In today’s environment, financial fraud is more prevalent than ever.

While financial fraud can happen to people of all ages, seniors are particularly vulnerable. In fact, fraud is the number one crime committed against older Canadians.¹ Some key reasons are because seniors may be home more often during the day to answer the door or the telephone, they may also be more trusting and may not have family or friends nearby to ask for a second opinion.

It is important to know how to keep your personal and financial information safe and secure. Learn how to recognize, reject and report common scams to help protect you and your loved ones from fraud.

Phishing

Fraudsters impersonating government agencies, banks, communication providers, or other companies contact potential victims to lure them into providing personal or financial information, such as usernames, passwords, credit/debit card numbers, PINs, and other sensitive data, that can be used to commit financial crimes.

Phishing typically occurs in an email but can also come as a text message (smishing)—or fake phone call (vishing).

Extortion scams

Impersonating Canada Revenue Agency (CRA) employees, fraudsters will call unwitting victims to falsely claim there are discrepancies from past tax returns and that payment is required immediately. They threaten that failure to do so will result in additional fees and/or jail time.

The CRA would never phone, email, or text you to ask for information. If you are concerned, you can always call the CRA directly at 1.800.959.8281.

Romance scams

Unscrupulous individuals will create fake profiles on dating or social networking sites to seek out potential victims and gain their trust over some time. Once the perpetrator has gained their confidence, they will eventually ask the victim to send them money.

Mail scams

Victims receive unsolicited mail advising they are the beneficiary of an inheritance or have won a prize. The fraudster states the victim must pay upfront fees before the funds can be released.

Service scams

Imposters call and identify themselves as representatives of a well-known technology company, such as Microsoft or Windows. They claim that your computer has been hacked and must be serviced for a fee payable by credit card or money transfer. These individuals will remotely access your computer, run malicious programs, alter settings, or steal personal information.

Bank investigator scams

Consumers are contacted by phone and asked for assistance to catch a bank employee who has been stealing money. The victim is instructed to visit their bank branch and make a cash withdrawal from their account without disclosing the reason, as the teller may be involved in the scam. The victim is then directed to place the cash in an envelope and meet the “investigator” or send the money through a wire service, such as Western Union.

Loan scams

Consumers seeking loans may stumble upon offers through advertising or websites designed to resemble legitimate lending institutions. Once the victim has provided their personal information, they are informed their loan will be deposited into their account within 24 hours of sending an upfront fee. Once the payment is received, the fraudster ends communication, and no loan money is provided.

How do I report a suspected scam?

If you or someone you know has been the victim of a scam, contact the Canadian Anti-Fraud Centre at 1.888.495.8501 or visit their website at antifraudcentre.ca.

Remember to: Recognize, Reject, Report.

Quick tips to prevent financial fraud

¹ https://www.canada.ca/en/employment-social-development/corporate/seniors/forum/fraud-scams.html

source https://rosenbergdri.ca/how-to-protect-yourself-from-financial-fraud/

The key to effective estate planning is to minimize estate tax and maximize the amount of wealth available for transfer to the next generation.

Investments and taxes

While registered assets such as those held within an RRSP, RRIF and pension plan allow for an immediate tax deduction and tax-deferred savings for retirement, any withdrawals will be fully taxed as income at the marginal tax rate. Any income or growth from non-registered investments such as GICs, stocks, bonds, real estate and cash will be taxable to some extent – either as it’s earned or upon the distribution of the assets. Even upon death, all assets are deemed to be sold at their fair market value for tax purposes, which can result in a significant tax liability for your estate. Many investors are simply looking to create a diversified pool of assets with stable returns that will attract the least amount of tax during their lifetime and transition that wealth to the next generation in a tax-efficient way.

How the strategy works

A tax-exempt permanent life insurance policy would be purchased, and the policy could be structured on a single or joint life basis. Clients can choose an insurance product with guaranteed values or accept a product with some market risk, which may result in higher values. Premiums for the policy could either be funded by reallocating assets from the client’s non-registered investment portfolio or using excess cash flow not needed for annual living expenses. The policy could be structured as a “quick pay,” meaning the premium would be payable for a pre-determined number of years, provided the policy performs as expected. At the death of the insured(s), the policy would pay out a tax-free death benefit directly to the named beneficiaries.

The estate reallocation strategy will provide a way to diversify the client’s current asset mix in a tax-efficient way, significantly increasing the net estate value available for the next generation.

Clients who will benefit

• Canadian resident
• Typically, clients over 45 (can also work for younger clients)
• In good health to qualify for life insurance
• Capital that exceeds lifestyle requirements
• Fixed income investments
• Receptive to long-term planning and slow growth
• Concerned with preserving assets for the next generation

The benefits

The benefits of the estate reallocation strategy include:

• Life insurance protection that can enhance the overall size of your estate
• The growth within the policy may increase the insurance proceeds payable at death to beneficiaries
• Potential to reduce taxes payable by shifting funds from a taxable environment to a non-taxable one
• Proceeds are paid directly to the named beneficiaries avoiding additional estate taxes/probate fees upon the insured individual’s death

Client example

Through a planning engagement, it was determined that a couple, male and female, both 60 years old and non-smokers, had $50,000 in excess cash flow each year. The clients were looking for an effective investment strategy that would maximize their estate for the next generation and minimize taxes payable upon their last death. After learning of the estate reallocation strategy, the clients preferred the benefits the insurance policy could provide compared to an alternate fixed income investment yielding 3.9%.

Comparing the two options:

The following table illustrates how the clients maximized the value of their estate while benefiting from significant tax savings.

*For illustration purposes only. Values as of April 2021, assuming a 51.30% personal tax rate, insurance products and rates will vary according to the client’s situation.

Want to learn more?

Our team along with our insurance specialists can provide more information about minimizing your taxes and maximizing the legacy you leave behind through the estate reallocation strategy.

This article is intended as a general source of information only and should not be considered or relied upon as personal and/or specific financial, tax, pension, legal, or investment advice. Please note that it is extremely important that individuals obtain advice from a professional advisor when developing an insurance strategy. Benefits from different strategies can vary greatly depending on a number of factors, such as age and health. Individuals interested in this type of planning should contact their professional advisors.

source https://richarddri.ca/the-asset-transfer-strategy/

Insurance solutions can address your family’s unique needs and efficiently help pass cherished family assets to the next generation.

You spend most summers at the family cottage – it’s even where your children learnt how to swim. It holds a lot of sentimental value and, understandably, you feel strongly about keeping it in your family. Unfortunately, passing ownership is not so straightforward. When it comes to recreational property succession planning, there are several tax and estate factors to consider. In this article, we look at how insurance can provide a cost-effective solution to estate planning.

Capital gains tax

Although passing ownership to the next generation is a nice sentiment, if your property value has increased from the time of purchase, your beneficiaries will face the burden of having to pay sometimes substantial capital gains tax.

When it comes to estate planning, one of the most cost-efficient ways to mitigate capital gains tax is through permanent life insurance, where proceeds can be used to cover this tax at death. Let’s use Amy as an example.

Amy wants to pass ownership of her cottage to her children (beneficiaries). She purchased her cottage 40 years ago for $200,000. At her time of death, the property is valued at $1,000,000. The accrued capital gain totals $800,000. Assuming 50% of capital gains are taxable at a personal rate of 53.53%, Amy’s beneficiaries would have to pay $214,120 in capital gains tax. That can be an overwhelming amount of money, and unfortunately, her beneficiaries may believe selling the family cottage is the best way to raise those funds. However, to avoid this outcome, Amy made sure her estate plan accounted for this. To offset the potential tax liability, she purchased a life insurance policy with a death benefit of $200,000, meaning Amy’s beneficiaries can use the full benefit amount to bring the remaining balance down to $14,120. And because of this, they can afford to keep the cottage in their family.

Estate equalization

What if one, or in some cases, most children are not interested in joint ownership of the family cottage? Perhaps one child already has a cottage of their own. Maybe another child lives overseas and won’t be able to use the property to the extent of their siblings. If not decided upon in your estate plan, this situation could potentially cause issues amongst family members. Life insurance can help ensure that all children receive an equal financial inheritance. Here’s how:

Let’s say you have two children, Martin and Omar. Martin is interested in keeping the family cottage valued at $700,000, but Omar isn’t. When it comes to Martin, he can be named as the sole beneficiary of the family cottage in your will. To fix this imbalance, you purchase an insurance policy with a death benefit of $700,000 that pays out directly to Omar. This ensures your assets are divided equally (and equitably) amongst beneficiaries. Even if the insurance policy doesn’t match the cottage value exactly, it goes a long way towards equalizing the estate and both children feeling they have been treated fairly.

Planning to maximize your investment

To capture insurability, and capitalize on lower premium costs, it is generally better to consider insurance strategies sooner rather than later. Insurance solutions can address your family’s unique needs and efficiently help pass cherished family assets to the next generation.

To learn how you can use insurance for recreational property succession planning, contact our office today.

source https://richarddri.ca/recreational-property-succession-planning-with-insurance/

Insurance is best known for protecting you from the risk of financial loss and safeguarding your wealth in a number of ways. That’s an important consideration in developing your Total Wealth Plan; so, let’s examine some ways this multifaceted tool can help protect your wealth.

A Total Wealth Plan includes assessing your financial risk in the event of a serious illness, disability or untimely death. Your ability to earn an income is one of your most significant assets; having an insurance plan in place to protect this valuable asset will alleviate financial stress in the case of illness, disability, or death.

Life insurance

At a minimum, any adult Canadian with dependents should consider life insurance. Coverage options can be broken into two main types: term insurance and permanent insurance.

Term insurance

Term insurance is often viewed as renting protection; it is generally used to replace future income or cover specific financial obligations, such as paying off a mortgage and other debts or funding post-secondary education. A specific amount of insurance coverage would be purchased for a specific period of time (the “term”), such as ten years. Usually, this type of insurance is less expensive due to the coverage duration being limited. Many of these policies are renewable and convertible, meaning the policy will automatically renew when it expires – at a higher premium – and there is an option to convert the policy to a permanent insurance product. These attractive features allow individuals to maintain coverage beyond the original term without proof of insurability. If the insured passes away while the coverage is in place, a tax-free death benefit is payable directly to the named beneficiaries of the insurance policy.

Permanent insurance

Permanent insurance provides you guaranteed lifetime protection from the financial impact your death could cause. As long as the premiums are paid, you will have insurance coverage from when the policy is issued to the day you pass away. Typically, permanent insurance is used to address estate planning needs, such as funding taxes owing due to death or creating capital that a business might need to facilitate ownership transfers.

Premiums for permanent insurance are higher than for term insurance because coverage lasts your entire lifetime, and benefits are sure to be paid out. In contrast, term insurance is often cancelled when the need is gone. Also, unlike term insurance, permanent coverage allows for wealth accumulation within the policy as a portion of each premium paid can be invested, allowing assets to accumulate on a tax-deferred basis within the contract. This enables clients to be more creative with managing their estate planning needs, which can evolve over time.

Most investors will build retirement wealth using RRSPs, which will transfer to RRIFs; any remaining balance becomes fully taxable at death. Similarly, any accrued gains on assets can result in significant capital gains taxes – the family cottage is a perfect example.

While tax liabilities can be “rolled” to a surviving spouse, upon that second death, the taxes are payable, which can deplete the estate or, worse, force a cherished asset to be sold.

Permanent life insurance is often the perfect solution for this situation as it provides the necessary funds exactly when needed.

Disability insurance

The risk of becoming disabled for a significant period before age 65 is actually higher than the risk of dying before that age. A disability insurance (DI) policy manages that risk by paying a monthly benefit for a predetermined duration – usually to age 65 – if you become disabled (based on the policy’s definition of disability). Policies typically include a waiting period before benefit payments begin. Various riders are selected to enhance coverage at an additional cost, such as ensuring benefits keep pace with inflation.

Be aware of group coverage limitations

Although many employers provide group DI plans that provide tremendous value, there are some limitations to a group disability policy you should be aware of. For instance, plans are owned by the employer and may be cancelled or changed at any time. Secondly, coverage is often terminated if you leave the company.

The definition of disability is also an important consideration and one that distinguishes individual from group DI. Usually, once you are considered disabled and making a claim, the definition changes after a certain time (one or two years), after which your ability to continue making a claim may become more difficult. If the insurer no longer considers you disabled, you may be forced to consider a role you usually wouldn’t take simply because you’re able to do the job.

Finally, benefits may be capped and are taxable if the related insurance premiums are employer-paid (unless premiums are a taxable benefit, then benefits are tax-free). If you already have group disability coverage, you may consider supplementing that plan with your own individual disability insurance policy. That way, you can mitigate these limitations, benefit from the protection of complementary solutions, and maximize your income replacement during a difficult time.

The cost of longevity

Many Canadians are retiring earlier and living longer. While a longer retirement is appealing, it does present a risk that, at some point, you may need additional financial resources to maintain your quality of life. Three insurance solutions can help:

Critical Illness insurance

Dealing with an illness can be very expensive. The financial impact from the inability to continue working and medical costs not covered through government plans can result in a significant financial setback.

Critical Illness (CI) insurance is a type of coverage that can protect your financial health. A CI policy will cover a range of illnesses outlined in the contract; if the insured is diagnosed with one of those covered conditions, the policy will pay a lump sum, tax-free benefit after the prescribed waiting period. While much of our health care is funded by the provincial governments, some treatments may have additional costs, depending on what they are and where they are received. There may also be ancillary costs, such as travel expenses, that can be burdensome. Worse, family members may want to take an unpaid leave to help provide care, which might create an income gap. Having Critical Illness insurance ensures that if you fall ill, your medical concerns will not be compounded by financial ones.

Long Term Care insurance

When long-term care is required, the costs can be high. Over an extended period, these costs could threaten the financial security you’ve worked hard to achieve. Long Term Care (LTC) insurance can eliminate the fear of outliving your savings or diminishing your estate for the next generation.

LTC insurance will provide a regular benefit that can be used to pay for the care required in your home or a care facility. A benefit would become payable when the insured cannot perform a certain number of Activities of Daily Living (ADLs) outlined in the contract.

With long-term health costs across Canada increasing and the financial support from governments shrinking, this type of protection can ensure quality care without the financial stress.

Life annuities

A life annuity is one of the few ways that investors can guarantee a lifetime income stream, allowing you to ensure you don’t outlive your capital. It can also be helpful in creating an income stream for a loved one while limiting their ability to access the original capital.

An annuity is purchased with a one-time deposit; in exchange for that deposit, the insurance company will make predetermined, regular payments to you for the rest of your life, at which point the contract ends, and the income ceases. Each income payment is a combination of the original capital and interest. Only the interest portion is taxable if the annuity is purchased with non-registered funds. Where registered funds are used, the income payment is fully taxable. The only risk with life annuities is that you don’t live long enough to recoup the original capital investment; however, there are options and strategies that can be used to mitigate that risk.

Annuities can be a useful part of a fixed income strategy and can be established jointly with a spouse, ensuring income continues until the last partner passes away.

We are here to help

Although risk is an inevitable part of life, having the right insurance solutions in place can act as a hedge and help you protect what you’ve worked so hard to build. Our Total Wealth Planning process helps determine how you can best structure, enhance, protect and distribute your wealth.

Contact our office today to get started.

source https://richarddri.ca/insurance-a-critical-tool-for-managing-risk/

A Registered Education Savings Plan (RESP) is a popular investment vehicle to help save for a child’s or grandchild’s post-secondary education. However, when it comes to estate planning, RESP assets are often overlooked.

Here is an overview of important estate planning considerations for your RESP.

Key benefits

RESPs offer three key benefits:

1. Income-tax deferral: income earned inside the plan is ‘sheltered’ and is not subject to annual taxation.
2. Income-splitting opportunities: when withdrawals are made, income inside the RESP is taxed in the hands of the beneficiary (the student), who is typically in a low tax bracket.
3. Government grants: Under the Canada Educational Savings Grant (CESG) program, the federal government will pay up to $500 each year that contributions are made for an eligible child. There are also provincial grants that an eligible child may receive.

Many parents/grandparents fail to think about what will happen to the plan should they (the subscriber) die before the plan’s assets have been fully withdrawn in the form of educational assistance payments (EAPs).

Unlike an RRSP or RRIF, assets in an RESP are considered part of the deceased’s estate, even though a beneficiary has been named. This means probate fees are payable, and the assets may be exposed to creditors of the estate. In addition, any government grants may have to be repaid from the plan.

Planning options

If the subscriber’s will contains no instructions about the RESP, the assets will form part of the residue of the estate and will be handled according to the terms of the will. In most cases, the only option may be to terminate the plan, resulting in all contributions being refunded to the subscriber’s estate. All CESGs (but not the accumulated income on the CESGs) that have not been paid out as EAPs must be refunded to the government. The subscriber’s estate may also face tax on accumulated income (but not on the original contributions).

This result (the plan’s collapse) is not what most subscribers intended or would want. Therefore, the better option is for the subscriber to specifically deal with the RESP in their will by naming a successor subscriber. If the subscriber dies, the appointed successor subscriber will have the authority to preserve and continue the plan on behalf of the beneficiary.

Sole (or last) subscriber grandparents may wish to consider naming the beneficiary’s parent as the successor subscriber. It may also be possible to establish a testamentary trust—with sufficient assets to continue making contributions—as successor subscriber for the plan.

Find out how the Dri Financial Group and an Estate and Trust Consultant at Scotia trust can help.

source https://advisor.scotiawealthmanagement.com/dri-financial-group/dont-forget-about-resps-in-your-estate-plan-2/

A Registered Education Savings Plan (RESP) is a popular investment vehicle to help save for a child’s or grandchild’s post-secondary education. However, when it comes to estate planning, RESP assets are often overlooked.

Here is an overview of important estate planning considerations for your RESP.

Key benefits

RESPs offer three key benefits:

1. Income-tax deferral: income earned inside the plan is ‘sheltered’ and is not subject to annual taxation.
2. Income-splitting opportunities: when withdrawals are made, income inside the RESP is taxed in the hands of the beneficiary (the student), who is typically in a low tax bracket.
3. Government grants: Under the Canada Educational Savings Grant (CESG) program, the federal government will pay up to $500 each year that contributions are made for an eligible child. There are also provincial grants that an eligible child may receive.

Many parents/grandparents fail to think about what will happen to the plan should they (the subscriber) die before the plan’s assets have been fully withdrawn in the form of educational assistance payments (EAPs).

Unlike an RRSP or RRIF, assets in an RESP are considered part of the deceased’s estate, even though a beneficiary has been named. This means probate fees are payable, and the assets may be exposed to creditors of the estate. In addition, any government grants may have to be repaid from the plan.

Planning options

If the subscriber’s will contains no instructions about the RESP, the assets will form part of the residue of the estate and will be handled according to the terms of the will. In most cases, the only option may be to terminate the plan, resulting in all contributions being refunded to the subscriber’s estate. All CESGs (but not the accumulated income on the CESGs) that have not been paid out as EAPs must be refunded to the government. The subscriber’s estate may also face tax on accumulated income (but not on the original contributions).

This result (the plan’s collapse) is not what most subscribers intended or would want. Therefore, the better option is for the subscriber to specifically deal with the RESP in their will by naming a successor subscriber. If the subscriber dies, the appointed successor subscriber will have the authority to preserve and continue the plan on behalf of the beneficiary.

Sole (or last) subscriber grandparents may wish to consider naming the beneficiary’s parent as the successor subscriber. It may also be possible to establish a testamentary trust—with sufficient assets to continue making contributions—as successor subscriber for the plan.

Find out how the Dri Financial Group and an Estate and Trust Consultant at Scotia trust can help.

source https://richarddri.ca/dont-forget-about-resps-in-your-estate-plan-2/

Do you wish to provide financial support for your grandchildren’s future education?

Many of us would like to help with private school or post-secondary school expenses, as we recognize the importance of a good education – and the high costs often associated with it. Here are a couple of options to consider if you are a grandparent.

Make an outright gift

You can take a “wait and see” approach and help pay for your grandchildren’s expenses as they arise. This lets you assess each grandchild’s situation while keeping the assets in your name. If you pay tuition fees directly to an educational institution, there will be no concerns about income attribution. If you plan to give money directly to a grandchild under 18 years of age, when that money subsequently earns interest or other investment income, the tax liability may be attributed back to you. A financial gift to grandchildren aged 18 and over is not attributed back to you. Instead, it is taxed at the child’s rate of taxation (presumably lower than yours). If the child uses the money to pay tuition, they may be able to transfer unused tuition and education tax credits to a parent or you. The “outright gift” approach makes sense for private school tuition fees since RESPs can only be used to fund post-secondary education.

Contribute to a Registered Education Savings Plan

Once your grandchildren are born, they qualify for a Social Insurance Number, allowing a Registered Education Savings Plan (RESP) to be opened on their behalf. Although contributions to an RESP are not tax-deductible, there is a tax-deferral opportunity as the contributions accumulate tax-free within the plan. Upon withdrawal, the income and government grant portions (refer to the bullet point on CESGs) will be taxable in the hands of the beneficiary (i.e., the student). At the same time, the principal contributions remain tax-free, provided that your grandchild is enrolled full-time or part-time in a qualifying educational program at a qualifying post-secondary educational institution. Your grandchild will likely be in a lower tax bracket than you at the time of withdrawal and will be able to offset some of the tax liability with tuition and education tax credits, lowering the overall tax burden on these funds.

• There are individual plans and family plans. In an individual plan, the subscriber (i.e., the one opening the RESP) can be anyone – a relative or otherwise – but there can only be one beneficiary. In a family plan, the subscriber must be a parent or grandparent. You can have multiple beneficiaries if they are related to the subscriber by blood or adoption.
• The total lifetime maximum RESP contribution is $50,000 per plan. Contributions to an individual plan may be made for up to 31 years after the plan is established. For example, if an individual plan was opened in 2000, the last contribution date is December 31, 2031. Contributions to a family plan may only be made until the date the beneficiary turns 31 years of age. The plan must be closed by December 31 of the 35^th year after being opened. A penalty of 1% per month is imposed on excess contributions for each month the funds remain in the plan.
• Your capital contributions may be withdrawn anytime; however, you cannot withdraw RESP income without tax consequences. For a beneficiary who qualifies for the disability tax credit, the termination date of the RESP has been extended from 35 to 45 years.
• Under the Canada Education Savings Grant (CESG) program, the federal government will pay a grant of 20% on the first $2,500 of your annual contributions. The maximum annual grant of $500 (up to $1,000 if there is sufficient unused accumulated grant room) is payable for each year until the end of the calendar year in which the beneficiary turns 17, to a lifetime maximum of $7,200 per beneficiary.

Contact the Dri Financial Group to discuss educational savings strategies in more detail.

source https://richarddri.ca/support-your-grandchilds-education/

One of the most effective ways for parents to save for their children’s education is to invest in a Registered Education Savings Plan (RESP).

The time has come to withdraw funds from your child’s RESP. Here are six tips to help you get the most out of your RESP withdrawals.

Scenario 1: When your child pursues post-secondary education

Tip #1: Proof of enrollment

To withdraw funds from an RESP, you must provide proof of enrollment for your child. This consists of a letter/ document on the educational institution’s letterhead containing the institution’s name and address (including postal code), date of issue (currently dated), student’s name (and student number, if available), confirmation that they are presently enrolled in the program at the institution, as well as the enrollment status (full-time or part-time). If a letter/document cannot be obtained, an invoice from the educational institution may also be accepted if all of the required information is included.

Tip #2: Withdraw tax efficiently

The main benefit of an RESP is that it allows a portion of the RESP withdrawal to be taxed in your child’s name. Typically, children have a low income coupled with tuition and education tax credits; therefore, they should pay little or no tax on the withdrawal. Let’s review the two portions of an RESP and how they are taxed.

1. Post-Secondary Education Payments (PSE)
The PSE is your contributions to the RESP and can be withdrawn tax-free. There is no limit to how much can be withdrawn at a time.

2. Education Assistance Payment (EAP)

The EAP is everything else and comprises investment income, capital gains and government grants/bonds earned in the RESP. The EAP is taxed on the student. Again, with your child’s low income and available tax credits, withdrawing from EAP may help reduce taxable income.

Note: The maximum EAP withdrawal during the first 13 weeks of school is $5,000 ($2,500 for part-time students). After that, there is no limit up to the annual EAP threshold. In 2022, the annual EAP threshold limit is $25,268. Should more than the limit be required, payments can be made from the PSE.

Tip #3: Time your withdrawals

You want to withdraw EAP in the years when your child’s income is low. Depending on summer jobs and co-op programs, their income may fluctuate yearly. Consider withdrawing more in low-income years to take advantage of tax credits. Ultimately, you want to ensure the entire RESP is withdrawn while they’re in school, or additional taxes may apply when the RESP is collapsed.

Scenario 2: When your child does not pursue post-secondary education

If your child does not attend post-secondary, the government will retract all grants/bonds if the RESP is collapsed. As previously mentioned, your contributions can be withdrawn tax-free from the RESP. What remains will be investment income, called the Accumulated Income Payment (AIP).

Tip #4: Move AIP to an RRSP

If you withdraw the AIP from your child’s RESP, it will be taxed at your marginal tax rate plus a 20% penalty. To avoid this, you can transfer this amount tax-free into your RRSP or your spouse’s RRSP up to your available contribution room, with a maximum of $50,000. If you do not have enough RRSP room, you can postpone the transfer to the following year.

Tip #5: Transfer to another RESP

If you have multiple children with RESPs, you can transfer the total RESP amount to a sibling’s RESP if the sibling is under 21. However, if the sibling has already received the maximum Canada Education Savings Grant (CESG) of $7,200, the excess grant has to be returned to the government.

Tip #6: Make use of the 6-month grace period

A six-month grace period is available after the beneficiary stops being enrolled in a post-secondary education program. During this time, beneficiaries can withdraw excess RESP savings in the form of EAP. However, there are some limitations, and Canada Revenue Agency might audit you if you make exceptionally large EAPs – the penalties could be severe.

For more information on RESPs and withdrawal strategies, contact the Dri Financial Group.

source https://richarddri.ca/6-tips-before-withdrawing-from-your-resp/

After being closed for Labor Day, U.S. indexes fell Tuesday, driven lower once again by investor fears over more hawkish Federal Reserve policy and a growing energy crisis in Europe.

The S&P 500 declined 0.4%, the Dow slid 0.5%, and the tech-heavy Nasdaq suffered its seventh consecutive day of losses, surrendering 0.7%. Meanwhile the TSX fell 182 points on Tuesday to its lowest closing level in six weeks, as the energy and materials sectors led broad-based declines.

Major North American indexes reversed course and moved higher in Wednesday trading, despite fears of a slowing global economy and an aggressive Fed. By Wednesday’s close, the S&P 500 was up 72 points, the Dow added 436, and the Nasdaq gained 247. Each of the S&P 500’s 11 sectors notched gains, except for energy, which fell over fears of waning Chinese demand. In Canada, the TSX rose 153 points, with gains offset by the energy sector, which lost 3.1%.

As expected, the Bank of Canada increased its policy rate by 75 basis points to 3.25% on Wednesday, the highest level since 2008. At this point, all signs indicate that the BoC’s fight against inflation is far from over. Meanwhile the Fed is expected to raise its rate by another 75 basis points at its September 20-21 meeting.

U.S. stocks rose Thursday as investors once again parsed new remarks from Fed Chair Powell, while the European Central Bank took forceful action to tamp down inflation, raising its rate by 75 basis points. By Thursday’s close, the Dow gained 193, while the S&P 500 and Nasdaq rose 26 and 70 points, respectively. In Canada, the TSX jumped 171 points.

N.A. Indexes Bounce Back

For the three trading days covered in this report, the Dow gained 456 points to close at 31,774, the S&P 500 rose 82 points to settle at 4,006, while the tech-heavy Nasdaq added 231 points to close at 11,862. In Canada, the TSX rose 142 points to end at 19,413.

Read more

source https://richarddri.ca/markets-gain-ground-despite-outlook-for-rising-rates/

When it comes to funding post-secondary education, parents and their teenage children need to have a financial plan in place that addresses everything from tuition costs and financial aid to money management for students.

Five tips for parents

Do your homework

Parents need to assess their finances to establish which colleges and post-secondary programs are within the family’s budget and whether or not they’ll need to pursue financial aid. Is there a Registered Education Savings Plan (RESP) already in place? If so, great; if not, there might still be advantages to setting one up—contact the Dri Financial Group for more information.

Game plan with your family

Open and effective communication is essential when planning for college or university. Make sure your children understand all the costs involved and if they will be playing a role in helping to fund their education—whether that means taking on student loans or part-time work during their schooling.

Look for free money

Scholarships, grants and bursaries are types of financial assistance that you don’t have to pay back. Scholarships are typically based on merit, while grants and bursaries usually consider financial needs as well. Check with your child’s prospective school to find out what you could be eligible for, and visit sites like www.scholarshipscanada.com to explore available funds.

Explore government loans

If available scholarships and financial aid can’t cover all your funding gaps, it might be necessary to consider a student loan. For more information, visit the Government of Canada Student Financial Assistance website www.canlearn.ca.

Be realistic

You want your child to have the best possible education to ensure a successful start in life. However, it’s important not to put your finances at risk to fund your child’s schooling. Be willing to explore other money-saving options, such as living at home instead of on campus.

Six money-management tips for students

Many university students run short of funds before the end of their school semester. Here are some tips to help ensure you spend your money wisely.

Track your spending

Where does all your money go? One way to find out is by writing down everything you spend money on – from textbooks and tuition to takeout food and lattes. You’ll be surprised at how little expenses add up. Learning how to budget is essential for students to master as they begin life away from home.

Use cash

Studies have shown that using cash instead of a debit or credit card can reduce discretionary spending. While tapping your card is quick and easy, it can contribute to unnecessary expenses.

Avoid buying new textbooks

Purchasing textbooks can take a big bite out of your budget. Instead, explore the various options such as e-versions or renting textbooks online.

Consider online classes

Online classes are an extremely cost-effective way to catch up and graduate on time or early. Avoiding an extra year (or even semester) of tuition, room, and board could be a financial lifesaver.

Late riser? Change your meal plan

If you never make it to breakfast, don’t buy the school’s three-meal plan. Instead, opting for the two-meal plan could save you hundreds of dollars each semester.

Consider refinancing school debt

Government loans don’t always offer the best terms. Always look for opportunities to refinance your university debt at more favourable rates.

Contact the Dri Financial Group to find out what options are available.

source https://richarddri.ca/preparing-for-post-secondary-education/