Financial Planning Flashcards
What are the steps in the financial planning process?
- Establish client-planner engagement
- Gathering client data and determining goals and expectations
- Clarifying the client’s present financial status and identifying problem areas and opportunities
- Develop and presenting the financial plan
- Implementing the financial plan
- Monitoring the financial plan
Explain Educational Assistance Payments. In what situations can they be paid?
EAP is the amount paid to a beneficiary from an RESP to help finance the costs of post-secondary education. Amount received reported on a T4A slips. Can be paid if: -Student is enrolled full time in a qualifying educational program -Student reached age of 16 and is enrolled part-tim in a specified educational program. A student can receive payments for up to 6 months after ceasing enrollment if the payments would have qualified as EAPs.
What is the limit on EAPs from RESPs?
Full time - $5,000 for the first 13 consecutive weeks - after completing 13 weeks no limit if student continues to qualify to receive them. If there is a 12-month period when student not enrolled - 13 weeks starts again. Part-Tim - $2,500 for 13 week period of enrollment in part-time studies.
Who can subscribe to an RESP?
No limits on who can be the original subscriber. Where no the original, you can only be a subscriber if: Spouse or common law partner of subscriber Former spouse or common law partner of subscriber Estate of subscriber
What is the limit for contributions to an RESP for each beneficiary? (annual/lifetime)
Annual - no limit Lifetime - $50,000
What is the CESG and how long does it continue?
Canada Education Savings Grant 20% of annual contributions - to a maximum of $500 per year (1,000 if there is unused grant room from a previous year), lifetime limit of $7,200 Beneficiaries qualify for grant on contributions made on their behalf before the end of the calendar year in which they turn 17.
What is the additional CESG amount and thresholds
Additional CESG on first $500 contributed: 40% (extra 20%) on first $500 - if family has qualifying income of less than 41,545 20% (extra 10%) on first $500 - if family has qualifying income of less than 83,088
What are the restrictions on CESG for beneficiaries who are 16 or 17 years of age?
Can only receive CESG if: - A minimum of $2000 of contributions have been made, and not withdrawn before the year the beneficiary turns 16, or - A minimum of $100 of annual contributions have been made, and not withdrawn, in at least any four years before they the beneficiary turns 16.
What happens when beneficiary of RESP does not go to post-secondary school?
Contributions returned to subscriber, CESG repaid to government Subscriber will have to pay taxes on investments - could reduce taxes by transferring the accumulated income payment to an RRSP.
What happens when money is withdrawn and used for non-school purposes?
Money can be withdrawn: 20% will be withheld as CESG repayments - will not be able to receive CESG payments for 3 years and carry-forward room can not be accumulated to make up for CESG lost.
When can you roll an RESP into an RRSP?
Investment income from contributions, or Accumulated Income Payment - can be rolled into subscriber’s RRSP or spouse’s RRSP without penalty if there is contribution room. Lifetime limit of $50,000 Conditions: - RESP must have existed for 10 years or longer - Beneficiaries must be 21 years of age and not attending post secondary education.
What if the RESP is not rolled into an RRSP?
Where the AIP is not fully offset by RRSP deductions, there is a deferral tax of 20% over and above a subscriber’s ordinary marginal tax rate.
What are the RESP catch up rules?
if you didn’t contribute to a Registered Education Savings Plan (RESP) in previous years, you can catch up on contributions and possibly still get the lifetime maximum Canada Education Savings Grant (CESG) of $7,200 that your child can receive. In every calendar year, you can catch up for roughly one more year of missed contributions. For example, let’s say no RESP contributions have been made so far for a child born in 2000. The total CESG room for the child is $3,800 ($400 for the years 2000 to 2006 and $500 for 2007 and 2008). If a RESP account is set up for the child and $5,000 is contributed to it, the child will receive a grant of $1,000 and have the remaining $2,800 carried over to future years. In this example, it will take another 6 years to bring the grant room down to zero.
What is the Canada Learning Bond?
A government of Canada grant to help lower income families start saving for their child’s post secondary education. Children eligible to receive from birth, application can be made until a child turns 18. CLB deposited right into RESP.
When can you receive the CLB?
If: - your child was born after December 31st, 2003, and -your monthly Canada Child Tax Benefit payment includes the National Child Benefit Supplement Generally for families with net income below $36,378
What is the amount of CLB?
First payment of $500 (+$25 to cover set up costs of RESP) Extra payment of $100 per year for up to 15 years Max of $2000
When can you participate in the HBP?
If you (or your spouse) have not owned a home which you occupy as your principal place of residence in any of the past 5 calendar years. Once you have entered into an agreement to buy or build a qualifying home, you may withdraw funds from your RRSP under the plan. Money has to have been in your RRSP for at least 90 days at the time of withdrawal.
If you use the HBP, when do you have to move into the home?
You must acquire the home before October of the year following the year of withdrawal.
What is a qualifying home under HBP?
- located in Canada - acquired no more than 30 days prior to withdrawal from RRSP - intended to be occupied as principal place of residence within one year after buying or building.
