Monday, January 27, 2014

A real life story about the need for Critical Illness insurance

I received the following heartbreaking email from a friend who is pleading for help:

"In June of 2013, my friend, 56, was diagnosed with stage 4 non-hodgkin's lymphoma. This fun loving, self-employed husband and father of two saw his life drastically change.

Since diagnosis, he has endured countless attempts at various chemotherapies without any success. Not so long ago, the family received devastating news that there is no cure for him in Canada.

His illness left him unable to work, and as a result he lost his business... a substantial source of family income.

The family is in dire need of URGENT financial help in order for him to be able to participate in a clinical medical trial only available from the USA. This trial is not covered by insurance and therefore his only hope is private donations. This medication is needed immediately and is VERY costly. This is his ONLY chance of survival. The family is desperate and pleading for help." 

An estimated 21 people per hour will be diagnosed with cancer in Canada in 2013.  Approximately 1 in 4 Canadians live with cancer presently (Canadian Cancer Society, 2013).  Critical illness insurance provides a one-time payment if you are diagnosed with cancer, heart attack, or stroke (it can also cover many other common and potentially financially devastating diseases depending on the policy chosen).  Is it time for you to find out about critical illness insurance for yourself? 

Visit www.timweichel.ca or contact us.  


In June of 2013, Kevin Block, 56, was diagnosed with stage 4 non-hodgkin's lymphoma. This fun loving, self-employed husband and father of two saw his life drastically change.
Since diagnosis, Kevin has endured countless attempts at various chemotherapies without any success. Not so long ago, the family received devastating news that there is no cure for Kevin in Canada.

Kevin's illness left him unable to work, and as a result he lost his business... a substantial source of family income.

The family is in dire need of URGENT financial help in order for Kevin to be able to participate in a clinical medical trial only available from the USA. This trial is not covered by insurance and therefore our only hope is private donations. This medication is needed immediately and is VERY costly. This is Kevin’s ONLY chance of survival. The family is desperate and pleading for help.
- See more at: http://www.youcaring.com/medical-fundraiser/keeping-kev/117076#sthash.eSYhLhhj.dpuf
In June of 2013, Kevin Block, 56, was diagnosed with stage 4 non-hodgkin's lymphoma. This fun loving, self-employed husband and father of two saw his life drastically change.
Since diagnosis, Kevin has endured countless attempts at various chemotherapies without any success. Not so long ago, the family received devastating news that there is no cure for Kevin in Canada.

Kevin's illness left him unable to work, and as a result he lost his business... a substantial source of family income.

The family is in dire need of URGENT financial help in order for Kevin to be able to participate in a clinical medical trial only available from the USA. This trial is not covered by insurance and therefore our only hope is private donations. This medication is needed immediately and is VERY costly. This is Kevin’s ONLY chance of survival. The family is desperate and pleading for help.
- See more at: http://www.youcaring.com/medical-fundraiser/keeping-kev/117076#sthash.eSYhLhhj.dpuf

Friday, January 24, 2014

Consultants and small businesses: When is it time to incorporate your business?


For most businesses, the question is not if, but when, to incorporate.  There are many pros and cons of incorporating a small business, depending a lot on individual situations.  But too many businesses fail to revisit the question of whether to incorporate.  As your business matures, and the realities of your legal and tax situations change, asking the question again may bring a different answer

The pros and cons of incorporating a small business can vary, but here are the most common:

Pros

1.       Limited liability: Your business is a separate legal entity and as such, creditors or legal actions go against your corporation and its assets, not your personal assets. (There are exceptions, such as personally guaranteed loans, government tax obligations and payroll deductions, among others.)

2.       Tax efficiency: You can choose the most tax-efficient way to pay yourself, including dividends, salary, bonus or a combination. You can even use dividends as a way to split income with your spouse if he or she is a shareholder in your Canadian Controlled Private Corporation.

·         As a sole proprietor (not incorporated), one must be careful when “income splitting” to other family members via salary or “fees paid” in a sole proprietorship. The question to ask oneself is, “what would l pay an arm’s length party to do this work they are doing?” In most cases, this would involve minimal amounts of income. With a sole-proprietorship, one is limited to income splitting to other family members via “salary or fees paid” to other family member(s).

·         With a corporation one can legally and acceptably income split with other family members via “dividends”, which is not based upon a “value for service rendered” concept; rather the payment of dividends, and thus access to income splitting, is based upon share ownership in the corporation. Therefore, the corporate model provides access to income-split much larger amounts than you would be able to income split via a sole proprietorship. Acceptable income splitting can be accomplished with other family members when a corporation is utilized, as the flexibility to income split via dividends to these family members is available and thus is applied to their lower personal tax brackets.

3.       As a sole-proprietorship, you are limited to setting December 31st as the year end of the business. An incorporated entity can set a year end at any time during the year.  This provides the flexibility to minimize overall income taxes, by allocating corporate income, which has a year -end that straddles December 31st, to two tax years of an individual shareholder, and his family members, who file their tax returns on a calendar year basis. This provides the ability to keep overall income in the lower tax brackets and thus pay less tax on the same income.

4.       If you don’t need all business earnings for personal income, you can leave them in the business, deferring personal taxes on withdrawals and possibly enjoying an approximately 15-per-cent preferred tax assessment on the first $500,000 of profit in CCPCs.

Cons

1.       Incorporating costs money. You can do it on your own, technically, but it’s more advisable to get the help of a lawyer and an accountant.

2.       Incorporated entities must file more paperwork, such as separate tax returns, an annual return, one-time articles of incorporation and notifications of share sales, moves or changes of directors.

3.       Losses in an incorporated company can’t be personally claimed. A failed start-up can only be “written off” personally to the amount you had invested, not the accumulated negative earnings.

As for the accounting side, as long as you remain a sole proprietorship, all your profits will be taxed as personal income, which could involve tax rates potentially as high as 46 per cent. If you have a small business, earning, say, $60,000 or so, you may be fine either way. Once, however, you start earning well above that level, you may be missing out on ways to more effectively manage your taxes: income splitting with family members and/or deferring income taxes, for example.

A business with anticipated losses and little legal risk can likely start as a sole proprietorship, but increasing risk and more significant earnings will favour incorporating later on.

In general, if you are committed to a career as an independent consultant, incorporation is recommended, but you should seek professional accounting and legal advice specific to your circumstances.

So when should your business incorporate?   Keep asking that question until you grow into a different answer, and then you can quickly take action.

Visit us at www.timweichel.ca or contact us by email.

Thursday, January 23, 2014

Spousal RRSPs and Minimizing taxes

Spousal Registered Retirement Savings Plans are an important tax-planning tool. An RRSP is designated as spousal when one spouse contributes to a plan in the other spouse's name. 

Spousal RRSPs will appeal to couples where one spouse earns a higher income than the other spouse, and is therefore in a higher tax rate bracket. By contributing to a spousal RRSP, the spouse earning a higher income will receive a tax deduction at the higher tax rate. For example, a higher income spouse in a 40 per cent marginal tax bracket, contributes $4,000 to a spousal RRSP and saves $1,600 in taxes. If the lower income spouse, in a 20 per cent marginal tax bracket were to contribute $4,000 to an RRSP, this spouse would save only $800 in taxes - a difference of $800. 

At the same time, this higher income spouse is creating a pool of funds for the lower income spouse to draw on at retirement. When the couple retires, they both have funds to withdraw from their own RRSPs as two separate incomes. So, they can both be taxed at a lower rate than if only the higher income spouse was withdrawing all of these funds as one individual income.

In this way, spousal RRSPs allow couples to income-split, and take advantage of Canada's progressive tax system. This means that it is more beneficial to have two individuals earning $40,000 per year than one earning $80,000. For example, in Ontario two individuals earning $50,000 per year would pay approximately $20,000 in total income taxes, while one individual earning $100,000 would pay approximately $28,000 in taxes.

Of course, income-splitting only works if one spouse stays in a tax rate bracket that is the same or lower than the other spouse.

To learn more, visit us at www.timweichel.ca or contact us by email

Monday, January 20, 2014

Planning for your health care needs tomorrow, today



Not many of us want to think about it, much less talk about it, but the reality is that if we live long enough, there’s a good chance we’ll eventually need long term care.

What is long term care? It’s the help you need when you can no longer take care of yourself and become dependent on others – possibly your family.

Watch the video in this link to find out more about Canada's changing social landscape and the  likelihood of your requiring long-term care.

Aside from the physical and emotional toll that long term care can take, most people I talk to are surprised to hear how much that care costs. Whether delivered at home or in a facility, paying for long term care could completely deplete your assets and retirement savings.

Long term care insurance can help you: protect your retirement assets; plan and control care decisions and lighten the care burden for your loved ones.  Preparing today for the care you may need tomorrow is just as vital to your financial plan as your savings and investments.

Did you know that it's Alzheimer awareness month in Canada?  Visit us at www.timweichel.ca or email tim@timweichel.ca to find out more about long-term care insurance and other ways you can protect yourself and your family.  


Friday, January 17, 2014

Health insurance: Not covered by a company group plan?




Do you want the health benefit coverage the province doesn’t provide?

If you are one of the millions of Canadians not fully covered by a group health plan, you are vulnerable to healthcare expenses not covered by your Government Health Insurance Plan.

Overall healthcare funding is continually reassessed.  As governments reduce coverage for some healthcare services and cease to provide others, more and more responsibility is placed on you, as an individual, to pay for routine and unexpected health-related services.

For only dollars a week, a supplemental health insurance plan offers you a unique combination of health benefits that provide you and your family with comprehensive coverage you simply shouldn’t do without.

Whether your focus is on prescription drug coverage, dental services, or a combination of both, there is a plan that will meet your needs and those of your family. Personal health plans are specially designed to provide flexibility and choice, allowing you to select the plan and level of coverage according to your current and future needs, your lifestyle and your budget. 

If you are self-employed or a small business owner, your plan may essentially pay for itself.  Many people may deduct their supplemental health coverage premiums from their annual income.  

Setting up a personal benefit plan is easy and will give you peace-of-mind, knowing that you’re covered for both the routine and the unexpected expenses that may occur due to accident or illness. If you would like to take advantage of this opportunity, please contact me to arrange an appointment.

tim@timweichel.ca or visit us at www.timweichel.ca