BCC Case Prep Flashcards
What is regular occupation?
Most used definition. Provides benefit as long as insured can’t do a job that doesn’t fit their range of skills
What is own occupation?
Most generous. As long as you can’t do your job, you’ll get the benefit. Ex. Surgeon
What is any occupation?
Most restrictive. No benefits if you can do any job you are qualified for. Normally used in lower occupations.
What are some benefits of the RDSP
-Free bonds
-tax splitting from parents to child
-beneficiary might not be able to save on their own
-will not interfere with provincial
Benefits
How are gains on stock options a treated?
Same as capital gains, but Proceeds-ACB(which is purchase price plus benefit) then had 50% stock deduction
What are the benefits of divesting stock options?
Diversification, locking in a gain
What happens when you transfer a corporate policy to personal ownership?
Policy is taxable as passive income to corporation (CSV-ACB)
What is the taxable gain for the individual when transferring a policy from corporation to individual?
Taxed as shareholders benefit on FMV. Unless he put any amount towards it then that would reduce the benefit.
What assets are hard to categorize?
- CSV
- balanced mutual funds/ETFs
- preferred shares
How do you calculate the real rate of return?
Return-inflation/
1+inflation
What does Assuris cover for disability benefits?
85% when benefit is higher than 2000/m.
-Covers the higher amount
How do tax credits on charitable donations work?
15% on first $200
29% on amount above
-can be carried forward up to 5 years
How do you determine the medical expense deduction?
The lesser of the max or 3% of your income
What are the key considerations of a spousal Loan?
- need a loan agreement (in case of marital breakdown)
- must charge CRA prescribed interest rate
- person getting funds can deduct interest
- person receiving interest would include it as income
How to calculate taxes/credit on dividend?
-dividend is paid Dividend is grossed up Tax paid on dividend (MTR) Dividend tax credit applied on grosses up amount After tax return (tax-credit)
What does LTD’s benefit calculation include?
Salary only, not dividends
What does LTD all-sources maximum mean?
If the plan is not taxable: take after tax monthly income and x 85% =can’t go Over this amount
How does someone who has a corp obtain more disability insurance?
- Replace dividends with salary.
- replace group plan with individual coverage
- change to an insurer that would cover dividends
What event would require a buyout?
- death
- disability or illness
- failure to perform
- morals
- loss of capacity
- marital breakdown
- personal bankruptcy
Why is purchase price valuation important in a buy sell agreement?
To get proper valuation of the business. Hire CBV to value.
Why is timing of purchase important in a buy sell agreement
Makes it clean and sets a common timing for certain events
Why is source of funds important in a buy sell agreement
To determine where the funds will come from. Insurance, loan agreement, third party borrowing
Why is tax handling important in a buy sell agreement
The amount paid to the departing shareholder can be from capital dividend, eligible, non Eligible, return of capital
What happens when you transfer property into a trust?
Think of it as if there’s no trust:
-if it’s staying in the control of the same person: no tax
-if there’s an opportunity for a spousal rollover: no tax
Needs to be over 65
What’s the 21 year rule?
All capital property is deemed to be disposed.
If you’re over 65 this doesn’t apply
What happens when the last interest beneficiary dies in the trust?
The trust pays tax on the last deceased on their terminal return
What happens to the death benefit of life insurance paid to the trust?
Paid out to beneficiary tax free
What is income interest in a trust?
When a beneficiary receives income generated in the trust
What is capital interest in the trust?
Gives the beneficiary the right to the capital in the trust. Cars, buildings, bank account
What is life interest in a trust?
Beneficiary has access to to the funds in the trust during their lifetime.
What is remainder interest in a trust?
A beneficiary only has access to the funds if the beneficiaries with life interests have died
How do the grants work for an RESP?
- 2,500 contribution gets 20% ($500)
- for additional grants:
- if income is less than 100k, it’s 30% on first 500, and 20% on next 2000
- if income is less than 50k, it’s 40% on first 500 and 20% on next 2000
How do grants work for RDSP?
Family net income over 100k=100% so 1000 gets 1000
-family net income less than 100k, 300% on first 500
And 200% on next 1,000
When do you normally use BGN ‘mode for TVM?
Lease payments, mortgages
What are the financial planning steps?
- Letter of engagement
- Discovery
- Calculate retirement needs
- Recommend products
How do you calculate GDS?
Mortgage or rent + property taxes+heating+50% condo fees/gross monthly family income
-upper limit is about 30-35%
How do you calculate TDS?
Debt payments+car payments+same as GDS/family net monthly income
How to calculate how much salary you need for a net amount?
Net amount/(1-tax rate)
What are the rates of depreciation for passenger vehicles, buildings, and most other things?
30%
4%
8%
What is the Canada learning bond for an RESP?
Modest family income
- max 2000 per child
- for children born 2004 or later
- 500 when the account is opened and 100 per year until child turns 15
What are some benefits to a fixed rate mortgage?
- More terms available
- eliminate interest rate risk
What are some benefits of variable rate mortgages?
Usually less expensive as more is paid towards principal
-has option to convert to fixed
