CFP Exam 2 Flashcards
Factors that should be incorporated into will. questions to ask yourself
is there a lot of value and complexity in the estate? may need a professional executor.
Are there business assets? If no succession plan, you’ll want to provide details on distribution. otherwise, it could cause fighting on death.
getting married? Need a new will.
How do you provide for your kids? Important to be careful where exes are involved?
How to protect matrimonial assets in case of divorce
assets brought in are protected. Ensure he has values of those assets recorded
use a marriage contract or cohabitation agreement to stipulate things like spousal
Gift assets to children
Family Trust Considerations
Owner can remain in control with voting rights and the trust can buy a minority position in company
21 year deemed disposition. this is from the day the trust is settled, doesn’t apply if settled at age 65 or after.
lcge - can be multiplied among trust beneficiaries, as long as they were personally eligible (make sure company would qualify in the first place). has to be a personal trust (which a family trust is. A personal trust is one wyhere beneficiaries didn’t pay for their stake).
supporting kids - if kids are under 18, kiddie tax will apply. 18-24 can also have tosi apply if they don;t work for the business (20 hours per week)
what changes for renters buying a homre
property tax, maintenance costs, home insurance, utilities
Fixed rate vs variable rate advantages
Fixed rate - no interest rate risk, more terms available (variable is usually only 3 and 5 year)
variable rate - has historically been lower, usually an option to convert to a fixed rate
donations and tax benefits
can carry forward up to 5 years
securities - 0% inclusion rate when donated in kind. if donated from a corp, the gain is credited to cda account
property - 300k fmv - 200k acb = 100k cap gain. can only deduct 75% of net income. if regular income is 50k + 50k taxable cap gain = 100k total. Can add 25% of taxable cap gain to income, so 112,500k total. 112,500k * 75% = 84,375
ecologically sensitive land - same as securities
benefits of holding company
-sell the op company eventually but keep assets in hold co and use to fund retirement
-build a portfolio with things like sotkcs, real estate, and life insurance,
-Transfer surplus cash and investments to protect from creditor claims.
-bring partner on as shareholder and split income once he’s 65
corp insurance
op co or hold co can pay premiums. op co or hold co could be beneficiaries.
how to delay aaii becoming a problem
ALWAYS READ THE MODE FOR TVM CALCULATIONS
variable mtg and baby coming
not paying mortgage down faster increases interest rate risk and may not be aligned with values, could cause committment issues.
if ror on investments is higher, could lead to better outcome. also an opportunity to build bigger emergency fund to maternity leave.
life insurance
is there a serious consequence to death of that person? if they’re at or close to retirement, probably not (at least for term insurance)
when to use trust company as exec
complicated estate, no clear executor (kids live out of province and partner isn’t capable) especially if there are concerns about fighting within the family
when tdsr or gdsr are an issue
save more, make a larger down payment, shop for home with cheaper heating costs, rent the home, sell a car or move down to one car
advantages of lira and pension
pension - hedges against longevity risk (can’t run out of money), may be able to keep your benefits, indexing, no management required (simple and less risk if she becomes incapacitated).
lira - potential to earn a higher return, can control investments and pick a portfolio that aligns with her desired asset allocation, control over the flow of income
