Quick estate planning tips that can help with a smooth transition

Planning for your estate is a practical gift that you can leave for your family, heirs and charities.

Here is a short list of some common estate snags that you can avoid with just a little bit of planning.

1. Get a Will. 

i)In general, in most jurisdictions dying without a Will means that your estate will be distributed by the courts in a rigidly prescribed manner which neither you nor your survivors have any control over. 

Having a Will avoids having your estate being distributed to people you didn't intend to give money to.

ii) Powers of attorney for your financial affairs and health care are very important additional items that you walk out of your lawyers office with when you make out your Will. These may seem like throwaway items at the time but can become extremely important documents that can have a dramatic influence for many years of your life, long before you pass away. 

Though not technically an estate snag, having powers of attorney in place avoids giving up control over these important life matters and can often help to avoid potential abuse of your assets while you are alive.  

2. Review and update your Will.

Over time things in life change. Births, deaths, preferences, divorce, remarriage and the charities you support are just a few things that should be considered. A rule of thumb is to review your Will at least once every 5 years.   Be sure to share any changes with your financial advisor who should be able to help you protect your assets and get the most out of your estate for your heirs. 

Like getting a Will in the first place, updating your Will avoids your estate being distributed to people you didn't intend to give your money to.

3. Probate.  

Thankfully there are exceptions however in general,  when you die most of your assets instantly belong to a new legal entity that's referred to as your estate, known as 'the estate of ... '. In most jurisdictions 'the estate of ...' must go through the probate process before it can be distributed. Probate is time consuming and expensive, reducing the value of your estate while your executor has little if any control over it. In general, your estate can't be accessed by your heirs until it clears probate which includes paying probate taxes and legal fees etc. 

If your estate is simple, probate can often take six to nine months or more; in more complicated cases it can literally take years. In particular, if you expect that your heirs will quickly need access to your estate assets to pay the bills etc. ask your financial advisor about setting aside money that sidesteps being included in your estate and avoids the probate process entirely.  

Avoiding probate where ever practical avoids putting a lot of unnecessary stresses on your survivors and allows 'the estate of....'  to flow quickly and smoothly to your intended heirs.

Mortgage insurance from the bank vs. Better Mortgage Insurance

Mortgage Insurance is a group insurance that's typically marketed towards homeowners who may be concerned that an unexpected death or illness could leave their loved ones in a difficult position of financial hardship. 

Better Mortgage Life Insurance is individual insurance that can perform a similar function for you, but isn’t tied directly to only covering your mortgage debt. It’s simply designed to provide your beneficiaries with money in the event of your death.  Its flexibility allows your beneficiaries to use the money for whatever purpose they wish. 

Why Better Mortgage Life Insurance vs Mortgage insurance from a bank?

1. It costs you less!

2. It's a fast, easy and safe way to purchase mortgage insurance directly on-line here. 

3. You own the policy. It stays with you and you get to choose the beneficiary.

4. Your payments stay the same for the term.  

5. The benefit doesn't decrease as you pay down your mortgage - unlike a the bank!

6. With Better Mortgage Insurance there is no need to requalify for insurance when you change your bank or mortgage provider.

7. Renewable without the need to requalify for insurance. 

8. Convertible to permanent insurance without needing to requalify.

9. Questions? Professional life insurance-licensed advice is always available .

Note: Better Mortgage Insurance is underwritten by Assumption Life.

Should you have a savings plan that's similar to having your own Defined Benefit Pension Plan?

As the Canadian postal workers union (CUPE) continues to negotiate with Canada Post over their contract and in particular the issue of phasing out of Defined Benefit (DB) plans in favour of Defined Contribution (DC) plans as was recently discussed on the CBC, I've been wondering why we're not hearing any discussions about guaranteed retirement income solutions that are already a huge market for many Canadians without DB pensions and have been available through a variety of Canadian insurance providers right across the country for many years.

In our practice we speak with many Canadians who have saved and/or are saving for retirement and find that most people have the common desire to have at minimum, a rock solid core retirement income that's guaranteed to keep them in the lifestyle they prefer. I would suspect that the postal workers union and their members probably have the same goals in mind.


From the outside looking in, the main problem in this dispute appears to be that even though DB plans are often the best guaranteed retirement income solutions available for employees the financial risks of DB plans are considered too high for most of today's corporate managers to take on. So the compromise of a simple DC plan offers similar ongoing financial support for workers but eliminates the corporate capital requirements required by pension regulation and future retirement income risks of employees away from the corporation.

A few of the key differences between DB plans and some of the available guaranteed income plans such as with variable annuity plans also known as GMWB's are:
a) savers maintain access to their savings in the event they need the money.
b) plans can be portable when people change jobs.
c) some plans offer lifetime income that is based on deposits plus 4-5% during your savings years (or market value which ever is higher).
d) lifetime retirement income might not be indexed to inflation.
e) savers can choose from a wide variety of investments.

Guaranteed income for life solutions that combine some of the DC plan attributes with some of the DB plan attributes such as these are often a good compromise that suits a majority of retirement income needs.

That's because in our experience we find that clients who integrate guaranteed income solutions into their financial plans tend to do so for a variety of common reasons. These often include such things as:

a) peace of mind comes from having a core part of retirement income that's provided for life that's above and beyond meagre CPP and Old Age Security (OAS) payments.
b) as a passive supplemental guaranteed income above small or insufficient existing DB plans in order to guarantee anticipated lifetime income needs.
c) create as close to a DB plan equivalent with RRSP's, RRIF's and DC plans as possible so the requirement for taking on additional investment risks are reduced or eliminated in savings years and most importantly, during retirement risk zone years.
d) smooth out or eliminate the negative effects on incomes that are often caused by volatile markets or savings that would otherwise be exhausted when needed during retirement years.















It's also important to note that the various guaranteed for life income solutions currently available are implemented to suit the specific needs of groups, couples and individuals on a case by case basis.

Volatile Markets, Retirement Income and the Risk of Time

Is a retirement income that’s guaranteed for the rest of your life important for you?

Studies show that over 60% of pre-retirees are most comfortable if their RRSPs and other savings would be 100% guaranteed to provide an income for life, regardless of market conditions.  

For safety and short term needs many people leave money in bank accounts, GICs and term-deposits. Savings of this kind are generally safe, but are growing at a rate that is barely keeping up with inflation. In many cases these savings may not be growing fast enough to meet longer term financial goals. 

It’s not that market risk or volatile markets are necessarily bad. In fact, higher risk tends to bring higher rewards with some investments. It is also technically correct that over time, securities markets outperform many other investment savings choices. But market rewards are gained at random times that don't match income requirements.


For those who will be taking income from savings  - an erratic or poor sequence of returns  5+ years before and or during early retirement years in particular can be financially devastating.

Longevity risk is another factor.  People are living longer which means savings need to be able to last longer and longer periods of time.

So time can be a critical factor when protecting savings that are earmarked to draw down as income.  

Thankfully there are a variety of guaranteed investments that take the risk of time out of your future financial plans.

To discover whether these guaranteed investment options meet your unique circumstances, some common questions to discuss might include:

•           Can lifetime expenses be covered by your current pensions, savings and government                  retirement benefits?
•       If the market drops 20% (or any number you'd wish to explore) during income years how          long will savings be expected to last?
•          Will there enough money to take care of dependants?
•       How do future travel plans and other bucket list items fit in?
•          If we eventually need to convert a nest egg into a guaranteed-for-life income stream, what          are the best available options and do they suit our needs?
•         Are long-term care costs factored into this equation?
•        After we’re gone, will we have enough to cover the needs of our survivors, bequests and           the charitable legacies that we wish to leave behind?

Knowing that we'll never run out of money for the rest of our lives is very helpful for most of us who like to sleep well at night. Control and access to our investment savings in case of emergencies are also important for many.                                                                               

Of the contractually guaranteed for life income solutions available today, some plans may also offer additional benefits to suit various circumstances such as:

•       Guaranteed growth of future income during savings years.
•       Plans that allow you to participate in the upside of the markets while also guaranteeing an         income for life.
•       Income payments that are guaranteed for life!
•       Other guarantees. For RRSPs and RRIFs in particular, your initial investment is the                   guaranteed minimum you'll be able to withdraw over time,  even if the market value  drops       below your initial deposits.
•       Control and access over your investments anytime. Just in case. 
•     Loss of control options that will pay a higher contractually guaranteed for life income are          also available when suitable.
•       Joint accounts, for the purpose of guaranteed income continuation for a surviving spouse.
•       Avoid probate. Note: If your wish is for your estate to avoid probate delays, taxes and fees - in most Canadian provinces, it is unnecessary to set up joint accounts with these types of guaranteed investments.
•       Transfer of residual proceeds to your beneficiaries can be delivered over time and/or as lump sums, as you see fit.

If you’d like to learn more about taking the risk of time out of your retirement income plans, I invite you to contact me today to help you discover if guaranteed investments are the right fit for you.

Please note: As an independent Certified Financial Planner and expert on guaranteed-for-life income solutions, I have personally invested in some of these solutions since they are also a perfect fit for my circumstances.

Jack Bergmans CFP

Certified Financial Planner/ Founding Partner 

Life Insurance & Estate Consultant

Bequest Insurance

jack@bequestinsurance.ca

Phone: (416) 356-4511 

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Have you set aside money in your Will to go to your favourite charities?

Even if you're still just thinking about it that's fantastic!  But if you could guarantee that your charities receive a much larger gift using this same money – and remove potential headaches for your executors – would you consider doing that instead?

Giving through your Will – a public document that all can see – can present challenges that you might not have thought of. 

For example, is there any chance that any of your beneficiaries may resent your charitable gifts because they feel that they deserve a bigger inheritance – especially if they have acted as your caregiver? It’s quite common that scenarios like this result in beneficiaries contesting philanthropic gifts made through a Will. 

Such challenges can result in significant delays in settling your estate. This adds significant legal costs that reduce the size of the estate for all of your beneficiaries, including your charities. This can decrease the size of charitable tax receipts that you may be counting on to reduce estate taxes in order to leave more to all your beneficiaries.

Also, the anger and disagreements that often surround contested Wills often permanently fractures families.

Here are three simple and cost-free ways that ensure your charitable wishes remain intact.

1. Give to your favourite charities while you are alive.  Time-honoured estate planning strategies often involve reducing the potential size of your estate. If you can afford to give now, your estate will be smaller so will its taxes, fees and many potential headaches for your executor.

2. Or if you are less than 80 years old, it’s often wise to use money you’ve set aside for your charities to buy a life insurance policy, naming your charities as its beneficiaries.

Life insurance allows anyone, even people of modest means, to give more.  In many cases, if you have normal health issues such as high blood pressure or cholesterol and they are effectively managed with medication, you are likely eligible to buy life insurance.  Finding out if you are insurable is actually a simple process.

When you choose a life insurance policy that grows in value over time you’ll get four important benefits without spending any more money:

i) You can withdraw the growing cash value inside your policy anytime, just in case you need money sometime down the road.

ii) The size of your charitable gifts increases over time so your charities can have a bigger impact on the causes close to your heart.

iii) Tax receipts to your estate also increase in value, helping to offset your potential estate income and capital gains taxes.

iv) Growth in the value of life insurance policies is tax-free so you’ll give more, without spending more.

Because life insurance policies are private, and usually can’t be contested*, you won’t lose control over your charitable intentions. Even better, because your death benefit will go to your charitable beneficiaries outside of your Will, your charities will get your gifts much faster and with very little effort on the part of your executor.

3. If you don’t qualify for life insurance, consider transferring your intended gifts into investments with an insurance company.  Such investments – including money market funds, GICs, segregated funds (the mutual funds of the insurance world) and annuities of any kind – are not considered part of your estate, which also makes your executor’s job easier. All your charities will receive the proceeds privately, quickly and unreduced by estate fees and probate taxes.

Now isn’t that something worth thinking about?

Note: To learn more about whether life insurance estate strategies are the right fit for your circumstances, you must consult with a licensed insurance professional. When using insurance strategies to multiply your generosity to charities, it’s ideal to consult an advisor who is well versed in maximizing the power of your charitable giving, while also reducing potential taxes and other challenges that your estate might incur.

Jack Bergmans, CFP

Best-selling author of
Ripple Effect: Growing your business through insurance and philanthropy  &
Multiplying Generosity: Creatively using insurance to increase legacy gifts

* Some exceptions

Maybe your RRSP contributions should be made before the end of the year?

In our practice we speak with many Canadians who have saved and/or are saving for retirement who have the common desire to have a rock solid core retirement income that's guaranteed to keep them in the lifestyle they prefer for life. Defined Benefit Plans once provided that guaranteed income but not many of us have those kinds of plans anymore.


Today we need solid lasting guaranteed investments that will provide for our own retirement income. Guaranteed income for life plans offered through insurance companies just might be that perfect fit!

A few of the key features of personal guaranteed income plans such as variable annuity plans (also known as GMWB's) are:
a) investors always have access to their savings in case they need their money.
b) plans are portable when people change jobs or can be changed to something else if better options become available sometime in the future.
c) some guaranteed income plans offer an additional 5% annual income bonus during savings years. - eg. RRSP contributions (and RRSP/RRIF switches) into guaranteed income plans that are made before the end of any year would receive the entire 5% annual income bonus.
d) lifetime retirement income might not be indexed to inflation.
e) investment choices fit the risk profile of many types of investors, but not everyone.

Who are guaranteed income plans intended for?

We find that clients who integrate guaranteed for life income solutions into their financial plans tend to do so for a few of common reasons. These often include such things as:

a) peace of mind that comes from having a lifetime core of guaranteed retirement income that will enhance CPP and Old Age Security (OAS) payments.
b) to enhance existing Defined Benefit plans in order to improve guaranteed anticipated lifetime income needs.
c) avoid outliving investment income. Usually this is done by converting personal  RRSP's,  RRIF's and Defined Contribution plans to guaranteed income plans but it is also done through non registered savings.
d) reducing or eliminating market risk in savings years leading up to and during retirement. These are known as the retirement risk zone years when savings that will be needed for retirement income should be fully protected.
e) annual RRIF income can drop like a stone whenever there are down markets but guaranteed income plans eliminate that risk by providing a nice smooth retirement income stream.

Please contact me anytime if you have any questions. Maybe your RRSP contributions should be made before the end of the year?




Jack Bergmans

jack@bequestinsurance.ca
416.356.4511

Should you consider getting life insurance before the rules change on Jan 1 2017?

Life insurance is commonly thought of as a simple estate planning tool. Yet it can also make a very powerful investment tool due to its favourable tax treatment.

Deposits and cash growth in life insurance policies are generally tax-free within certain limits, as are death benefits, which makes life policies used as investments very valuable.

On January 1, 2017 the part of the Canadian Income Tax Act governing life insurance policies will be amended to more accurately reflect changes in mortality rates (people are now living longer). It will also place additional limits on life insurance deposit amounts considered tax exempt.

If you decide to take advantage of life insurance for investment purposes and estate planning before these tax changes take place, your life policies will be grandfathered and provide you with the ability to invest more money tax-free than life policies purchased in 2017 and beyond.

There are many situations whereby you should consider investing in life policies before December 31, 2016. A couple of key situations include:

•  Your business is growing. Insurance taken out on the owners can create or strengthen succession plans to insure the business won't suffer when key people are unable to continue working for any reason.
•  You own properties whose value has grown beyond the capacity of your estate to cover estate tax obligations. It's possible that capital gains taxes will not allow you to have your estate assets distributed in the way that you’d like. Life insurance can be purchased to cover big tax hits such as these, and allow you to leave more to loved ones and charities.  

If you've already set aside specific funds to go to beneficiaries such as your spouse, grandkids, kids, community causes and charities, Bequest Insurance’s Generosity Multiplier™ can mobilize those funds to guarantee that your beneficiaries receive even more than you hoped, at no additional cost to you.

Rates of return on our Generosity Multiplier™ are based on age, and since none of us are getting any younger and tax changes are coming on January 1st, this could be the perfect time to contact Bequest Insurance to learn more about how you can reduce your taxes and leave more to meet your personal or business needs!