Get ready to tap into your inner fountain of youth in this fantastic episode. Kicking things off, Darryl throws on his young man hat and dives into the world of Marketing to A Younger Audience! Meanwhile, René shares some insights on the intricate art of saving for your kid's education, shining a light on RESPs. And just when you thought it couldn't get any more entertaining, the guys close out the episode with a lively discussion about snack foods and the secrets to making healthier choices. 

Tune in, hit play, and join the fun as the guys bring you a perfect blend of laughter and knowledge to spice up your day!

Personal finance is personal: Personal finance is unique to each individual and what works for one person may not work for another.

RESPs for your grandkids? Should you have one? There's a whole bunch of options when it comes to this. there are pros and cons.

📽 Watch our other video on how the RESP works: https://youtu.be/e033Qd2Nx3Q

📽 Watch our video on the RESP rules, contribution limits and grants: https://youtu.be/AFNHAnD6R9c

For more information on Rob & The Tetrault Wealth Advisory Group, click here: https://robtetrault.com/about/

More than half of Canadian adults don't have a will which can cause additional legal costs, family conflict, and unnecessary legal battles. 

Unfortunately getting a will done is very easy to procrastinate on as it can be a hassle to set up meetings with a lawyer, ask those difficult questions and be involved in all the back and forth that's required when setting up a will the traditional way by meeting with a lawyer face-to-face. 

As many long time listeners of the show know, I'm a big fan of technology companies that help automate or at least make it a lot easier to do some of the more tedious but important things that we need to get done. 

So in this episode, I'm excited to bring on Daniel Goldgut, a former tax and estate planning lawyer here in Canada, who together with his team over at epiloguewills.com has created a tool that you can use to get a will created in as little as 20 minutes. It's also a lot less expensive than what I paid to have our will done with a lawyer years ago before this tool existed. 

We cover what the top mistakes are that Canadians do when creating a will, as well as how and when to properly update it when different events occur in your life. 

We also cover designating a power of attorney and how to ensure that your will is actually legally enforceable here in Canada.

If you want to check out the tool that Daniel and his team have built you can go to epiloguewills.com, and Daniel's been kind enough to also provide Build Wealth Canada listeners with a $20 discount if you choose to use the service. To get that just use the promo code BUILDWEALTH20.

There's no affiliate or commissions for me on that, it's just a straight $20 off for all Build Wealth Canada listeners.

Questions Covered:

1. To start things off, why is having a will important, and what are the main negative consequences that we may encounter if we don't have one set up correctly?
   
   
2. What are some of the most common or most critical mistakes that Canadians make when it comes to their will? and how can we remedy them?
   
   
3. Before we go any further, for anybody that hasn’t heard of you or Epilogue before, can you give us a bit of a background on what you do?
   
   
4. I saw an article on your company in the Financial Post about how Epilogue is the first online will platform to give its customers the option to include their RESPs in their wills (Registered Education Savings Plans). Can you speak to why that is important?
   
   
5. I noticed you recently launched a free tool to create a Social Media Will. Can you talk about what that is, why it's important, and where can we go to have one created for free?
   
   
6. When we hear about wills, we often hear about also designating a power of attorney. Can you explain what that is, and are there any other elements like the power of attorney that we should be aware of?
   
   
7. When we set up a will, how can we ensure that it's actually legally enforceable, in case somebody ever challenges it in court?
   
   
8. In what scenarios should we be updating our will? And what's the best way to do that?
   
   
9. Whenever we do update our will, how can we ensure that the newest version of the will is what will get enforced?
   
   
10. What are the pros and cons of using a tool like Epilogue vs hiring a lawyer directly?
    
    
11. Are there any clauses that you think are especially critical to have in a will to prevent issues and conflicts in the future?
    
    
12. How important is it to use an actual Canadian lawyer or service like yours, as opposed to using something from the US or another country, or one of those “create your own” will packages that we may see in a store or advertised on TV or online?
    
    
13. How long does it actually take to create a will using Epilogue, and for anybody that doesn’t have a will or needs one updated, how can we get started?

If you liked the episode sign up for free to receive all new episodes as they get released, news on giveaways, and the free guide on the Top 5 Personal Finance and Productivity Tools.

• Identity fraud. Как защититься от подделки персональных данных.
• Investing and dividends: самые доходные варианты пассивных инвестиций в Канаде.
• Пенсионные программы, предоставляемые работодателем: defined benefit и defined contribution.

Транскрипт выпуска

Mailbag с Артемом и Кирой. Отвечаем на ваши вопросы.

Identity Fraud: подделка личных данных

In this episode, Rob speaks with veteran portfolio manager and hedge fund manager Andrew MacCreath.

Andrew has over 30 years of industry experience and has a regular show on BNN - Weekly With Andrew McCreath

Donating Securities In Kind

Hey guys, today we're talking about donating securities in kind, how to do it, why you would want to do it, and how extremely tax efficient it can be to donate to your favorite charity. I'm Rob Tétrault from robtetrault.com, Head of the Tétrault Wealth Advisory Group here at Canaccord Genuity Wealth Management. And I am excited to talk to you guys about this today.

Donating to Charities 

All right. Most people when they donate, they write a check, they take their checkbook out. I want to donate five grand to United Way or whatever the charity of my choice is. Take a check, write it out, send the check in.

That check then gets me a tax credit for the equivalent of a $5,000 donation. And I get to put that against my income. My charity's happy, costs me roughly 50 cents on the dollar, give or take, depending on the province that you're in. And everyone kind of wins. I feel good about myself. I'm a big, big, big believer in philanthropy and giving back and charitable donations. I created the Canadian CMV foundation. It's something I believe in a ton and a lot of you out there are philanthropists in your own way. But let's talk today about how to do it in a more optimal way.

Marc:

Thanks so much. That was great. Saving and investment can be an overwhelming thing. So I've asked Rob from Canaccord to come and help us. So Rob, how are you?

Rob:

Really good. How are you Marc?

Marc:

Good. I've gotta say, why should we invest? Cause I think a lot of people at home, that's what they're asking, right?

Rob:

Yeah. The neat thing about investing is you get the power of compounding on your side, right? So a dollar starts working for you from day one. You know, if you're 30 or 35 or 25 yeah. If you can get that dollar working for you way earlier, you get that whole power of compounding on your side. It compounds the dividends, the interest they compound and you end up getting more money for you at retirement.

Marc:

And the one thing that people need to understand too is that you don't have to have millions of dollars in the bank in order to start investing. Right? Because it's that mentality, right? I need to have a certain amount before I can start.

Rob:

No, I'd start your first dollar that you save, you know, that should be in my mind, should be invested. You should take a look at some growth funds or in particular some equity funds to make sure you get that money growing for, you don't need to wait until you have 50 grand or a hundred grand or a million bucks. Those dollars need to start working for you early

Marc:

 because you want to have those years before retirement. Right? Absolutely.

Rob:

Why are we saving money? Why are you and I saving money? We want to save? Because there will be a point in our lives where we're not going to be able to draw income or draw a salary. That's right there. We get old, right? Exactly. I mean, you have the gray hair, right? Or I'm in a Home.

That's right. And someone needs to pay for that. Right? So ideally you've saved, you've got retirement funds, you've, you've put money aside and that you can then draw on and pay for yourself and your retirement years. Okay

Marc:

Talk about the process because I find that what's great about you is the fact that you actually customize depending on the person.

Rob:

Yeah. I built my business around custom holistic wealth advice. So there's kind of two parts. One is the actual portfolio management. So that is me, my passion building portfolios, what I studied my whole life to do. Portfolio theory. Yeah. Risk adjusted returns. And actually it's, it's the custom-ness of the advice piece. So holistic wealth advice. I want to walk a mile in your shoes, Mark. I want to know, you know, what makes you tick. But I gotta make sure you know... are we saving for the kids? Or, you know, the retirement fund? What are we doing with respect to your personal situation? And it becomes a custom piece of wealth advice.

Marc:

So talk to me about a child's education cause I think that's a lot on, on people's minds, right? The ones that have kids. I have two kids and it's something that keeps coming up. So what are, what's your advice?

Rob:

The neat thing with our country is you get a bonus that the government will, you know, chip in some money for you if you contribute to an education plan. So you get those dollars, you get to contribute, they throw in some money so you get your money working for you, you get the government's working for money working for you. Then you get the compound that much earlier. You do have like in theory, 18 years to save, right? For the kids. Yes. Well get started early, I would say.

Marc:

Perfect. And what about retirement? Talk to me about retirement.

Rob:

Yeah, retirement is a critical one because you want to have, you want to make sure that your... the investments that you have now are, are going to be tax efficient. They're going to grow and then when you're drawing down on them, you're optimizing your tax situation at retirement. So this is a holistic wealth plan. We want to take a look at cashflow now, cashflow in retirement. Where are we going to draw the funds from in retirement? Are we taking it from this account or this account? Saving for retirement and optimizing your wealth for retirement is not a simple thing and one of the reasons people reach out to us.

What is Financial Planning?

Rob:

Financial planning; why it makes sense for you, what to make sure you have, and what are the pitfalls to avoid?

I'm Rob Tétrault from robtetrault.com, Head of the Tétrault Wealth Advisory Group here at Canaccord Genuity Wealth Management. I'm here with Adam Buss. He's a CFP wizard with this kind of stuff. Senior Wealth and Estate Planner here at Canaccord Genuity Wealth Management. Adam, thanks for being here.

Adam:

Thanks for having me, Rob.

Rob:

All right. Adam financial plans. Who needs to have a financial plan?

Adam:

Well rob in my opinion, I think everybody needs to have a financial plan.

Rob:

Is your opinion biased?

Adam:

(Chuckles) Well, because I do the financial planning it's automatically biased, but yes, as a financial planner, I believe everybody needs a financial plan, but everybody needs one for different reason. Everybody's at different stages of life. The ones that we often come across are those approaching retirement.

Rob:

They're approaching retirement. You're thinking, oh my goodness, do I have enough cash for where am I going and do I have enough cash for retirement?

Adam:

That is often the biggest question – can I retire? Sometimes it's us giving the client permission saying, yes, you have enough financial resources or cash at your disposal to retire comfortably and live that lifestyle.

Rob:

The financial planning process is all about giving the client peace of mind that they can accomplish their retirement goals. Let's talk about the actual financial planning process here at the Tétrault Group for example. How does it go?

Adam:

Well, we have a fairly dedicated process. It generally involves a couple of different meetings with the client. We want to sit down, we want to get to know you. We want to know what your unique goals and objectives are.

There's no cookie cutter approach here. There's no one size fits all when it comes to financial planning, because unless I sit down with you and learn what's important to you, I can't try to accomplish those goals for you.

We first want to do a fact finding and we want to sit down. We want to gather as much information as possible from the client.

Then I go back and I work on building the financial plan. Perhaps I need to get some additional information, coordinate with the client's accountants, lawyer, anybody else that's important in that decision making process. And then I have the plan ready.

We'll sit down with the client. We're going to go through everything step by step, educate them on the entire process. What's important. And then of course, it's not just simply done at that point.

We want to do annual reviews. We want to make sure that we're keeping up with any changes that happen in the client's life.

Rob:

If someone sells an asset perhaps, or there's a death, or maybe there's a new grandchild – those are goals that would for sure form part of the review portfolio.

Adam:

We call it major life events. A death in the family and inheritance, or retirement and birth of somebody, all of those different things may change how the client views their financial goals going forward.

Rob:

Okay. Let's take a look at the kind of questions on people’s minds. Cashflow, or do I have enough to retire? What are some of the other questions that you would look at when you're doing the financial plan?

Adam:

Often, nobody wants to pay more tax than necessary, and everybody wants to pay the least amount of tax possible. We always take that approach with clients, whether it's an incorporated individual that asks the question if they should take dividends or salary, or draw down their corporation, or start taking money from my RRSP.

That's a very common one that we get. Often, it's how much money is left for my beneficiaries down the road? Can I leave more money to the family? What's my tax bill when I pass away?

Those are all some of the aspects that we look at.

Rob:

What are some of the pitfalls that you've seen that you're able to avoid or you're able to advise people to avoid? I'm imagining income splitting and taking money from the wrong corporation. I'm taking dividends instead of salary. What are some of those other ones that you sometimes see?

Adam:

Well, those are certainly a lot of the big ones, but another is not planning ahead of time. Coming to us after you've already retired and then wondering, well, did I make the right choice? Should I have waited to retire? Should I have waited to take my Canada pension plan?

Rob:

The world-famous - "Should I take my CPP" question?

Adam:

That is a world-famous question and one that we see multiple times per day.

Rob:

Sometimes it's too late. Once you've made that decision,

Adam:

Once you decide, that's it. You're stuck with whatever choice you made.

Rob:

We would take a look at that. We would take a look at income splitting. We would take a look at the tax efficiency in corporations. We would take a look at to see, I would imagine if there's any life insurance that can be used to kind of optimize wealth and what does the actually look like? So what do you actually do in a plan - it's number crunching and it's cashflow projection?

Full Video and Blog Article on Income Splitting

Adam:

That's the basis of it. Maybe we come back with a nice detailed report saying, okay, what does your cashflow look like in retirement? That's great. You want $6,000 per month, but where do we take that from? We're going to look at your Canada pension plan, your old age security, your work pension, your corporate dollars, your RRSP or RRIF or your tax free. Where is the most logical and efficient way that we can get to that goal of $6,000 per month

Rob:

And then you will build that year by year.

Adam:

Yes.

Rob:

Until you’re 90-95 something like that.

Adam:

Yeah. We generally try to use fairly conservative planning projected out until mid-nineties to ensure that the client does not run out of financial resources.

Rob:

What about this comment I hear all the time that you need 70% of your income in retirement to live? What do you think about that?

Adam:

I would view that as a common misconception. If I'm working today and retire tomorrow, my lifestyle and expenses are probably the same. I can't say that I need 70% of my income. Perhaps I want to travel more in retirement time. My expenses may actually go up.

There is no one size fits all. It's about us getting to know the client, their goals, their objectives, their cashflow needs to make sure that we are achieving their target number that they want to spend.

Rob:

The great thing is, is that it's truly a year by year breakdown. If there is a year where you would maybe sell the home or sell the cottage or get an inheritance, that can be factored into the plan.

Adam:

Absolutely. We want to update it as time goes on as well. You may know that you're going to get an inheritance down the road, but we don't build it in. We wait for it to have actually happened. If we have a real dollar, we'll factor it in.

We can estimate when you're going to sell the cottage or when you're going to sell the house. Perhaps you want to downsize, or you want to sell the family cottage down the road.

Rob:

I imagine that there are some years where there's going to be less expenditures potentially down the line. These plans are very nimble and you're able to front load them for some clients, with more cashflow needed in years 1 to 10 and less cashflow needed potentially at the back end.

Adam:

We see that very often with clients. They have a higher need for the first 10 to 15 years of retirement. They're more active years, they want to travel more. You want to do a lot of fun things while you're healthy and able to do these. You need more cash to do that. We want to add more cash to the budget for the first couple of years and then reduce that down over time.

Rob:

See, at the end of the day, our goal here is to protect the wealth. Makes sure that we can answer the question as to can I retire? Like the financial planning process is initially is going to be, can I retire? That's the question. And then it's going to be optimized.

Adam:

Absolutely.

Rob:

Which accounts? Tax efficiency, leaving more to the estate, protecting the wealth. It truly is a fun process. We've gone through it so many times with clients and I find that it brings me great joy because when we do deliver that plan to the clients, they are so thrilled.

They're so excited, they have an answer, they know they have peace of mind and they tell us how unbelievable it is for them to get this peace of mind.

Thanks for, thanks for coming Adam today. I appreciate you taking the time to chat with us about financial planning and how important it is for clients.

How RESP Grants Work 

Rob:

Hey guys, today we're talking about the RESP grant, how it works, when it makes sense, how much you can get, what the limits are, and how to take advantage of it.

I'm Rob Tétrault from robtetrault.com, head of the Tétrault Wealth Advisory Group here at Canaccord Genuity Wealth Management. To my right, your left is Adam Buss, Senior Wealth and Estate Planner here at Canaccord Genuity Wealth Management. Adam, we're thrilled to have you. Thanks for coming in.

Adam:

Thanks for having me again.

Rob:

Alright, RESP grants. Adam, first of all, how do they work? What's the basic percentage and what do you get when you make an RESP contribution? Or first of all, what is an RESP?

Adam:

Whoa, that's a great question. So Registered Education Savings Plan, the grants is kind of the whole concept as to why you should put money into an RESP. You get 20% of free government money added to the RESP account for every contribution that you make.

Rob:

All right, so I put 1000 bucks in…

Adam:

They’ll throw on $200 extra for you, added to the pot to use towards future education.

Rob:

Do I get that as cash or does that go into the account?

Adam:

Goes into the account.

Rob:

Okay, I knew that. Just testing!

Adam:

But it's good. But, of course there's maximums. They're not going to say, oh, okay, well Rob put a hundred thousand dollars into the RESP, let's give him 20 grand. That's not how it works.

Rob:

There's a maximum per year.

Adam:

There's a maximum per year. And there's also a lifetime maximum.

Rob:

The maximum per year is…

 Adam:

Is 20% of up to $2,500 contribution.

 Rob:

$500 in grants.

Adam:

$500 per year. However, you can make up for past unused contribution room of up to $5,000 that you put in, the government will throw in $1,000.

Rob:

All right, so that's per child.

Adam:

Per child.

Rob:

I'm lucky I have four kids. I could in theory put $10,000 into my RESP per year and I would get $2,000 of grants every single year.

Adam:

Correct.

Rob:

And if I forgot to do it last year, I could do $20,000 this year,

Adam:

Absolutely.

Rob:

Okay. And I'd get $4,000.

Adam:

But if you decided to do $21,000, they would not give you any additional grant money on that extra thousand dollars.

Rob:

Now how would that be set up for me if I wanted to do it that way. That would likely be set up as a RESP family plan.

Adam:

Correct.

Rob:

We put all the four kids – Alexandre, Arielle, Angéline, Aubrie – all in one plan and then they all get to use the grants effectively.

Adam:

Yeah. The best part is any of the children can use that grant money when they go to post-secondary education.

Rob:

If one of your, kids decides they don't want to go to post-secondary education, you don't lose that grant.

Adam:

Don't lose it.

Rob:

Very interesting. I'm sorry, go ahead.

Adam:

Yeah, sorry. I did mention there is a lifetime maximum as well. It's up to $7,200 of grant money per child.

Rob:

Okay.

Adam:
So they do cap it.

Rob:

Oh, okay. So $7,500, that'd be like $37,500 of contributions. Okay. So that's quite a bit of contribution amount. Yeah. All right. Clearly this can’t be tax free, right?

Adam:

It's after tax dollars that go into the RESP account.

Rob:

Okay.

Adam:

You pay tax on it and then you put the money into it. Unlike in RRSP, which is often confused. And when you take the money out down the road is when it's taxable as withdrawn. So your money you put in is withdrawn, tax free. The government money and any income or growth has been generated in the account is taxable to the beneficiary when withdrawn.

Rob:

We always like to say the grants and the growth.

Adam:

Grants and the growth.

Rob:

The grants and the growth are taxed. In theory, the way this works out is, in my mind anyways, is hopefully the kids have a much lower income bracket than you do. And when they're pulling it out, most of it is likely tax-free.

Adam:

Yeah. Ideally they're in university, they're poor students and don't have necessarily that income level. And they also probably have additional write-offs from education credits.

Rob:

Right, right.

Adam:

Essentially, they hopefully will pay as close to zero taxes on that money as possible.

Rob:

Okay. It's the first year, my son's in university, we submit a confirmation of enrollment. This could be for pretty much any post-secondary education.

Adam:

Yeah. There is a list on the government of Canada website as to qualify post-secondary education institutions. It was a little bit more limited when the program came out, but it's pretty wide variety now, including some international schools as well.

Rob:

International, some trades.

Adam:

Yeah.

Rob:

Some traditional universities, colleges, those are all candidates.

Adam:

Fairly flexible.

Rob:

And I know there's a limit in your first 13 weeks.

Adam:

I think it's $5,000 if I remember correct.

Rob:

$5,000 bucks your first 13 weeks, and after that effectively the sky's the limit. Let’s talk about the Canada learning bond and how that works. So that would be for lower income families?

Adam:

Yeah. So that is additional money that they throw into the pot. It has nothing to do with your contributions, so it doesn't even matter if you throw any money into it. They will add money to the RESP free of charge based on your income level.

Rob:

If you open the RESP,

Adam:

If you open the RESP, and they'll continue to do so and as long as your family income is within a certain level.

Rob:

How long can I contribute for my kids RESPs, does it end at some point? Can I contribute all the way until they're 18?

Adam:

Generally, you would contribute to the end of the year that they turned 17 because that is the last year that you can qualify for the grant money. Really you can contribute beyond that. But what's the point if you're not going to get the government money?

Rob:

Absolutely. How long do these things last? I imagine I have to pull the money out at some point.

Adam:

There are different restrictions in place. It depends as to when the plan was established, how old the kids are. Those are all different things that we want to work with our clients on. Hopefully take out the money early on when the first child goes to school, and that way we can close it later on.

Full Video & Blog Article on How an RESP Works, and RESP Withdrawal Rules 

Rob:

It's basically a really neat tax arbitrage strategy.

Adam:

Absolutely is great.

Rob:

Yeah. What happens if none of my kids go to university?

Adam:

Okay, well if none of your kids go to school, you still get your money back. You essentially get all the growth and income that was generated on your money. All the government money goes back to the government. That's only fair. Your kids didn't go to school.

There is a penalty that the government does charge, which is approximately 20% which equates to the growth on the government money as they put in 20%... anything that you take out and you get your money back, tax free, any income is you can either roll to your RRSP if you have the enough room in your RRSP, or where you take it out as taxable income.

Rob:

The RESP grant, pretty neat stuff. Makes sense for a lot of families out there. Some of them super important to consider too. I would say be an important part of a financial plan, right? When you're building a financial plan, you want to factor in this and any other education goals, right?

Adam:

Yeah. If the goal is to help the kids pay for post-secondary education costs is a fantastic program to do so.

Rob:

All right. Adam, thanks so much for joining us today. Adam Buss, Senior Wealth and Estate Planner here at Canaccord Genuity Wealth Management. If you have questions on this or your portfolio, go to speaktorob.com, and book a no obligation consultation.

Today we're reviewing the popular RESP, the Registered Education Savings Plan, a fantastic tool that is available to save for the next generation’s post-secondary education needs.

⭐ Video & Blog Article on How Does a RESP Work – What are the RESP Withdrawal Rules? (CLICK HERE) https://robtetrault.com/how-does-an-resp-work-what-are-the-resp-withdrawal-rules/

It is a really neat tool that the government started several years ago. A truly great program to help save for education costs for your child, a niece/nephew, grandchild or even a family friend.

Thankfully it’s not just restricted to your direct children. Most people will set them up for their own children because it's easier to track the government grants, right? Oh wait, what are these grants?

Canada Education Savings Grants 

The grants (CESG – Canada Education Savings Grants) are the key to the popularity of this savings vehicle in Canada, in which the government will match 20% of the first $2,500 of contributions annually.

Let’s say you contribute $2500 to your child’s RESP, the government will kick in an additional $500!

That is an instant 20% return on your money and free money to help your children pursue post-secondary education.

Given this level of RESP grants being provided, there are certainly RESP contribution limits, as you can’t simply contribute as much as you want and get a 20% bonus.

There is a lifetime maximum grant limit of $7,200, which means after lifetime contributions of $36,000, you will no longer get any grant monies.

However, the RESP limit for lifetime contributions actually is $50,000, you just won’t benefit from any more grant money.  

Now the RESP rules limit the amount of grant you can get in one year, which is based on $5000/year for contributions (using your current year limit plus one catch up year), but we will cover that shortly.

If you want to maximize the full value and the full grant, you could contribute $2000 per year for 18 years.

That would equal the $36,000 in contributions or you could do $2,500 for approximately 14-15 years.

Canada Learning Bond 

The government also has another form of a grant, which is called the Canada Learning Bond (CLB). The CLB is designed to help those with low or modest income levels to save for future education costs.

 Upon opening the RESP, the account automatically gets the CLB of $500 and then an additional $100/year for every year your household meets the requirements.

Many families may find finances a bit tight while raising a young family and they may not have surplus cash to add to the RESP until the later years.

The great part of the RESP, as we eluded to earlier, is the ability to make up for past unused contributions.

Perhaps your children are now seven, eight, or even ten years old and you have a better cash flow. You can actually contribute up to $5,000 per year, per child to maximize the grant monies.

However, if you decided to put $10,000 in today for one child, the government would only match up to one year of carry forwards.

This means $2,500 for the current year plus your $2,500 for one prior unused year.

This would result in $1000 of CESG for your $5000 of contributions and $0 of CESG on the other $5000 contributed.

Of course, all the RESP excitement does not stop there. Let’s review the benefits of a Family Plan RESP.

Family Plan RESP 

Using a family plan is critical, if you have more than one child, are considering having more than one child, or beneficiary, then you want a family plan.

As you likely know, kids have different ambitions and different goals and will likely take different paths in life.

Let’s discuss a possible scenario about how great the family plan would be.

Perhaps my son chooses not to go to university, but my daughter decides that she does wants to go – she can actually use the grant and the contributions for my son and take it out in her name.

So, the family plan is a great way of having access to the entire funds to benefit any of your beneficiaries.

What investment options are available for your RESP account?

RESPs have the same investment options that you can take advantage of with your RRSP or TFSA.

This provides you with access to a variety of asset classes. You can invest in stocks, you can invest in bonds, you can invest in preferred shares and more.

⭐ Video & Blog Article on Value vs Growth Stocks (CLICK HERE)  https://robtetrault.com/value-vs-growth-stocks/

Choosing the right investment mix is critical, and best of all with a RESP you already know your exact investment time horizon as to the earliest they will begin university.

Any investment growth or income generated within the portfolio, is fully tax sheltered until withdrawn, thereby allowing a greater rate of growth.

A quality Portfolio Manager will help you determine the best investments to grow your children’s RESP.

Now your children are going to school and require money, how does that work?

Generally, you can take out a maximum of $5000 in the first 13 weeks provided your child is registered in a qualified post-secondary education institution.

Once they are in their second semester and are still registered fulltime, then there is essentially no limit on the withdrawals available.

So, you could potentially take out the entire amount if you wanted to.

When you complete the withdrawals, there is no requirement to show proof of what the funds are used for.

However, the funds are intended to be used towards education related expenses (Tuition, Room & Board, Books, Laptops, Fuel, Bus Pass, Parking etc).

What is the catch? Well, you received all this free government grants and tax-sheltered growth, at some point there will be tax, right?

When you withdraw the funds for education costs, there are two forms of withdrawals, Education Assistance Payment “EAP” or Capital.

EAP is the grants, investment growth/income or any CLB in the account.

EAP payments are taxable to your child when withdrawn and the capital portion is already after-tax dollars and is tax free upon withdrawal.

The majority of the time, your child is in a very low tax bracket while attending post-secondary education and could pay little or no tax on their income.

Not only does the RESP help with education costs, it is also a great tax planning tool to use!

What happens if your children or beneficiaries don’t actually pursue further education.

Well, there are time frames required for the plan to be open for and ages for the beneficiaries, however you do get your money back!

The grant money goes back to the government, there is a penalty charge of 20% (which coincidently equates to any income/growth on the grant money).

Any income or growth left is taxable in your hands; however, it can be sheltered in your RRSP if you have adequate room. Your contributions go back to your pocket tax-free.

In the end, the RESP is a really exciting tool to use in save for future education costs.

What is your Investment Horizon?

Let’s talk about your time horizon investment risk profile.

In meeting with individuals to discuss their investment planning horizon, I’ve noticed that there is a common misunderstanding of the concept.

As an investment horizon is a frequent section on investment questionnaires and forms, I want to break it down for you guys.

Anytime you open an investment account or a bank account, you’ll be asked the question:

Do you have a short-term or long-term investment horizon?

While your answer could be 4 years, 5 years, 10 years or more, the actual concept of investment time horizon is very important for the purposes of drawing out your assets and determining what your exposure to equities should and could be.

Therefore, the first step to determine your risk tolerance is assessing your ability to stomach movement in the market. Are you losing sleep at night? Are you stressing over a market correction?

Full Blog article on How Much Money Do I Need To Retire Comfortably?

Another important factor is deciding whether you need your money in 6 months, 1 year, 2 years, 10 years or only at retirement. This, will have a significant impact on your investment strategy.

Let’s look at the following example.

A young couple just got married, they’ve put aside their first $50,000 and are saving for the future. The couple own their home, have a little bit of liquidity either through a credit line or a tax-free savings account and the rest of their assets are in their RRSP.

The couple are 25-30 years old and thus, have a very long investment horizon and are likely not going to touch that RRSP money till they’re 65 or 70.

The couple will likely go through many economic cycles: the highs and the lows.

If they do and if they are able to stomach the volatility through their mental fortitude or their intestinal fortitude, the time horizon question becomes less relevant for them because of their long-term investment horizon.

Contrary to that, there’s another young couple who puts their first 50K aside as a down payment for a house.

Now, if this young couple is set on the idea of buying their house shortly, then that couple should not be invested in equities and stocks.

Why?

Because who knows what will happen in the stock market in the short term. If we see a 20% correction in the market, that couple might no longer be able to use that 50K for a down payment. Consequently, the time horizon question becomes more relevant for them, as they most probably will use that money in the short term.

Accordingly, individuals either have a short, a medium or a long term investment horizon.

RESPs (Registered Education Savings Plan) and how it applies with the topic of investment time horizon

Let’s pretend you have a couple kids at home. They’re 3, 4, 5 and/or 6 years old. When it comes to their RESPs, think of your investment horizon for this specific investment account (RESP) as these kids grow and before they turn 18.

If you have a 5 year old, he/she will start using his RESP at 18 years old so that gives you a 13 year investment horizon. Therefore, you could own equities in that portfolio and over time, you could consider reducing the equity ratio in the portfolio as those cycles can generally be anywhere from 3 to 7 years.

The closer you get to the lower end of those years, the more you want to move towards some fixed income and some more defensive strategies.

The key factor you need to know with your investment time horizon is obviously your retirement date.

I often hear this misconception: ‘’When I retire at 65, all my assets need to be in cash.’’

I don’t believe this is right, I believe it’s a misnomer.

Full Blog article on How To Prepare A Sound Retirement & Estate Planning Strategy:

What usually happens and what I’ve seen with my own eyes with my clients is entirely different.

One would retire, then start drawing a little bit on their income.

Perhaps you have a pension, you have some other dollars coming in and maybe you have some real estate income coming in.

Regardless, you have some income coming in and some income needs to be derived from equities, dividends, dividend paying preferred shares, etc. It may also make sense to include some fixed income in there as well.

Over time, you should reduce your allocation of longer-term investments as you near the end of your investment time horizon. The team and I would welcome the opportunity to discuss what is best for your specific situation.

Contributing to an RESP

Let’s hash out the popular RESP (Registered Education Savings Plan).

In Canada, this is quite an attractive way to save for your children or grandchildren’s post-secondary education.

There are a number of different factors to consider.

Do your initial investment dollars go directly towards your RESP or do they not? Let’s tackle a few of those questions right now.

Full Blog article How To Prepare A Sound Retirement & Estate Planning Strategy:

In this scenario, let’s pretend that you have just had your first child. You’re now in a position to invest in an RESP or you may have received a letter in the mail that says you are eligible for a grant.

The government is essentially encouraging you to begin putting money aside for future education costs.

Family RESP

Ideally, you could open an RESP Family Plan account, whether you have one, two, three children or more.

An RESP Family Plan offers each individual child the opportunity to use the grant monies from any member on the family plan (such as siblings).

It’s a huge advantage!

There is very little to possibly no risk when considering the RESP Family Plan. .

RESP Contribution Rules

Should you contribute to your RESP, your RRSP or to your TFSA?

Before diving in further and moving forward with an investment firm to open an RESP, let’s review the RESP contribution rules.

For each child, you can contribute up to $2,500 per year and the government will match this at 20% or up to $500 in grants per year. As an example, if I contribute $2,500 to my child’s RESP, the government will add in $500 of grants per year, and now the account is at $3,000.

If you missed a few years early on, you can catch up (maximum $1000 in grants per year). You can only do one year of catch-up per year. So, in theory if you had a nine-year-old and you never contributed to their RESP, you could only double contribute for up to nine years (until the child is 18 years old).

Avoid RESP over contributions

There are maximums as to how much in government grants you can receive in your lifetime. The RESP contribution limit would only fund a total maximum of $7,200 of grants per beneficiary, if contributions were made accordingly. There are also maximums as to how much you can withdraw from the RESP before one of your children are eligible to withdraw from the RESP (18 years old).

There are a number of rules with respect to how taxation works.

The concept of the government’s plan is to shelter all investment growth and income until withdrawn for post-secondary purposes.

The beneficiary child would receive the taxable income equivalent to the grant and income withdrawn from the plan. The original contributions are not taxable when withdrawn.

Generally, the beneficiaries will have significantly less income than their parents when in school and should pay little to no tax when the withdrawals take place.

Now, are you better off investing funds in the RESP or the RRSP?

If you choose to contribute to your RRSP, you will receive a tax credit for the funds deposited and allow for tax deferred growth. However, the funds are then taxed to your hands when withdrawn.

If you choose to invest through RESP contributions, you will not receive a tax credit, but you will get an instant boost of 20% from grants, if contribution rules were followed. Then, only a portion of the withdrawal is taxed to your beneficiary and not to yourself when withdrawn for education purposes.

The liquidity is almost the same in both. However, if you want maximum liquidity and more choices as to how you should use the funds later, a TFSA could be the best option.

Not everyone is in the same situation. Everyone has different needs, goals, income, etc.

Talk to your investment advisor to determine what strategy is most applicable for you.

Full Blog article on Liquidity Management & Planning: What Is Your Liquidity Ratio?

You want to get this right. Ideally, you want to take advantage of the government’s free grant money, provided you’re not hurting your own personal cash flow.

Bottom line, if you have non-registered assets that are sitting there accumulating dust and gaining little to no income, then it makes sense to put them in an RESP.

RESP Calculator

Basic Science Clinic by Steve Morgan & Sophie Connolly

 “…water is the driving force of all nature….without it, nothing retains its form.”

Leonardo Da Vinci

Welcome to Basic Science Clinic Raw Science episode 5. Let’s get down to business and accompany oxygen on its relentless tumble from nasopharynx to mitochondria down the partial pressure staircase that explains how 160 mmHg of inspired oxygen partial pressure becomes 20 mmHg in the inner mitochondrial matrix. In this pod we will examine step one of this cascade and the science of the humidification of dry, inspired atmospheric gas, whilst paying deference to dihydrogen oxide.

Water is pretty amazing stuff. It is the solvent of life characterized by anomalous idiosyncrasies without which biology wouldn’t even be a thing.  It is the only substance found concurrently in 3 phases on Earth’s surface and is a byproduct of the outpouring of stellar gas and dust produced when a star is born. NASA recently discovered a water vapour cloud surrounding a quasar 12 billion light years away, a celestial snapshot capturing the antiquity of water in the universe.

What to expect:

• What makes water so special?
• What is water’s role in the first step of the oxygen cascade?
• What is the difference between a gas and a vapour?
• How do you define humidity?

 
Raw Science Factoids

The length of the side of a cube that could hold all of Earth’s water is 1150 km, containing 1.5 billion km3 or 800 trillion Olympic swimming pools.

Everywhere there is liquid water on Earth there is life inspite of temperatures of 100s of degrees or searing acidity.

All of Earth’s water likely arrived on carbonaceous meteorites that can be up to 20% water as ice, between 4.5-3.8 billion years ago during the late heavy bombardment.

Thanks for listening. For feedback, corrections and suggestions find us on twitter @falconzao and @sophmcon or post on ICN. Next up we’ll scrutinize respiratory gas flow.

Basic Science Clinic by Steve Morgan & Sophie Connolly

Equipped with his five senses, man explores the universe around him and calls the adventure Science.

– Edwin Hubble

Welcome to the third podcast in the Basic Science Clinic Raw Science series.  Following our investigation of the how and why of oxygen, you may be eagerly anticipating the gas’ entry into the respiratory system, prompting a discussion of gas flow, partial pressures and similarly patient-based physiology. Think again.  Resisting the urge to dive down the trachea, we need to describe some foundational concepts to fine tune the resolution of your understanding. Enter atmospheric physics.  Remember physiology is functional biology, biology is effectively applied chemistry, and chemistry is applied physics.

This week we discuss the physics of atmospheric gas in the biosphere.  Such a topic raises discussion of fluid and gauge pressure, heat and temperature, the SI units and clearly, why the sky is blue.

Feedback, requests and corrections are always welcome.

Raw Science Factoids

• The atmosphere has a total mass of 5 x 1018kg, or 5 quintillion kg or 5 zettagrams (1021), which is 5 sextillion grams.
• Every square metre of Earth has 10 tonnes of atmosphere pressing down on it.
• The average temperature of the universe is 2.73K, which is -270.42°C.

On today’s show we have three guests.  Mike Davies is a financial planners with IPC Investment Corporation in Brantford, and he explains the RESP rules, including how much you can contribute.

In the second segment Barton Goth, a bankruptcy trustee based in Edmonton, Alberta, explains what happens to an RESP if you go bankrupt.  Alberta has different rules than Ontario, and we discuss the differences.

In the bonus segment Ted Michalos, co-founder of Hoyes Michalos, gives his opinion on how the federal government should change the rules to make the RESP rules consistent across Canada.