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- 12 Costly Mistakes To Avoid When Designating a Life Insurance Beneficiary
You knew getting life insurance was the next step for securing your family's future. So you did the right thing, looked into a few quotes, signed up for a policy that seemed like the right fit, and declared your spouse as a beneficiary. Then, after a job well done, filed the paperwork away never to be thought of again. Not so fast. Failing to pay attention to your policies and beneficiaries can create detrimental consequences for your family. Long-term neglect of an insurance policy puts your family at risk for a number of potential uncertainties, costs, and stress. This article looks into 12 costly mistakes people make with their life insurance beneficiary designations. If it’s been a while since you reviewed your policy, it’s time to make an appointment with Ken. Continue reading to learn more. 1. Forgetting to keep insurance policy and beneficiaries up-to-date Let’s start by getting the obvious out of the way. As a rule, estate plans should be reviewed at least once per year. If there is a death, divorce, or other major change to the structure of your family, your estate plan needs to be updated immediately. Keep in mind, if you need to change a primary or contingent beneficiary, there will be paperwork involved that requires your signature. Depending on how busy the life insurance company is, once we send them the paperwork, it may take some time for them to review the paperwork and implement the change - all to say that it’s not as simple as making a quick phone call. 📞 Schedule your free consultation with Ken 2. Making your estate your life insurance beneficiary When signing up for life insurance, some people may have a difficult time deciding who to name as their beneficiary. In this case, they may decide to default everything to their estate. Generally, this isn’t recommended. Why? While each province has their own set of rules, when a death benefit is left to your estate, what could have been a seamless, tax-free life insurance payout becomes eligible for probate, creditor access, and potential taxes. Further, typically, when an estate goes through probate, the beneficiaries and amount paid to them can become public knowledge. An essential part of estate planning is ensuring that your plan is properly implemented and funded. Has all of the paperwork been properly titled, signed, and drafted? Are all of your beneficiary designations current? Unsure? Schedule a meeting with Ken today. 3. Benefiting someone without meaning to Let's face it, sometimes, a “happily ever after” doesn’t happen. Perhaps someone passed away or there was a falling out, and now some of the people you initially wanted to include as a beneficiary no longer qualify. A few examples of beneficiaries you may wish to change include: A former spouse/ in-law A spouse or other family members who passed away Former business partners Need to update your policy? Call today. 4. Designating specific dollar amounts from policies for beneficiaries If it’s been a few years since you’ve last looked at your policy designations, this point is especially important. Let’s say you purchased a policy with a $500,000 death benefit. At one time, the approach was to designate a specific dollar amount for each beneficiary ($500,000 split between 5 beneficiaries for a payout of $100,000 each). These days, policy holders are encouraged to designate a specific percentage of the benefit for each beneficiary (ie: 20% to each beneficiary). Doing this can help your family avoid unnecessary delays from any dividends or loans. 💡 Further reading: 11 Estate Planning Myths That Hold You Back 5. Not selecting contingent beneficiaries As you may have guessed, buying a life insurance policy is not a quick and easy process. There’s a good deal of paperwork involved, questions to answer, and decisions to make. Not to fret, Ken will take you through everything with you before you sign anything. More often than not, people choose their spouse as their primary beneficiary. From time to time, however, new life insurance purchasers can have trouble when it comes to choosing a contingent or back-up beneficiary. This can happen for a number of reasons. It may be simple for someone to name their spouse as the primary beneficiary, but if they don’t have children, siblings, or parents, a brainstorming session may be needed to choose a contingent. A back-up plan is essential because if your primary beneficiary were to pass away before you or at the same time as you, without a contingent beneficiary, your insurance proceeds could default to your estate and be subject to taxes. If a specific person doesn’t come to mind when naming secondary or tertiary beneficiaries, consider choosing a charity or meaningful organization. Need help choosing an appropriate beneficiary? Speaking with an unbiased third-party can be helpful - make an appointment today. 6. Unintentionally excluding a child or grandchild Families grow and change all the time. But if your beneficiary designations don’t change alongside your family, some of your loved ones may be excluded from their share of your life insurance benefit. Meet with Ken to review your policy so you can touch base with your original plan and ensure it matches your current circumstances. Call today. 7. Naming a minor child as a beneficiary or not setting up a proper trustee Traditionally, parents purchase life insurance as a way to support their family in the event that one or both of them pass away unexpectedly. Naming a minor child as a beneficiary without a trustee, however, is typically something that most policies won't allow and best to be avoided. Life insurance companies are unable to pay life benefits directly to a minor which is why a proper and complete estate plan includes appointing a trustee for minor children to ensure that the proceeds can be distributed at the right time rather than getting lost in the courts. In theory, a trustee will distribute the death benefit once the child is old enough to receive the funds. Depending on the amount, you may decide to plan several payments to take place over a number of years. In addition, some children may require special care if they were to be left on their own. This is an important consideration as inadequate arrangements or funding could result in leaving your most vulnerable beneficiary at risk. If you purchase life insurance for the purpose of benefiting your minor children but fail to create a trust or make legal arrangements for a trustee/ guardian to manage the money on their behalf, the court will appoint one for you. Unfortunately, this process can take time and who they appoint is something that you will not have any control over. Having the proper trustee in place ahead of time can help minimize complications involved when it comes to distributing funds to a minor. 📞 Schedule your free consultation with Ken 8. Not knowing your settlement options For certain family members or anyone you’d like to support by declaring them as a beneficiary, it isn’t always the best or safest idea for them to be handed a large lump sum of cash. But that doesn’t mean that you can’t or shouldn’t provide for them. Did you know it’s possible to control how and when your money is paid out? By planning ahead of time, you can protect your beneficiaries by arranging a payout schedule in advance. If needed, Ken can help take care of this for all your policies and does not charge a fee for this service - schedule your appointment today. 9. Forgetting to name a beneficiary for any disability insurance policies Often overlooked but not to be forgotten about are certain policies, like disability insurance, that can have death benefit payouts. If it’s been some time since you’ve gone over your policy paperwork, double check that a beneficiary has, in fact, been designated and that their information is still current. Not naming a beneficiary, or having the wrong/ misspelled name, can result in a major and untimely situation. Essentially, if you have the opportunity to name a beneficiary, ensure that you do and that their information is correct. 10. Not knowing that you can support a meaningful cause As a part of the legacy you leave behind, there may be an opportunity to support a charitable cause by designating them as a beneficiary on a policy. In addition to the philanthropic aspect, the tax credit can also be a helpful asset for your estate when the time comes. Interested in learning more? Schedule a free consultation with Ken. 11. Unintentional conflict between your policy designations and will When settling an estate, what is the first thing an executor looks for? The will. What happens when the will dictates one set of directions but the life policy designations suggest otherwise? This is a common issue that comes up for people who take the DIY route when it comes to creating their will and estate plan. While there’s a number of things you may prefer to DIY. Writing your will and solidifying your estate plan on your own is not one we’d recommend. It’s no surprise that when someone passes away, there is a considerable amount of paperwork involved and important decisions to make. It’s when the paperwork contradicts itself, that everything gets complicated. Avoid confusion, delays, and surprise expenses by ensuring your will and policy designations are on the same page, so to speak. Need help? Meeting with Ken can help tie up any loose ends. Click here to make an appointment. 12. Being too general with details In addition to making sure your policies align with the directions in your will, it’s important to be specific about your intentions and anything that could be left up to interpretation. Ken can help you organize a document with all of your beneficiary designations as well as their value. A list of full names, Social Insurance Numbers, and current contact information will become a major asset for your executor and family during what may be one of their most grievous times. Furthermore, if you are leaving money to a charitable organization, be sure to list the organization’s name, address, and tax ID number. 💡 Further reading: Executor Duties & Responsibilities A simple way to help avoid beneficiary mistakes One of the best things you can do with your insurance policy(ies) is review them annually with Ken. Doing this gives you the freedom to go over your choices about your insurance proceeds and update them if needed. If you know there are changes to be made, it’s important to take care of them while you can. If we’ve learned anything over the past couple of years, it’s that life can be very unpredictable if not chaotic. Need to review your own policies or have questions about your life insurance options? Click here to make an appointment with Ken or give us a call today (250-861-7777).
- What Is An Executor Advisor and Why Do You Need One?
Anyone who’s been tasked with settling an estate before will tell you that it’s much more work than they were initially expecting. Emotional stress aside, even the most organized of people find being an executor and settling an estate to be a long and daunting task. When the time comes, many people who earlier agreed to take on this role will find themselves wondering what they’ve agreed to and where to begin. From sorting through the personal private belongings that until recently belonged to someone else, to trying to locate the proper documents needed to start the paperwork, and dealing with family members claiming items that may or may not have previously been promised to them, there’s a lot to process. 💡 Further reading: Executor Duties & Responsibilities Simply put, closing someone’s estate is not a simple task. Being an executor is complicated and, frankly, not everyone is a right fit for the job. Relying solely on the deceased’s will for instruction is a strategy that can leave any executor in hot water. Ticking tasks off a checklist without any awareness of the potential penalties involved and laws that need to be followed is a reckless way to handle someone’s estate. What is an Executor Advisor? As an Certified Executor Advisor, Ken can guide you through the executor process from start to finish. Focused on helping people, he doesn’t charge a fee for this type of service. From knowing where to begin, helping you gauge an estimated time-frame, and taking you through the necessary paperwork, he will help you get through the entire executor experience with as much ease as possible. Working with an executor advisor gives you a bit more breathing room and time to process your loss in addition to handling the many other tasks you will be facing at this time. 💡 Further reading: 11 Estate Planning Myths That Hold You Back If possible, for the sake of everyone involved, we strongly recommend that the family member or close friend and their chosen executor meet with us ahead of time. We can facilitate a constructive conversation and have the resources to ensure all bases are covered in order to streamline the process of closing the estate when the time comes. A neutral hand to hold through an emotional and complicated process Ultimately, a Certified Executive Advisor will guide you when you feel like you’re off track and offer advice when everything seems like it’s too much to handle. In addition, Ken can provide the professional advice you need in order to best understand the options available for your personal situation. 📞 Schedule your free consultation with Ken While we can’t take away the pain of losing someone close to you, we will support you through this difficult time and help you through the complicated process of closing an estate. Whether you have taken on the role of executor and are wondering where to begin, or you want your own executor to be as prepared as possible for when you’re no longer here to give direction, start the process and book an appointment with Ken today.
- What Is A Financial Plan & Why Do I Need One?
“Good fortune is what happens when opportunity meets with planning.” - Thomas Edison Generally speaking, a financial plan is a set of instructions for your future that’s specific about how to best manage your finances and prepare for potential costs and issues that may arise. There are many aspects involved with financial planning, including tax-planning, savings, retirement, estate planning, insurance, and more. It’s not uncommon for people to combine their financial plan with an investment plan, as investing is often part of what will help you save for the future. This article takes a look at the elements involved in creating a complete financial plan and why working with a professional is essential for your long-term bottom-line. Continue reading to learn more. What is a financial plan? A complete financial plan identifies, organizes, and prioritizes your financial goals and then outlines the best way to reach them. The process involves meeting with Ken and taking a thorough look at your current financial situation. Once he has a practical understanding of where you're starting and what you hope to achieve in the future, he can make recommendations and show you how to best implement them. 💡 Further reading: What is the Difference Between a Financial Planner and a Financial Advisor? Rather than focusing on a single aspect of your finances, we see our clients as real people who have a variety of goals and responsibilities. Because of that, Ken works to address a number of financial realities to best help you make the most of your life. With his insight, he can look ahead to see if you’re on the right track to meet your goals or if it would be helpful to make adjustments to your current spending habits. Financial plans can take place over years, months, or decades, depending on the timeline for your goals. By taking one step at a time, such as reaching your monthly savings goal or consistently investing a portion of your monthly earnings, your financial plan can prepare you for the future while offering you peace of mind for today. When is time to get a financial plan? At some point, everyone needs to develop a long-term financial plan that includes considerations for retirement, paying off your house, funding post-secondary education for your children (if you have them), and estate planning. Oftentimes, we see people seeking financial advice when they find themselves in one or more of the following scenarios: Getting ready to retire and wanting to ensure they’re on the right track Recently inherited money from a parent and looking for advice on how to invest it Newly married and looking for help managing finances as a couple Going through a divorce and looking for advice to move forward financially as a single person Children of aging parents who need help managing their general finances Not a fan of investing and financial planning, but seeking professional help Interested in financial planning and investing, but looking for a second opinion on how to improve With all of the free information out there on the internet and in books, you may be wondering if you really need to meet with a financial advisor. The following questions can offer a bit of direction: Do you have a wide knowledge of investments? How much do you enjoy reading about wealth management or other financial topics, including researching specific assets? Do you have expertise in financial products? Do you have the knowledge and time to monitor, evaluate, and make periodic changes to your portfolio? While you may be up for the challenge of doing your own research, to do it right, it will cost you a lot of time to stay current. From all of the investing and insurance regulations to changes in tax laws or other legislation that could affect your finances, there can be a lot to keep up with. In addition, a DIY financial plan leaves you at risk for making decisions based on your emotions. Finances and emotions never mix well. Working with Ken gives you the advantage of having an unbiased professional to check in with from if you are ever confused or emotional when it comes to wealth management. Add in the fact that most people find it difficult to see far enough into the future to imagine, much less plan for retirement; professional advice can be very handy. 📞Schedule your free consultation with Ken Furthermore, with a financial plan from Thom & Associates, you’ll have a better understanding of your personal finances as well as actionable steps or a road map to follow to reach your goals. What are the essential components of a financial plan? We set out to create an extensive and personalized financial plan for you and your family to ensure it’s as effective as possible. In order to do this properly, the first step is to meet with Ken to discuss multiple aspects that involve your financial life, such as your tax returns, retirement accounts, and existing investments. 📞Schedule your free consultation with Ken While no two financial plans are the same, the good ones tend to focus on similar concepts. Meet with Ken to explore your financial goals and figure out ways to make them achievable. Depending on your unique circumstances, he can make recommendations about a variety of subjects including retirement, long-term investments, setting up an education fund for your children, and tax-friendly strategies to ensure you live comfortably for the rest of your life. While there may be short-term changes to make, your personal plan will help ensure a smooth transition through life’s financial phases. In Ken's 27+ years of experience, these are the elements that are addressed most often and should be revised as necessary: Retirement strategy: No matter what your short-term priorities are, your plan should include a strategy for growing the retirement income that you’ll eventually rely on. Comprehensive risk management plan: This includes a review of life and long-term care insurance. Long-term investment plan: A custom plan based on specific investment objectives and a personal risk tolerance profile. Tax reduction strategy: A strategy for minimizing taxes on personal income to the extent allowed by the CRA. Estate plan: Arrangements to maximize the benefit and protection of your heirs in addition to guidance for your executor when the time comes. The table below takes a more in-depth look at the services we can cover as your financial planner. If you have questions about any of these or would like to get started, send us a message today. Parts of a Financial Plan At Thom & Associates, we offer a variety of services, many of which go hand-in-hand. This means we can create an expansive plan that considers all aspects of your current situation and future aspirations. Get in touch today. Working with a professional gets you results Creating a financial plan that takes you from your current situation into retirement is an exceptionally detailed process. There are many scenarios to think about and potential loose ends to consider. At Thom & Associates, you’ll receive not only an overarching gauge of your overall situation, but also extensive advice to help you meet your goals. Ken will be your partner in piloting your finances through every stage of life. Once your plan is designed and the necessary steps to put your plan into action have been taken, you can meet for reviews as frequently (or infrequently) as you like to monitor and adapt your plan as your life changes. ☎️ Call 250-861-7777 to make an appointment today.
- 11 Estate Planning Myths That Hold You Back
Spooked or put off by the idea of Estate Planning? To no surprise, you aren’t alone. To be honest, we can’t think of anyone who’s walked through our doors feeling excited and joyful about tackling the task of their end-of-life planning. In our experience as financial planners and executor advisors, it’s fair to say we’ve heard nearly every excuse out there when it comes to putting off estate planning. Ultimately, however, nothing can stop inevitable from happening. Which is why we believe it’s best to plan ahead and tie up your loose ends now to prevent them from coming undone once you’re no longer here to give direction. There’s a number of myths out there when it comes to estate planning. Perhaps you've heard a few of them before (2, 7, and 9 are the ones we hear most often). This article takes a closer look at 11 of the most common estate planning myths people fall for that unfortunately puts their family at risk for excess stress, costs, and turmoil. Continue reading to learn more. Myth #1: Estate planning is only for those with deep pockets and large estates There's no doubt that the protection and distribution of assets is a major part of estate planning, but it’s not the entire point. For instance, if you were suddenly incapacitated, how would you want to be taken care of? Or, to be less hypothetical, have you thought about what you want your end-of-life process to look like? Would you like to have a life insurance policy or fund set aside that supports your family? Are you going to be buried or cremated? Who should be in charge of taking care of your pets? What about childcare? For families with young children, the most important part of estate planning has nothing to do with money or assets, it’s about designating a caregiver for your child(ren) should something happen to both parents. From this basic overview of a few of the most common estate planning challenges, you can see that estate planning goes beyond the division of assets. Your estate plan helps communicate instructions and an action plan to carry out your wishes for a variety of issues including health care or childcare. A good plan is for anyone who may be involved in an accident, become seriously ill, or pass away - that is to say, it’s for everyone. Myth #2 - I already told my family how to deal with everything after I’m gone It’s a mistake to assume that your family will follow your wishes just because you told them to. A legally-bound trust or will is the only guaranteed way to ensure that your personal belongings, whether they are assets or items with great sentimental value, are delivered to the right people. Even the most functional of families can end up in a feud without proper estate planning. Grief brings out a lot of emotional stress; a legally-binding document that clearly lays out directions to follow will not only help your family avoid any potential conflict, it will help them to avoid any uncertainty or confusion. Having an estate plan isn’t all about you, it’s a simple courtesy for your family. Myth #3 - I’m too young for an estate plan Most of us have a general idea of what we want to happen if we were to fall ill. But if that idea exists only in your mind, no one will know your thoughts on the best way to go about things. When you’re young and healthy, you can feel invincible, or like nothing will ever happen to you. You may be the most confident person in the world, however, and can still fall victim to unexpected circumstances. You may be in the process of paying off a mortgage, car loans, or student loans. If you have a child(ren) or are married your children and spouse will likely need money for their education, housing, and care. If one thing is a given, it’s that we’re all here for a limited time. Taking the time to create your Estate Plan as soon as possible is one of the best gifts you’ll ever give yourself and your loved ones. Plan for the worst, hope for the best. 📞Schedule your free consultation with Ken Myth #4 - I don’t have any beneficiaries or loved ones, so none of this matters Perhaps you’ve gladly found yourself in this situation by choice, or maybe this is a harder part of your life story. Regardless, you made your mark on this world and you still have a legacy to leave behind. Creating an Estate Plan gives you the chance to support a cause or an individual that you care about. Your estate plan will serve as a guideline for where and how to donate your assets. Whether you choose to leave something for a student, favourite care aid, or charity, your legacy doesn’t require blood to carry on. Myth #5 - My Estate Plan is nobody’s business Perhaps you’re an incredibly private person and believe that your personal business shouldn’t concern anyone else but you. We respect that, but we’re also going to look out for your best interest and give you advice that reflects that. While you want things done in a certain way and have direction to give in your estate plan, it’s really about creating a plan to protect and offer comfort to your loved ones. In fact, some of our clients consider creating an estate plan to be a crowning act of love and care for their friends and family. If you don’t tell anyone about your estate plan, there’s a possibility of your assets being divided up, with some of your investments going unclaimed because no one knew to ask about them. Even worse, if your family doesn’t have a clear direction on how to divide your assets, much of what you have could be tied up in probate, leaving a judge to decide. If something were to happen to you, consider the amount of relief your family would feel, knowing that you already have a plan in place for them to continue forward without any confusion. It’s best to always communicate with those who will be affected. Doing this will make the planning process more manageable, ensure that your legacy is placed into rightful hands, and that your loved ones can focus on what really matters - healing and honoring your memory. Myth #6 - I can do my estate planning on my own Without tooting our own horn, this isn’t our first rodeo. Your ambition to tackle this mountain of estate planning by yourself doesn’t go unappreciated - unless you actually go forward with a DIY estate plan. Here’s why: estate planning involves a number of scenarios to consider and moving parts to pay attention to. Trying to tackle all of this on your own is not only overwhelming but can often lead to missing key parts that end up costing you time and money, while running the risk of not even being a legal plan that gets followed after you’re gone. At Thom & Associates, we are seasoned Financial Advisors and Certified Executor Advisors. We understand the complex in’s and out’s of estate planning because we deal with them all the time. Call 250-861-7777 to learn more. Myth 7 - The first draft of an estate plan is enough Estate planning isn’t a “set it and forget it” kind of deal. Life changes quickly and often. Safe to say you aren’t the same person you were 5 years (or even 5 months) ago. Perhaps you have new grandbabies, a new spouse, or new property to enjoy. People change. Circumstances change. It’s what keeps us going forward. Any time there’s a major life event that changes your assets, your beneficiaries, or any other conditions you set out in your estate plan, everything needs to be updated to reflect those changes. An out of date estate plan that was never updated is much more likely to be challenged when the time comes. Regularly review your estate plan with Ken to make sure your intentions are clear for what you want to happen once you’re no longer here. 📞 Schedule your free consultation with Ken Myth #8 - Estate Planning is only about distributing assets Yes, you have assets and need to make a plan for how they should be handled after you pass away. That’s the most obvious part of estate planning. It’s the other details, such as your wishes in certain medical situations that are easily overlooked. There are many decisions to be made while creating an estate plan. It’s important to note that some assets such as joint accounts and accounts with beneficiaries may not be included in your will and should be considered and accounted for through other methods. Estate planning is a key part of financial planning. Your financial life doesn’t end after you’re no longer here; it continues and affects those you leave behind. Myth #9 - If I pass away without an estate, my spouse will get everything anyway If you would like to have all of your belongings to go to one person, that’s quite simple to make happen with an estate plan. Without one? Not so much. You’d be surprised to see who may come out of the woodwork to claim your assets after you pass away. Because it’s legally-binding, Estate Planning is the only way to ensure that your spouse truly inherits everything as intended. Furthermore, we’ll help you put back-up plans in place, in case something were to happen to you both at the same time. Clients often forget to consider that they may outlive their spouse which is why your best plan of action is for both you and your spouse to have estate plans in place, and to keep them up-to-date. Myth #10 - I don’t need an estate plan because I’ll be gone and my family can tie up my loose ends If you’ve made it this far into reading this article, it’s likely that you realize that an estate plan isn’t really about you. This plan is about you giving direction on how to best protect and offer comfort to your loved ones once you’re no longer here. It’s a simple courtesy for your family that you leave behind to help them while they grieve your passing. A complete estate plan saves months, if not years, of pain for those that you leave behind. At a time when they’re feeling uncertain and emotional, your estate plan offers direction and guidance for how best to deal with your affairs and assets. It also ensures that most of the estate stays with your loved ones rather than being wasted on legal fees from family feuds. Unfortunately, even with the best of intentions, friends and family can’t make decisions on your behalf if you pass away without an estate plan. Without anything legally-binding to explain your intentions, the Court decides who gets your assets and will appoint a caregiver for any minor children. 💡 Further reading: Executor Duties & Responsibilities Myth 11 - I am way too busy to bother with estate planning We’re not sure where it got started, but there’s a common thought that setting up an estate plan is a painstaking process that takes a long time. It’s true that creating a proper estate plan is important and can be confusing if you’re not familiar with the local estate planning and probate laws. But that’s why you get help from experienced professionals. Here at Thom & Associates, we put you, our client, first and will make estate planning as quick and painless as possible. Yes, it may take time for you to gather the proper documents and think through your arrangements, but you’ll be working with professionals who will do everything to make planning the future of your estate a simple and straight-forward process. In conclusion As you can see, there are a number of misconceptions out there about estate planning. Knowing the truth about these myths can help you avoid countless mistakes and cost. Estate planning is a crucial part of financial planning, your financial life doesn’t end when your life does. All people, young or old, affluent or not, share similar concerns and considerations about estate planning - we all want to deal with what we have in the most effective way that we can. We’d like to do the best for those left behind, reduce taxes, and make sure our directions are followed. Estate planning is preparing for the future. Let's get started. Contact Ken at Thom & Associates today - 250-861-7777.
- What is The Difference Between a Financial Planner & Financial Advisor?
When you take a closer look at your finances and decide it’s time to start planning for the future, you may be wondering how to get started. Unsure where to begin, perhaps you turn to Google in an attempt to figure things out or maybe you try downloading one of those investing apps only to realize it’s like trying to learn an entirely new language. As optimistic as you may be, it’s hard to trust that your internet research will be enough to make the best decisions with your life savings and retirement plan. 💡 Further reading: What is a Financial Plan and Why Do I Need One? You’re intelligent and have the best of intentions, but deep down you know you deserve a retirement plan that doesn’t rely on crossing your fingers. Furthermore, your financial future and retirement plan is much too important to DIY and leave up to chance. At Thom & Associates, we offer the balanced approach of both a Financial Planner and Financial Advisor to give you the best of both worlds. While these terms seem to be used interchangeably at times, there are a number of distinct differences between the two. Continue reading to learn more. Similar, But Different. With +27 years of experience offering financial advice and financial planning services in Kelowna, Thom & Associates has helped countless individuals in the Okanagan and beyond meet their financial objectives and go on to have the comfortable retirement of their dreams. A question we often hear when meeting with someone for the first time is: what is the difference between a Financial Advisor and a Financial Planner and which one is best for my situation? 📞Schedule your free consultation with Ken Whether you’d like to grow your savings with investments, pay off debt, plan for retirement, or reach other financial goals, we’ll walk with you through the entire process, step-by-step. We’re here with answers to your questions and will make sure you feel confident going forward with your customized financial plan. Let’s begin by exploring what these terms have in common. Both a Financial Advisor and Financial Planner provide invaluable services and have the skills to help you manage your money. Where a Planner and an Advisor differ is in what they focus on. An Advisor tends to target investment management while a Planner looks at the bigger picture of your whole financial life starting from college savings to retirement. A Financial Advisor is more likely to be interested in markets, bonds, and securities. They have an abundance of financial advice and recommendations on how you can improve your immediate financial situation. A Financial Planner can also manage investments, but they tend to do so with long-term strategies tailored to help you reach your goals. Now that we have an understanding of how these two terms are similar, let’s take a closer look at their differences. What Is A Financial Advisor? Traditionally, Financial Advisors focus on investment management. With consideration for your current financial situation, risk tolerance, and how soon you’d like to reach your goals, the approach of a Financial Advisor is to offer advice and facilitate specific investments on your behalf. Generally speaking, the goal of a Financial Advisor is to make smart investments on your behalf that help you grow your wealth and achieve short-term goals. What Is A Financial Planner? Whether you’d like to create a budget, pay off debt, build good credit, or save for retirement, a Financial Planner’s approach is to create a comprehensive plan to help you reach your long-term goals. By taking a 360-degree look at your expenses and financial goals, a Financial Planner will do their best to gain a full-understanding of your complete financial situation. From there, a customized plan is developed and tailored to help you reach specific goals. A Growth Mindset with the Bigger Picture In Mind At Thom & Associates, we find that a well rounded approach often works best for the financial goals of our clients. Frequently enough, the affairs of a Financial Planner and Financial Advisor go hand-in-hand and our clients appreciate that we go above and beyond to offer them the best of both worlds. With the growth mindset of a Financial Advisor and the comprehensive understanding of a Financial Planner, we strive to gain a full understanding of your complete financial situation before offering advice and a plan on how to best reach both your short-term and long-term goals. 💡 Further reading: What is a Financial Plan and Why Do I Need One? While our recommendations may involve investment strategies, we also look for tax-efficient solutions that make the most sense for your specific situation. By serving you with a multi-way approach we can ensure that all bases are covered. We also specialize in estate planning and are Certified Executor Advisors as well as Certified Professional Consultants on Aging. Learn more about our certifications here. Whether you have a few questions or are looking for a complete financial plan, call today and book an appointment with Ken 250-861-7777.
- 4 Smart Ways To Build Your Child's Education Fund
When you first start growing your family, planning for the day your children leave the nest is likely to be the last thing on your mind. This, however, isn’t something you want to put off for too long because high school graduation day will be here sooner than you think (even if, some days, it may feel like it will never arrive!). Without a plan to consistently contribute to a savings account for their post-secondary education, you could find yourself going into debt while trying to support your child (or children) as they go after their dreams. In Canada, post-secondary education costs have gone up considerably over the last few decades and continue to rise year to year. As costs rise, so does financial strain for parents. Many parents are left wondering how much they should be saving for their child’s education. They’re also asking when is the best time to start putting money away for their child’s post-secondary years. The answer is simple: the earlier you start saving, the more you’ll likely be able to put away. Setting money aside on a consistent basis, especially with rising inflation and pandemic costs, however, tends to be easier said than done. This article explores when, how, and what to expect while saving for your child’s post-secondary education. Continue reading to learn more. When To Start Saving for Your Child’s Education While they might still be learning their ABCs, your child’s post-secondary education can seem like something you’ll have more time to deal with down the road. That said, with the cost of living and price of tuition continuously on the rise, putting aside whatever you can now will add up to be a big help when the time comes. According to Stats Canada, “Nationally, Canadian students enrolled full-time in undergraduate programs will pay, on average, $6,693 in tuition for the upcoming 2021/2022 academic year, up 1.7% from the previous year. The average cost for graduate programs rose 1.5% to $7,472”. Although we don’t recommend foregoing your own retirement savings to build up your children’s education funds, it’s no surprise that the sooner you’re able to start saving for them - the better. 📞 Schedule your free consultation with Ken How To Start Saving As rising costs loom, there’s no need to worry about selling your first born in order to send them off to college. Let’s take a look at the savings accounts plus government grants and benefits that can help as you start putting money away for school. Registered Education Savings Plan (RESP) An RESP is a tax-advantaged savings account that is registered with the Canadian Government. The money in an RESP is invested tax-free, making this a specialized savings account designed to maximize the amount of savings available for your child’s post secondary education. To stay consistent with contributions, many parents opt to set up automatic contributions with the monthly minimum contribution being $25. Have more than one child in your family? You can start as many RESPs as you need to save for all of your children’s education, but there is a lifetime limit of $50,000 per beneficiary. There are three types of RESPs: 1. Family Plan A family plan is ideal when you have more than one child and when blood relatives (parents, siblings, and grandparents) would like to contribute. 2. Individual (non-family) Plan With this plan, only one beneficiary is named for the RESP and they don’t necessarily need to be a direct blood relative. 3. Group Plan Generally, with a group plan, you’re making regular payments into the plan over a certain period of time. The funds added to a group plan are actively managed in low-risk investments. Meet with Ken to learn more. Unsure which plan is right for you? Schedule a meeting with Ken for free advice. Canada Education Savings Grant (CESG) The CESG is a grant paid directly from the Federal Government into an RESP. This grant matches 20% of annual contributions you make to all eligible RESPs up to a maximum of $500 per beneficiary per year with a lifetime limit of $7,200. Everyone with an RESP is eligible to receive the CESG, regardless of household income. Tax-Free Savings Account (TFSA) While we wouldn’t recommend a TFSA as your first choice for building savings for education (because of the CESG and additional tax incentives that come with an RESP), a regular tax-free savings account is a great way to set funds aside for college or university above and beyond the RESP maximum contribution limit of $50,000. Provincial Education Savings Incentives Depending on where you live, there may also be assistance available to you on a provincial level. In BC, the British Columbia Training and Education Savings Grant (BCTESG) will contribute $1,200 to eligible children. Learn more about the BCTESG here. How Much Should You Be Saving? We can’t stress enough that it’s best to start saving as early as possible for post secondary education. Education costs only continue to rise and will likely be much higher than the current average when it’s time for your child to start college or university. On top of tuition and textbooks, there’s additional costs such as the price of living on campus, food, and supplies just to name a few. While every family is different, the amount you choose to save will depend on things like your household income, daily expenses, retirement plan, generosity, and other investments you may already have. Keep in mind that you have the option of opening a flexible RESP account which allows you to make regular contributions that start at $25 per month. 💡 Further reading: What is a Financial Plan and Why Do I Need One? What Happens If Your Child Doesn’t Continue Their Education After High School? Now, after years of saving, it could be the case that your child decides they don’t want to take the conventional route of post-secondary education. Don’t panic - your saving wasn’t all for nothing. There are still options available to you. An RESP can stay open for 36 years, giving them the freedom to use it in a few years if they change their mind. If you decide to close the RESP, the money that you put in will be returned to you. Keep in mind that you will not be taxed on the amount you contributed into the RESP but you will need to pay taxes on the money that you earned in your plan as interest. As for the CESG, the money can be shared with a sibling if they have grant room. Otherwise, the grant must be returned to the Government of Canada. 📞 Schedule your free consultation with Ken From ABCs to RESPs to PHDs Getting a post-secondary education is a privilege and if you’re in a position to support your child throughout their college/ university years - no matter how small or large of a contribution you can make - we hope they appreciate just how fortunate they are. As costs continue to rise, it may be a challenge to find extra room in your family budget. This is why we believe the earlier you can start with consistent contributions the better ($25/month over 18 years adds up). Ready to start saving? Call 250-861-7777 and make an appointment with Ken today.
- Estate & Retirement Planning: How To Make The Most of Your Golden Years
From putting an investment strategy in place now to making decisions about how you’d like to spend your time during your golden years, retirement planning helps you reach your goals. The next step is making sure that the legacy you’ve worked your whole life to build stays secure and that’s where estate planning comes in. When you think about it, managing your estate plan alongside your retirement plan is a smart move for many reasons including the fact that planning ahead of time will save you and your family from unnecessary stress (and taxes) down the road. This article explains why creating an estate plan for yourself in conjunction with retirement planning is important. Continue reading to find out why these two go hand-in-hand and the long-term benefits that will serve you for years to come. A Big Myth About Estate Planning From time to time, we hear from someone who thinks that estate planning is only for families with large estates and deep pockets. This could not be further from the truth. In fact, falling for this myth or sidestepping estate planning as a way to avoid thinking about your inevitable passing will cost you and your family in the long run. No matter your cash flow or the size of your estate, failing to create an estate plan puts your family at risk for unnecessary stress and taxes. Truth-be-told, just about everyone can benefit from estate planning. Young or old, wealthy or middle class, a proper estate plan can significantly reduce the amount of taxes owed to the government as well as other expenses related to your estate. On top of that, a complete estate plan helps streamline the distribution of assets to the next generation while ensuring that the beneficiaries are protected. 💡 Further reading: 11 Estate Planning Myths That Are Holding You Back The Hardest Part of Estate Planning is Getting Started We understand that the idea of planning for your retirement, as well as the future needs of your loved ones, may leave you feeling overwhelmed and unsure where to begin. You may have questions such as: How much do I need to start saving now for my retirement? Can I invest my savings in a way that creates financial growth while still being tax-efficient? How can I make sure my loved ones spend their inheritance wisely? These are just some of the questions we often hear from our clients at the beginning of the retirement and estate planning process. Not to worry, Ken will make sure you feel well-informed and confident going forward with planning the later stages of your life. What You Gain From Including an Estate Plan With Your Retirement Plan at Thom & Associates: Recommendations that allow you to make the most of your current financial situation. The potential to increase the value of your assets, both for you and your beneficiaries. A strategic evaluation of your will and business documents such as shareholder agreements. Knowing whether or not you’ll have enough saved to pay off your final expenses and taxes when the time comes. Alongside suggestions on how to make sure that you do. Learn how you can make the most of your retirement income. Strategic insight to minimize taxation through personal and/or business planning. Advice for business and farm succession planning. In addition, we can work alongside your lawyer and accountant to ensure that all of the puzzle pieces for your retirement and estate plan fit together properly. It’s important to make sure that everyone involved understands the total picture - not just their piece. 📞 Schedule your free consultation with Ken Downsides Of Not Creating an Estate Plan While we’ve established that working on an estate plan as a part of retirement planning is a smart choice for everyone, we appreciate that some of these topics may feel a bit morbid to talk about. Nonetheless, not having an estate plan in place or refusing to bring your loved ones into the fold will not stop the inevitable from happening. Without a proper estate plan in place, some of the problems you may face include: Not having any certainty over how your full financial situation will play out for your family after you pass away. Legal loopholes resulting in your assets being given to the wrong people. Tax costs totally diminishing the value of your estate; leaving your family extra costs to cover after you’re gone. Let’s Work Together to Create a Retirement and Estate Planning Strategy While it feels natural to plan ahead for the significant moments in your life, planning how your legacy will support the life moments of your loved ones after you pass away may be beyond what you’re comfortable with. That’s the essence of legacy planning and it’s best to be embraced rather than avoided. Your legacy includes how well your assets, interests, and your children’s long-term security will be protected. In our experience, most people are excited about planning their retirement. Which makes sense - who doesn’t look forward to sailing off into their golden years? Retirement is a comforting concept; something to look forward to as an end goal for your career. In fact, many employers offer, if not require, a retirement plan within the framework of their company’s employee benefits. Estate planning however, because of the emotional toll involved, can bring up feelings of uncertainty and conflict involved with accepting the eventual reality of your own passing. Retirement and estate planning are more closely related than you may think. Below is why we recommend taking the next step in your retirement planning by creating an estate plan that gives you and your family peace of mind. 4 Reasons Why You Should Make Estate Planning A Part of Your Retirement Plan They go hand in hand - Both your retirement plan and your estate plan involve your income, investments, and assets. For the amount of effort and time that goes into creating your retirement plan, it’s a smart strategy to go one step further and set out the details of your estate plan. Combining the two is one of the best ways you can be proactive for you and your family’s future. Plan for what is difficult while it is easy - It makes sense that it’s easier to think about the day you retire compared to the day your executor will need to take over your estate. A retirement plan is straight-forward because you likely know when you plan to retire. Estate planning, however, doesn’t offer you the full certainty of knowing the date it will go into effect. It may be helpful to think of planning the details of your estate around your retirement as a ‘two birds with one stone’ situation that keeps you and your family up to date. Protect your legacy and children - Hypothetically, without an estate plan, if you suddenly passed away and there wasn’t a surviving spouse to take care of your children, it’s likely that probate court would intervene and choose a legal guardian/conservator for them. It's hard to trust that someone else would make the best choice for your family. Estate planning gives you the power to be in charge of these decisions, even if they remain hypothetical. Taking this further, if you’re second guessing how your child may handle their inheritance, estate planning can help you protect them. Whether they’re still minors, or adults with poor judgment, estate planning gives you the option to restrict access or designate a specific family member to act as a trustee. Be proactive about your peace of mind - While it’s a lot to take on, once the details of your estate for your children and your legacy are all planned, the sense of relief you feel will be incredible. Bring your family a sense of empowerment by not leaving anything to chance. There is a remarkable amount of accomplishment and control that comes with completing your estate plan. 📞Schedule your free consultation with Ken Estate Planning is Not One Size Fits All In today’s age, it’s unusual to meet someone who considers their situation to be simple and straightforward. It’s more common to meet with a client who has unique circumstances that require a customized estate plan to ensure that their family and asset situation is properly addressed and planned for. We prefer to work alongside your legal advisors and accountants to build a complete estate plan that is comprehensive and effectively tailored to your family’s unique needs. Once your estate plan is complete, we recommend reviewing it every three years to keep up with various life changes. Planning carefully in the first place and then keeping your estate plan up-to-date can keep your family protected, maximize the value of your estate, and minimize the complexity and time to administer your estate when the time comes. It’s a smart investment and the right thing to do. If you’ve been putting off getting your estate plan together or have questions about how to blend retirement planning into your estate plan, we are more than happy to help. Send us a message or call us today (250-861-7777).
- Executor Duties and Responsibilities
While many approach taking on the role of an executor as an honour and privilege, the duties and responsibilities of an executor can be complicated and, at times, overwhelming. There’s much more to being an executor than simply finding a copy of the will and handing out assets from the estate. Depending on the estate, an executor may spend up to a year or more tying up loose ends and making sure everything is properly taken care of. 💡 Further reading: 11 Estate Planning Myths That Hold You Back Before choosing an executor, you need to understand everything involved with the role so that you can reassure yourself and your family that your estate will be left in good hands. Furthermore, if you’ve been asked to take on the role of an executor, perhaps by a close friend or family member, it is important to know what you’re getting into before you accept. This article takes a comprehensive (but not exhaustive) look at a number of responsibilities an executor takes on while carrying out their role. Learn About the Duties and Responsibilities of an Executor Before asking someone/ agreeing to become an executor, it makes sense to become familiar with everything that the role entails. An executor is someone named in a will to manage the closing of the deceased person’s estate and allocating any remaining assets as per the will. As you may have guessed, this is rarely a quick and easy process. Typically, the role lasts 12 months or more from start to finish, but this can vary depending on the size of the estate and complexity of the family involved. This article is a great place to learn more about what’s expected of an executor, however it’s important to know that each estate is different. If you have specific questions about being an executor, reach out to our office, Ken and Pauline are both Certified Executor Advisors and will be more than happy to help. Contact the Will maker, if possible Before you agree to become an executor, we strongly recommend that you feel comfortable in your abilities prior to accepting. The more you can learn about the estate from the person who owns it, while they’re still alive, the better. If a will maker asks you to be their executor, arrange to meet with them as soon as possible. Topic to discuss with them include: The location of the most current copy of their will All financial assets, alongside other important details like account numbers and passwords Non-financial assets, such as jewelry and other family heirlooms and the stories behind them Any professionals that the will maker does business with as well as their contact information Funeral plans, powers of attorney, and wishes respecting organ donation As an executor, it will be your responsibility to keep accurate records, make many decisions, and monitor all estate activity. Even if you get help from others, at the end of the day, you are legally responsible for the estate. If you don’t do the job properly, you could be personally liable. If you decide that you are unable or not wanting the position, speak with an estate lawyer before acting on any executor responsibilities. Once you start dealing with estate assets, you will be legally bound to continue. Create a thorough system for record-keeping As we dig deeper into the duties and responsibilities of an executor, you can already see that there is a lot to keep organized. It’s crucial that you take notes and keep accurate and complete records of everything you do including any financial concerns based on the estate and various expenses that come up as a part of serving as an executor. Depending on the will, you may also wish to record the amount of time you spend working on the estate. Beneficiaries are allowed to request copies of any invoices, cheques, and other accounting materials. If they feel bothered by how an executor is handling the estate’s finances, they may ask for the accounts to be reviewed by the Court. If an executor is unable to account for all assets, receipts, and disbursements, they may be personally liable for any losses or assets not accurately accounted for on behalf of the estate. 📞 Schedule your free consultation with Ken Locate the Will When someone passes away and you know you’re their executor, one of the first things you need to do is find the most current version of their will as well as any trust documents. You will also need to track down any additional paperwork that concerns the estate. If, for some reason, you’re only able to find a copy of the will (not the original) as the executor it is your responsibility to get in touch with the lawyer who drafted the will so that they can determine if your copy of the will is current and valid or give you a copy that is. Here in BC, executors are also required to search the Wills Registry via Vital Statistics. From your search, you will receive the Will Search Certificate that will specify if a Will Notice was ever filed by the will maker. If they did file a will notice, it will confirm the date and location of the original will. Hire qualified professionals to support you If you choose to be the executor of an estate, it’s likely that you and the will maker were close. It is to be expected that you may still be mourning your loss when it comes time to take on the duties and responsibilities of an executor. You’ll be working through a number of complex procedures from selling real estate and valuing assets to maneuvering through estate taxes and legal filings. Emotions and legalities do not mix, which is why we suggest finding a team to support you through the process. At the beginning, it may be easy to believe that you can carry this duty all on your own. If you take action in good faith, without ensuring that you are complying with current laws, it may be too late by time you become aware of the alarming legal consequences. As Certified Executor Advisors, we can offer a helping hand to support, direct, and advise you through the entire process. Here at Thom & Associates, we have the skills and experience to guide executors through the complete process as efficiently as possible. You will not be billed for meeting with us and we can help ease the heavy burden while giving you the time and energy to deal with all of your other obligations. Funeral and burial arrangements Even though the details of a funeral are usually made by family members, the family may refer to the executor during the process of funeral planning. As an executor, you have the legal authority to make decisions. Keep in mind that all expenditures coming out of the estate will affect the amount that will be distributed to the beneficiaries. When preparing funeral and burial arrangements, unless it’s stated outright in the will, an executor must act in the best interest of the estate while ensuring that the costs are reasonable and relevant. The course of action for planning a funeral involves a number of steps which include selecting a funeral home and determining the details for burial/ cremation and memorial services. Understandably, taking care of these details may be overwhelming for those closest to the recently deceased, so it’s best to be prepared for them to depend on you to help make these arrangements. Take note, ahead of time, there may be various types of insurance available for you or your executor to cover these types of final expenses when the time comes. Contact us to learn more. Identify beneficiaries Depending on which province you’re in, as an executor, you may be legally required to mail all beneficiaries mentioned in the will a copy of the will as well as a notice of your intention to probate the will. Specifically, in British Columbia, if the deceased died without a will, this information must also be sent to anyone who would be entitled to a share of the estate, even if they were not clearly named as beneficiaries (ie: children and close relatives). Take note that if any of the beneficiaries are minors or mentally incapable, additional notification requirements and care will apply. Determine value of assets As an executor, it is your responsibility to prepare a complete list of all assets included in the estate as of the date of death. Each item you list will also require a monetary value. The estate assets list will need to include: Personal effects including jewelry, furniture, art, various furnishings, automobiles, and recreational vehicles; Contents of all safe deposit boxes held under the name of the deceased; All digital assets owned by the deceased; Payouts from any life insurance policies; Any outstanding amounts owed to the deceased from their employer, which includes salary, holiday pay, and group benefit amounts; Any money left in RRSPs, TFSAs, and RRIFs; All property owned by the deceased, including any outstanding mortgages; All other assets owned by the deceased; and Any debts owed to the deceased. Estate accounting The sooner you can get a full understanding of the estate finances, the better, so that you can take the next steps in settling the estate. This is where your thorough system for record-keeping will come in handy. Depending on the complexity of the estate, this can be as simple as creating a spreadsheet to fill in as you go or using a specialized accounting program. Before you can begin settling the estate, you must prepare a statement of all financial transactions involving the estate from the date of death. You are required to make this statement as itemized and detailed as possible as a copy will be sent to each beneficiary. Determine and pay debts of the estate Using funds within the estate, an executor is responsible for paying bills and debts owed by the deceased. This involves reviewing their papers and records (including electronic records), and by inquiring with third parties as required. Debts against the estate may include: Medical expenses; Funeral and burial expenses Credit card debt or lines of credit; Outstanding expenses involving property and other assets; and Debt which allows the lender to use the asset to repay previously advanced funds (i.e. a mortgage) While doing this, if you come across a bill or debt and are unsure about it’s legitimacy, do not hesitate to consult with the appropriate professionals. Scams have a way of sniffing out money and preying on people when they’re at their most vulnerable. In addition to closing any debts against the estate, it is also the responsibility of the executor to ensure that income and estate tax returns are filed in a timely manner. Tax Returns Filing the appropriate tax returns on behalf of the deceased and the estate can be a complicated process for some executors. Depending on circumstances and complexity of the estate, post mortem tax planning may be a smart choice. Once the returns are assessed by the Canadian Revenue Agency (CRA), then you can apply for tax clearance certificate(s). Obtaining these certificates prior to distributing the assets of the estate can save you from being personally liable for any unpaid taxes, interest, and penalties owed by the estate. If the deceased happened to own assets outside of Canada, you may be required to prepare and file tax returns according to whichever country these assets are located in. In these situations, it’s best to consult a tax lawyer or accountant who has experience in estate administration and related tax issues. Executor Compensation Unless stated otherwise in the will, an executor is permitted to claim a fee for their time and effort that went into settling the estate. Generally, this fee is calculated using a set out formula. As an example, in British Columbia, the maximum fee an executor can receive is 5% of the gross aggregate value, capital, and income of the estate. Also in BC, an executor may claim an annual care and management fee for the investment of estate assets up to a maximum of 0.4% of the annual average market value of those assets. Typically, when determining the actual amounts that will be paid out, the Court will consider the following: The duties and responsibilities involved; The overall value of the estate; How much time the executor put into completing their duties; The competency and resourcefulness demonstrated by the executor; and How successfully the executor managed the estate. In situations with more than one executor, the fees paid must be shared. 💡 Further reading: 11 Estate Planning Myths That Hold You Back Duties and Responsibilities of an Executor It’s clear to see that estate administration is not a walk in the park. Much more than simply allocating assets and filing taxes, not all executors are cut out for the job. Which is why, for the sake of your family and the legacy of the estate, it is vital to vet whoever it is that you’re considering to be your future executor. On the other hand, if someone is asking you to become their executor, it’s just as important to know what you may be getting yourself into. As we like to say here at Thom & Associates, being an executor is the hardest job you never applied for. While you may want to support your loved-one or close family friend, without the proper help, you may find yourself in legal hot water or in crisis while dealing with surprise debts or unhappy beneficiaries. If you would like to further discuss the duties of an executor or any other aspect of estate planning and management, our Certified Executor Advisors do not charge you for meeting with them and are here to help. Book an appointment today!