QAFP Exam 2 Flashcards
Permanent insurance provides a basis for estate planning. there has to be a need, buying young because its cheap isnt enough. term and perm can have level premium and are cheaper at a young age. tax deferral is only relevant if reg accounts are maxed and there is an insurance need
can use hbp to purchase for disabled relative. disability trust is testamentary, can’t be inter vivos. henson trust can be inter vivos, not short term though. rdsp is accessible at jan 1st at age 59, grants/bonds up until age 49.
rdsp grant and bond
1k bond per year up to 20k lifetime. 3x match on $500 and 2x match on $1000. 1x match on $1000 if above income threshold
pre-existing limitations on group disability only last 1-2 years (ex. join plan with a disability).
permanent insurance has to indicate a need.
Step 1 in planning process
describe business model (before conflicts on interest are dealt with)
objectives are important to develop strategies but asset allocation should be based on investment knowledge (may not be able to tolerate a loss with little knowledge)
potential for profit is the greatest reason to hold company shares
privately owned companies and stock options
can have employees defer gain on options until disposal (can’t be offered at a discounted price)
elections post mortem
can rollover to spouse if its more tax efficient
if investor profile doesnt match planners personal assessment, be conservative
pay attention to investing style and objectives
objectives established before building portfolio and showing potential returns
adding partner to group plan increases premiums, life insurasnce extended is minimal, coverage for spouse is up to 24 months usually. PHSA can bhe used to cover expenses not covered under group plan
what types on benefits plans are dependent on business type and income type
workers comp, cpp, ei
(salary vs dividends)
morningstar, what it tells us
how a fund performs compared to similar funds
DPSP Accessibility
The end of the year in which the beneficiary turns 71 years of age, and
90 days after the earliest of:
the death of the employee
the day on which the employee is no longer employed by a participating employer
the termination of the plan
most immediate priority - whats the cost of not fixing this? Becoming disabled with no insurance carries a much larger risk than carrying a credit card with a large balance. lost income would outweigh interest costs
overvaluing home could mean endowment effect and a reluctancy to sell an ASSET. prevent someone from making the correct decision
if owner is paying themselves dividends, be prepared to recalculate projected cpp benefits
cpp contribution is mandatory from 18-70 if not collecting
50% inclusion on 50% gis clawback on employment income above 5k (25% effectively)
penalty tax of 100% on tfsa overcontribution returns (some latitude on this) + 1% per month
can stop paying premiums and let csv pay them. you can cover just insurance but if cash flow is tight, rely on policy to pay itself.
charitable donations create tax credit and dont reduce earned income. employment expenses, pension contributions and childcare expenses do reduce income.
What rate of return is required to do better than pension? Calculated fv using a real rate of return. if its greater than 0, that’s your answer.
py and cy set to 12, unless it states compounding is annual
mortgage mutual fund needs
income, stability
