point of concern, but we urge you to consider them in a new light: as an opportunity for some creative tax planning. This interesting article from The Globe and Mail proposes a series of strategic, tax-effective moves to make in response to the market fluctuations as of late. Examples to consider include:

  • Realizing losses to recover your taxes paid;
  • Transferring your capital losses to your spouse;
  • Freezing your estate;
  • and more.

In the piece, Tim highlights a normal rule of thumb during times of uncertainty: avoid making sudden moves and keep in mind your longer term planning and goals.

If you have questions as to how any one of these strategies might fit with your portfolio, please let us know. Preserving and protecting your wealth is what we’re here for.

Pete

Lock In The Prescribed Loan Rate By July 1st

Clients and friends,

Considering making a loan to a family member for investment purposes? Be sure to do so before July 1st, when the prescribed rate is set to rise from the current 1%. As long as the rate is set prior to the month of July, it will be locked in for the duration of the loan.

A prescribed loan rate can be beneficial for investment purposes. The strategy involves the lending of money to a spouse, a common-law partner, or an adult child who is in a lower tax bracket, which allows for the investment income to then be taxed at a lower rate.

Interested in learning more? Click Here for a related article with more detail on the topic. Just something to keep in mind should it be relevant to your planning.

Pete

A Special Report on the 2022 Federal Budget

Clients and friends,

As you know, we make a point of keeping you up-to-date on all things family business, estate, and tax planning. As such, we are sending a follow-up Special Report on the 2022 Federal Budget.

Our professional organization for family business planning and life insurance, CALU has provided an in-depth account on the topic. Tax-specific highlights include further discussion of Bill C-208, increased access to the Small Business Deduction, amendments to tax treatment for “substantive” Canadian-Controlled Private Corporations (CCPCs), and more. To read the full article, please click Here

Should the piece provoke any questions, please let us know. It’s what we’re here for.

Pete

Why We Recommend Drawing Down from Multiple Assets

Clients and friends,

Retirement income planning is not once-size-fits-all; it can depend on lifestyle, the source of your assets, what you’re invested in, and more. There is one thing we can all count on in retirement, however: tax. And while it can’t be avoided altogether, proper planning can help you to reduce your taxes payable.

As you may know, age 71 is the age by which minimum annual withdrawals from your Registered Retirement Income Fund (RRIF) must begin to be made. Comprised of investments which allow for your balance to continue to grow tax-sheltered, once withdrawn, these funds become treated as taxable income. Plus, other non-tax-sheltered financial assets can arise during retirement from a number of sources, such as the sale of an investment property, the downsizing of your home, an inheritance settlement, and more.

To mitigate potential tax issues, it may be worthwhile to run some analysis, with consideration for taking out income from your RRIF earlier than the prescribed age of 71. Keeping it in tact as long as possible holds the potential to increase what is left in your RRIF, leaving you exposed to higher income tax brackets. A retirement income plan which involves drawing from a blend of sources, such as your TFSA, CPP, OAS, dividends from your corporation, and life insurance cash value will leave you in a better place overall tax-wise.

To learn more, we suggest reading this interesting article on the topic. Looking to discuss planning for your future further? Ready when you are.

Pete

Be Aware of the Proposed Luxury Vehicle Tax

Clients and friends,

As shared in a previous touchpoint, the proposed 2022 Federal Budget includes discussion of a luxury vehicle tax which targets the sale of new, high-priced automobiles and aircraft (priced over $100,000), as well as new boats (priced over $250,000). There is now a proposed date for this to be made effective: September 1st of this year.

So, how will the tax work? Either as:

  • The lesser of 20% of the value above the price thresholds; or
  • 10% of the full value of the luxury vehicle, aircraft or vessel.


Click Here for an article with more on the subject. If you have any questions, we’re here to chat.

Ukraine’s Invasion: Impacting The Capital Market State

Clients and friends,

We find ourselves facing strange, surreal times. The bottom line is that international conflicts like the Russian invasion of Ukraine have a ripple effect across the globe, in a myriad of ways, for so many of us. Our thoughts are with all who are affected.

For the purposes of our discussion today, we’d like to touch on the capital market implications of these alarming events. While we can count on uncertainty during such challenging times, history shows that the financial trade industry has faced these situations many times through the years and has always managed to eventually recover. A few major trends of note include:

  • A generalized slowing of economic growth and increased inflation pressures;
  • A rise in risk premiums due to the extent of global economy sanctions and supply chain disruptions;
  • The potential for global commodity price increases and stock shortages; 
  • A high degree of volatility in equity markets;
  • Stability in and a resulting increased demand for bonds (in the short-term);
  • The providing of a “safe haven” by assets like the U.S. dollar and gold.

If you’re interested in reading a more detailed commentary on the subject from Mackenzie Investments, please click Here. The overall takeaway from the article is to adhere to the “Golden Rule” of investing: stick with your portfolio should it still reflect your long-term goals and wider planning.

If you have any questions, we’re always here to chat. Until then, take care.

More On The Proposed 2022 Federal Budget

Clients and friends,

Regarding the 2022 Federal Budget, experts advise not to expect significant changes anytime soon. Citing little bandwidth for the Department of Finance, they predict that the budget will focus on 3 key areas:

  1. Jobs;
  2. Economic growth and productivity; and
  3. The “greening” of the economy.

Additionally, some speculate that the budget will address lingering tax promises and fairness issues, such as luxury tax (on cars, boats, and planes), a 15% minimum tax for high-income earners, Bill C-208, and more.

While many anticipate that budget-related discussions will be tabled this spring, we’ll be sure to keep you informed. In the meantime, you can read more on the topic Here. As always, if you have any questions, we’re happy to chat.

Possible Amendments To Family Business Transition (Bill C-208)

Clients and friends,

As we near 2 years of these uniquely challenging times, it becomes all the more clear the importance of family-run businesses. The backbone of our economy, they provide quality jobs, encourage creativity, and build communities across our country.

As you might recall from one of our previous touch points, Bill C-208—now federal law—provides tax relief to business owners considering selling a farm or other small business to adult children or grandchildren. As with sales to unrelated third parties, business owners can now claim the proceeds from the sale of shares as capital gains, which are taxed at a lower rate. Some can even defer tax entirely, claiming the lifetime exemption. This equalization is an exciting development in the intergenerational transfer of businesses.

In the days and months since its passing, loopholes have become a concern to the Bill’s critics, leading to possible amendments, such as:

  • The requirement of “legal and factual control” of a corporation by the family member to whom the business is transferred to;
  • A specified amount of “reasonable time” for the business owner parent to maintain control;
  • A specified degree of involvement for the child or grandchild taking over control following a transfer;
  • timeline within which a transfer must be completed;
  • And other specified transfer requirements.

We’ll be sure to keep updated on any further changes as they might relate to your family business succession plan—it’s what we do best. Looking to chat further? Ready when you are.

Tax Tips as We Near the Year’s End

Clients and friends,

There’s still time for tax-efficient planning before we reach the year’s end. Here are some helpful tips from a recent AdvisorToGo podcast we tuned into:

  1. Be sure to pay certain expenses before year’s end. Expenses related to investments (i.e. interest on money owed) are deductible for Non-Registered accounts if paid before Dec. 31st.
  2. Consider tax versus income deferral. Evaluate your tax rates for both money in the corporation and your income. Determine whether you’d prefer to enjoy tax deferrals or leave the money in the business and whether you’d prefer to take salary or to defer income.
  3. Rebalance your portfolio sooner than later. Those who have invested in equity markets have seen massive gains in their portfolio as of late. Rebalancing allows you to take those gains and reallocate them with your investment policy statement.
  4. Think about year-end loss selling. Rebalancing will also help to realize potential losses and you might want to offset those against your capital gains.
  5. Discuss year-end donation planning. In the season of giving, donating portfolio wins to a registered charity or worthy cause not only can support those in need, but it can also reduce your income tax expense. Alternatively, setting up a donor-advised fund allows for in-kind contribution, no capital gains tax on any accrued gains in your portfolio, and still provides a receipt for the fair market value on your donations.
  6. Review your RESP options. Revisit planning for contributions to Registered Education Savings Plans (RESPs) for your children.
  7. Consider your loan options. The prescribed spousal loans rate is fixed at 1% until the end of the year.
  8. Review your RRSP contributions. For business owners, total compensation is key and salary must be considered against dividends. Paying yourself enough in salary (at least $162,000) is vital to being able to make the maximum contribution ($29,210) to your Registered Retirement Savings Plan (RRSP) next year. Those who turned 71 this year seeking to convert their RRSPs into Registered Retirement Income Finds (RRIFs) or Annuities have until Dec. 31st to make any final contributions.


Just some things to consider before we head into the New Year. Ready when you are.

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