Monthly Archives: March 2013

Odette Morin

It’s official. Canadian Investors will soon know how much they pay for financial services from their investment adviser.

Writing a Check

A new amendment under N1-31-103 of the Canadian Securities Administrators will include enhancements to account statements and client disclosure.

Investors can expect new cost disclosure that includes:

  • at account opening, what product and service costs they can expect to pay;
  • at the time of a transaction, the transaction cost and any deferred cost; and,
  • annually, a summary in dollar terms of what they were charged and any other fees paid to the firm, such as trailing commissions and commissions on trades.

Investors can expect a new annual investment performance report that includes:

  • how much they have contributed and what it is worth as of the report date;
  • deposits and withdrawals for the past year and since their account was opened; and,
  • percentage returns for their account over one, three, five and 10 years and since it was opened.

The amendments will take effect on July 15, 2013.

We at YOU FIRST / FundEX Investments welcome the news.  Transparency makes for better adviser client relationships. Clients will soon be able to see whether their bank or independent adviser is providing the level of Investment and financial planning advice that justifies the fee they earn. We look forward to gain much market share as a result!

Odette Morin

Federal Budget Highlights


The March 21, 2013 federal budget introduced specific tax measures aimed at individuals and small businesses. While Budget 2013 did not make any changes to tax rates, some of the changes will affect most Canadians to some degree. Here is a summary of the key elements that may affect your financial plan.

New first-time charitable donor Super tax credit

For those of you who have been wanting to donate, an extra 25% tax credit has been announced. The new First-Time Donor’s Super Credit is designed to encourage first-time charitable donors through an enhanced tax incentive. The standard tax credit for a donation is 15 per cent of the first $200 and 29 per cent for amounts beyond that level. The super credit, which the government describes as being temporary, would add an extra 25-per-cent tax credit for cash donations up to $1,000.

Bottom line, the new credit would give first-time charitable donors a 40-per-cent credit for the first $200 or less and a 54-per-cent credit for amounts between $200 and $1,000. It pays to give!

New enhanced adoption tax credit

There are some other small measures for families, including an enhanced adoption tax credit that can be used to help offset costs incurred before parents are matched with a child. The new Adoption Expense Tax Credit (AETC) is a 15% non-refundable tax credit up to $11,669 per child.

Safety-deposit box

The cost of renting a safety deposit box has traditionally been a deductible expense as a carrying cost. The budget proposes that the cost of renting a safety deposit box will no longer be deductible, beginning in 2013, justifying this change by saying that “taxpayers using safety deposit boxes are increasingly likely to be using the boxes for personal purposes (e.g., to safeguard valuables), rather than for an income-earning purpose.”

Converting Income to Capital Gains – Closing out the use of income producing “Tax Class” funds

This will affect many of you who currently have income producing corporate class a.k.a. Tax class funds. The budget proposes new rules that would effectively eliminate the ability for investors to convert fully taxable ordinary income into tax-preferred capital gains, taxable at only 50% of your marginal tax rate. The changes proposed will affect mutual funds that invest in a portfolio of bonds to earn interest income and then use forward derivative contracts to convert highly taxable distributions into distributions of capital gains. The net result is that in respect of forward agreements entered into on or after March 21, 2013, these funds will no longer be able to provide this tax advantage. The use of corporate funds will still be useful to avoid tax on the switches made between funds of the same class but will eliminate the tax advantage of the income generated. We will keep you up to date on the developments of this proposed change as we find out.

Labour-Sponsored Venture Capital Corporations Tax Credit

The budget announced that it will be phasing out its federal tax credit for investments in labour-sponsored venture capital corporations (LSVCC). While the credit will remain at 15% for 2013 and 2014, it will drop to 10% for 2015 and 5% for 2016. It will be completely eliminated for 2017 and subsequent years. In addition, the government will immediately cease registering any new federal LSVCCs.

Revised Form T1135

If you own foreign property costing more in total than $100,000 at any time during the year, you must file a “Foreign Income Verification Statement” (Form T1135). Foreign property includes foreign bank accounts, foreign non-personal real estate, and foreign stocks (but not Canadian mutual funds or segregated funds with foreign holdings) held in non-registered Canadian brokerage accounts.

Currently, Form T1135 only requires general information as to where the foreign property is located and what income is generated from that property. The CRA will be revising this Form and require taxpayers to provide more detailed information regarding each foreign investment, including: the name of the specific foreign institution or other entity holding funds outside of Canada, the specific country to which the property relates and the foreign income generated from the property.

Beginning with the 2013 tax year, the CRA will remind taxpayers, on their Notices of Assessment, of their obligation to file Form T1135 if they have checked the “Yes” box on page one of their tax returns, indicating that they own foreign property with a total cost of more than $100,000. The CRA is also developing the ability to file the T1135 form electronically.


Lifetime Capital Gains Exemption

The budget proposes to increase the Lifetime Capital Gains Exemption (LCGE) on the sale of a small business by $50,000 from $750,000 to $800,000, starting in 2014. In addition, the LCGE will be indexed to inflation for taxation years after 2014 and the increase in limits will also be available to those who have previously used their full $750,000 exemption. This is a welcome news to small business owners.

Dividend Tax Credit for non-eligible dividends

The most significant tax measure in the budget could be an adjustment in the dividend tax credit as it affects non-eligible dividends, or those paid by small businesses (not publicly-traded blue chip dividend stocks). The change will business owners who pay themselves dividend income instead of salaries and will result in more taxes being paid on these non-eligible dividends paid after 2013.

The government has realized the intention of the gross-up tax credit system is to integrate corporate taxation and personal taxation but it‘s gotten out of sync over the years so that someone who is running a small business is actually ending up with a larger tax benefit by having the dividend come out of their small business corporation.

To fix this, the budget proposes to adjust the gross-up and dividend tax credit for dividends paid after 2013, from 25% to 18%. The net result will be higher taxes on non-eligible dividends, starting next year.

Estate Planning related changes

Testamentary trusts are trusts created upon death, generally in your will. These trusts calculate tax using the graduated tax rates applicable to individuals as opposed to other trusts, such as inter-vivos trusts, which pay federal tax at the highest marginal rate of 29 per cent. The taxation of testamentary trusts at graduated rates allows the beneficiaries of those trusts to effectively access more than one set of graduated rates and is often recommended as a great estate planning strategy.

The government announced that it is “concerned with potential growth in the tax-motivated use of testamentary trusts and the associated impact on the tax base” and as such, intends to launch a consultation on possible changes to the tax law to eliminate the tax benefits that arise from taxing testamentary trusts at graduated rates. We will be sure to keep you up-to-date on that front as well.

Several tax loopholes have also been closed such as the 10/8 insurance policies and loans arrangements, Leverage Insured annuities, strategies we never used here at You First.




Odette Morin

Travel Insurance: Don’t leave home without it

family travelIt’s spring break time and many will soon be hitting the slopes or going south to the sunshine! Only 41% regularly buy travel insurance, finds a BMO study. Further, 40% have travelled with someone who required medical assistance.
Medical emergency can be VERY costly. The U.S. Government’s Agency for Healthcare Research, says that the average cost per hospital stay in for adults aged 45 to 84 was over $12,000 in 2010.  I have seen group insurance claims myself running in the hundreads of thousand dollars. 

Don’t cross the border without Medical Travel Insurance. Some will be covered through their Group Employee Benefit plan.  Don’t assume.  Read the booklet BEFORE crossing the border. Here’s what to consider when selecting a travel insurance policy.

1. Get enough coverage: Basic travel insurance will cover things like lost luggage, trip cancellation and missed connections, but may not include medical coverage. Look for a policy that includes medical coverage, air ambulance, private duty nurse expenses, trip interruption and airfare/lodging for a family member to be by your side.

2. Make it cost-effective: “Pay-as-you-go” medical travel insurance can be purchased before each trip. However, those who are out-of-province or out of Canada more than once during a 12-month period should consider a policy with an annual premium.

3. Understand who pays: Some insurers pay the doctor directly while others require the traveler to pay up front and then get reimbursed at a later date.

4. Read the fine print: Make sure your policy covers you for all your trip activities and is valid for the duration of the trip. Clarify any issues with the insurer before leaving home. Keep a copy of the policy for your records and the contact information of your insurance company.

Call us.  We do provide Travel insurance or if you are a client, we will be happy to review your group insurance booklet to make sure you are adequately covered!


Odette Morin

Long Term Income Stream Benefit in case of sickness or accident

cliff-hangerWhat would happen to your lifestyle and savings in the event of sickness, accident or a progressive deterioration of your ability to earn income or be independent?

Are you in one of these situations?

  1. High risk occupation with difficulties to get traditional disability insurance
  2. Someone who participates in extreme sports and activities
  3. Professional athlete
  4. Self-employed (small business owners)
  5. High income earner who has reached their disability insurance maximum
  6. High net worth individual with non-liquid assets
  7. High net worth individual who wants to protect his or her assets
  8. Former cancer, heart attack and stroke survivor (clear for 12-24 months)
  9. Smoker (without heart condition, asthma or diabetes)
  10. Someone who is caring for aging parents
  11. Widows or widowers
  12. Unemployed individual

A long term income stream benefit plan may be your best option to limit the erosion of your investment assets.

Typically, a benefit of $1000 or $2000 per week would be paid to you if you are unable to perform the basic activities of daily living such as dressing, bathing, eating, toileting, continence, transferring (getting in and out of a bed or chair).  It would also pay if you suffer from any deterioration in mental ability and require continual supervision.

Age is not a determining factor and this coverage has no risk ratings, exclusions and does not take family history or smoking into account.

About 60 percent of individuals over age 65 will require at least some type of long-term services during their lifetime.[1] About 40% of those receiving this type of benefit today are between 18 and 64.

Without long-term benefit insurance, the cost of providing these services may quickly deplete the savings of the individual and/or their family.

This plan offers tremendous versatility:

  • Provides you with a non-taxable income payable throughout your lifetime should you suffer from an accident, illness or simply the aging process (can purchase the plan from ages 18-80)
  • Supplements existing disability coverage
  • Guards against asset liquidation and accelerated cash depletion
  • Allows for continued financial growth and portfolio diversification
  • Generates a significant return on premiums invested – while on claim
  • Offsets related tax consequences should the need arise to draw on RRSP’s and RRIF’s prematurely
  • Guarantees a legacy to your estate

Please remember that this product is not a replacement to disability insurance.  It is most appropriate in addition or if you cannot obtain traditional disability insurance due to your occupation, lifestyle or medical history.  Anja will be able to help you with your needs and determine the best combination of disability and /or long term income benefit.

Contact us to find out more.

Terry Broaders

Weekly Update March 18 2013


“See Everything, Overlook A Great Deal, Correct A Little” -John XXIII


Toronto Closes Higher

The Toronto stock market closed higher Friday, helped by energy and mining stocks, while U.S. markets gave back a bit of the enthusiastic gains of recent sessions. The S&P/TSX composite was up 30 points to 12,830, while the TSX Venture Exchange rose 4 points to 1,116. The Canadian dollar was up 0.29 of a cent at 98.11 cents US, backing off a three-week high of 98.22 reached in the morning. After eight record high sessions and 10 consecutive days of gains, the Dow industrials gave back some of that on mixed economic data, dropping 25 points to 14,514. The Nasdaq was down 9.86 points at 3,249.07 and the S&P 500 index slid 2.53 points to 1,560.70. “The U.S. drive has been pretty relentless. Sooner or later, you’re going to have a down day,” says Colin Cieszynski, market analyst at CMC Markets Canada. “You’re at a point where some people are just looking for any excuse to take profits because we’ve had such a run the last few days.”

U.S. Output Rises

A strong increase in auto output boosted U.S. factory production last month, the latest sign that manufacturing is helping drive economic growth after lagging for much of 2012. Factory output rose a seasonally adjusted 0.8 per cent in February from January, after falling 0.3 per cent in the previous month, the Federal Reserve said Friday. The biggest gain was in autos and auto parts, where production increased 3.6 per cent after falling 4.9 per cent in January. Car sales have risen steadily this year after reaching a five year high in 2012. Overall industrial production, which includes mining and utilities, rose 0.7 per cent in February. That is the most in three months.  “Growth has clearly picked up,” Jim O’Sullivan, chief U.S. economist at High Frequency Economics, said “This is another positive sign” for the economy in the January-March quarter. Jonathan Basile, an economist at Credit Suisse, said the healthy increase in output suggests manufacturers will need step up hiring in the months ahead. Factory job gains could rise to 20,000 a month, up from average gains of 13,000 in the past three months.

Market Update as of March 15, 2013

The TSX closed at 12830, up 5 points or 0.04% over the past week. YTD the TSX is up 3.2%.
The DOW closed at 14514, up 117 points or 0.81% over the past week.YTD the DOW is up 10.8%.
The S&P closed at 1560, up 9 points or 0.58% over the past week.YTD the S&P is up 9.4%.
The Nasdaq closed at 3249, up 5 points or 0.15% over the past week.YTD the Nasdaq is up 7.6%.

Sources:  Bloomberg, globeadvisor, Investment Executive

Odette Morin

How much of an RRSP contribution should you make?

There is always the tax saving angle and the retirement planning angle.  Make sure to consider both.  Too many just look at whether they are getting a refund or not and will make just enough RRSP to cancel the tax owing if any.  Look at how much you need to save to be on track with your plan first, make sure your total contributions were at least that amount this year and then decide if you should make more. That is the proper planning process.  Email, call or come in for a meeting.  We are there to help you do what is best for you given your individual circumstances this year.

GettyImages_88621296If you are always scrambling to make an RRSP contribution, set up an easy monthly pre-authorized contribution now for 2013, enjoy the tax refund next April and a comfortable worry free retirement!!