Not only does writing your will force you to acknowledge the inevitability of your own death, but it also forces you to plan for it. And although people find planning for death somewhat of a morbid activity, it’s crucial that you plan properly. A will is just an instruction manual for your survivors on what to do with your money, assets, and even your kids or other dependants upon your death. And although choosing who gets what seems easy enough, it’s important to be properly informed when thinking about designing a will. Here’s 3 commonly asked questions about writing a will:
When should I write my will?
There’s no set age or milestone to reach before being eligible to write a will, but if you’re an adult, own significant assets, and have dependants in your care, you should be looking into designing a will. Your will dictates to whom your assets and property will go to, and whose care your dependants are left in.
Are certain assets excluded from my will?
Not all assets can be included in your will. Wills tend to not cover any assets that you don’t own exclusively. For example, a joint bank account or a jointly owned property has a “right of survivorship”, meaning that these assets will automatically become the exclusive property of the joint survivor upon your death. Also, wills don’t apply to assets like TFSAs, life insurance, RRSPs, and RRIFs, where you’ve already assigned a beneficiary to whom these assets will go to.
Should I consult a lawyer?
There’s a guide that you can use called a will kit, which informs you of what you can and cannot include in your will. Although will kits are perfectly legal and consulting a lawyer isn’t necessarily required, it’s probably a better idea if you seek one out as there isn’t a one-size-fits-all plan to accommodate all your needs. You may (and probably do) have a unique set of circumstances, for which an example isn’t included in a will kit, that requires custom provisions from the help of a lawyer. Furthermore, you may feel more confident in the validity of your will after showing the completed document to a lawyer
It’s not uncommon for people to dread tax season, however pushing the thought of preparing them aside or waiting until the last minute to file can make the process much more painful than it needs to be. Here are some common mistakes taxpayers often make when scrambling to file their returns:
Reporting income incorrectly:
It’s very common for taxpayers to make mistakes when reporting their income, whether it be double reporting taxable benefits that are already included on their T4 slip or simply failing to report investment income. Failing to report your income correctly can lead to you being stuck with unwanted penalties and interest charges.
Not keeping receipts:
Even if you file your returns electronically, you need to keep your receipts. If the CRA requests you to prove an amount that you’ve claimed and you cannot, your return will be reassessed without that credit or deduction included.
Filing returns late:
Assuming you have taxes owing, you’ll face a late-filing penalty amounting to 5% of the balance owing, plus 1% of the balance for each month your return is late, to a maximum of 12 months. If you have filed late in previous years, the late-filing penalty is 10% of the balance owing, plus 2% of the balance for each month your return is late.
Overlooking new credits:
The CRA makes changes from year to year, which introduces the risk of not claiming an available credit simply due to the fact that you were unaware of its existence.
Not filing capital losses:
Failing to claim capital losses on your return can result in you missing out on thousands of dollars of negated capital gains. If you have no gains during the year, know that capital losses can be carried forward indefinitely to be used in future years.
A Tax-Free Savings Account (TFSA) is a flexible, registered, all-purpose savings vehicle that has allowed Canadians to earn tax-free investment income since it was introduced in 2008. Here are three reasons that you should be contributing to a TFSA:
A second stream of retirement income:
If you’ve already maximized your Registered Retirement Savings Plan (RRSP) contributions, you can use a TFSA as an additional source of funds in retirement. A TFSA is very complementary to an RRSP, as you can withdraw funds at any time without tax consequences and you can contribute at any age (unlike an RRSP, which you can only contribute to until you turn 71).
Saving for a specific goal:
Unlike RRSPs, you can withdraw funds from your TFSA whenever you want without being taxed on the withdrawal. Whether you’re saving for retirement or saving to take a family vacation, this lack of restriction makes a TFSA an ideal investment vehicle for both your short and long term investment goals.
Reducing taxes paid on your income:
TFSAs are a great way to avoid paying taxes on a portion of your income. If you are earning investment income, you can move those funds into a TFSA. The income you earn will be tax-tree, which will help your money grow at a faster rate.
Few people enjoy thinking about the inevitability of death, but it’s important to have measures in place to ensure that your financial dependants are adequately taken care of when you’re gone. When purchasing a life insurance policy, the size is largely based on the amount money your dependants will require upon your death. Determining the amount of life insurance you need depends on the following:
1. Income Replacement: A big factor for life insurance is income replacement, which will be a major factor when determining your life insurance needs. If you are the sole provider for your family or you simply want your family to be able to maintain its current lifestyle upon your death, you need to ensure that that your policy payout is large enough to replace you income.
2. Debt: All of your debts should be paid off in full, including mortgages, car loans, student debt, etc. If you have $20,000 in student loans and a $150,000 mortgage, you will need at least a $170,000 policy to ensure all your debt will be settled.
3. Future Expenses: If you are planning to pay for your children’s university education, you will need to estimate the cost of this obligation and ensure that it is included in your life insurance policy.