Starting this January, the government is taking 30 per cent off the average tuition for families — that means a savings of $800 for undergraduate university or college degree students and $365 for college diploma and certificate students this semester. This grant will also be extended to eligible students beginning or continuing their studies in the summer semester.

In September, the permanent 30 per cent off Ontario Tuition Grant will apply to the full school year. This translates to a savings of $1,600 for students in a university or college degree program and a savings of $730 for students in college diploma and certificate programs.

According to a press release issued by the FPSC, “The long-standing and sustained contributions of the people in this first-ever group of Fellow of FPSC recipients are exceptional. Their contributions have made an important impact in helping to build this profession and advance financial planning,’ says Cary List, President and CEO, FPSC.

To become a Fellow of FPSC member, candidates must be nominated by at least two other individuals and meet at least two of the following criteria: advancement of FPSC’s vision and mission through volunteering with FPSC; advancement of Certified Financial Planner^® professional standards; and embodiment of CFP^® professional standards.

Examples of contributions from this group of Fellow of FPSC recipients include long-standing and exemplary service to FPSC through volunteerism; promotion of financial planning and CFP certification as the profession of choice to the next generation; significant involvement in FPSC’s examination development process; direct and broad support of the CFP designation within industry; and extensive promotion of financial planning and CFP certification to Canadians on a
grassroots level.”

A Will allows us to express our final wishes and let our loved ones know that we took the time to think about and provide for them after we have gone. Everyone’s situation is unique to their personal circumstances, but the following are some common issues to look for in a well drafted Will:

a) Dying without a Proper Will (“Intestate”)

Where there is no Will or a Will has failed (i.e. due to incomplete execution or ambiguous wording), our government has imposed a process for dealing with your estate. For example, assume that you are currently living in Ontario, have both a spouse and children, and the value of your estate is over $200,000. The legislation dictates that your spouse will receive the first $200,000, with the remaining value of your estate being divided between your spouse (who would receive 1/3) and your children (who would receive 2/3). If your children are minors, they may not receive their share of your estate until they reach of age of majority or until the minor’s guardian is granted custody of the assets. Either way, it becomes a more difficult process which can be avoided by simply having a Will which clearly outlines your wishes.
The complications of dying intestate are compounded if you are in a blended family situation, or a common law relationship, or are the owner of a private company, or hold assets in other jurisdictions and/or hold dual citizenship with another country. These are only a few of the obvious issues to consider.

b) Taking Care of Children

This is rightfully a big consideration for many parents. The only place where you can express who you would like to take care of your young children in the event something happens to you is in your Will. If you die intestate and your children are entitled to a share of your estate, their share is paid into court and held for them until they attain the age of 18 years or until the minor’s guardian is granted custody of the assets, which can take a significant amount of time. Perhaps of even greater significance is the fact that there are no restrictions or guidance provided to your child when they receive their share at the age of 18 years. Many people are concerned at the thought of having their children receive a large sum of money (for use at their absolute discretion) at a very young age.

c) Tax Planning

There are two different types of taxes that are payable at death, income taxes and estate administration taxes. As a general rule, one is deemed to have disposed of all of their property immediately before death, which commonly results in the triggering of capital gains. Under a properly structured Will, capital gains can be deferred upon death. There are also other tools that can be utilized in particular circumstances to minimize the payment of income taxes and/or estate administration taxes, such as the use of various testamentary trusts or the use of multiple Wills.

How is a Will an Estate Planning Tool?

During our lives we focus on how to gather and manage our assets so that we have enough wealth during our lifetime. However, we also need to focus on preserving those assets on death and ensuring that the wealth is transferred to the next generation. A properly planned Will is a critical and integral component of your estate plan.

What Are You Really Paying For?

A properly drafted Will can save your loved ones grief and aggravation during a sensitive and difficult period. Some people are taken back at the cost of properly drafting a Will when there are pre-printed forms and computer programs available on the market for a fraction of the cost. So why use a lawyer? You are paying for someone to think through the maze of legal and practical issues surrounding death to ensure what is written in your Will reflects your wishes and works for your particular circumstances. You are paying for the analysis, planning, critical thinking and drafting which is behind the paper that the Will is written on, not the paper alone.

Pre-printed forms, computer programs, or a poorly drafted Will may seem like a good way of saving money on legal fees. However, there is a risk that these forms could be completed incorrectly or could include ambiguous wording. This may end up costing your loved ones significantly more in court and legal fees than the amount you would have paid to have the Will properly drafted by an experienced lawyer in the first place.

Jag Gandhi practices in the area of Tax, Trusts and Estate Planning at Wilson Vukelich LLP, Barristers and Solicitors in Markham (www.wvllp.ca). She can be reached at 905.944.2953 or by e-mail at jgandhi@wvllp.ca.

Before the 2011 budget, when flow-through shares were donated to a charitable organization, the donor could receive generous tax credits and deductions that would result in little after-tax cost. This was due to the fact that the donor could take advantage of the deduction for the expenses flowed through from the corporation, the applicable federal and provincial mineral exploration flow-through tax credits, the charitable donations tax credit or deduction in respect of the value of the shares, and relief from capital gains tax, including tax on the portion of the gain attributable to the zero cost of the shares.

The budget proposed to change the rules with regards to shares acquired on or after March 22, 2011 to allow the exemption from capital gains tax only to the extent that the cumulative capital gains in respect of the disposition of the shares exceed the original cost of the flow-through shares.

With regards to past service contributions, After March 22, 2011, they will have to be funded firstly froma transfer of the plan member’s RRSP assets or by reducing his/her RRSP contribution room before newdeductible past service contributions can be made.

.

Starting January 2011 the rules that apply to Canada Pension Plan (CPP) have changed. Since the CPP is a component of retirement income for all Canadians it is important that you are aware of the changes and consider them in your retirement planning.

Four areas will be impacted by these changes.

Calculation of Career Earnings

This is one area that will be positively impacted. Up until 2010, the dropout percentage for years of low or no earnings (referred to as the “general drop-out provision”) was 15% of average career earnings. This percentage will be increased to 16% in 2012 and 17% in 2014. Therefore, retirees who start receiving their CPP income in 2011 or future years should have a higher retirement benefit than those who started receiving their benefits before 2011.

Removal of the Work Cessation Test

This is another welcome change. In the past applicants were required to cease employment or have reduced income for a two month period in order to be eligible to apply for benefits. However, starting in 2012 this is no longer the case and you can apply for your CPP benefits while still working.

Change in Benefits for Those Who Start Before or After 65

This change is fair given the fact that we are living much longer than we used to when the CPP was first introduced in 1966. According to these changes those who start receiving their benefits earlier than age 65 will have a bigger reduction in their benefits and those retirees who start receiving their benefits after age 65 will have a bigger enhancement in their benefits.

These changes will be implemented gradually starting in 2012 for reduction in early receipt and will be fully in place in 2016. At that time, you will receive .6% less for each month that you start receiving your CPP retirement benefits before age 65 (36% less if you receive your benefits at age 60, vs. 30% less before the changes).

The changes with regards to delaying receipt and receiving enhanced benefits will gradually be implemented starting in 2011 and will be fully in place by 2013. When the rules are fully implemented, for each month that you delay receiving your CPP benefits beyond age 65, you will receive .7% increase in your benefits (42% if you delay receiving your benefits until age 70 vs. 30% more before the changes).

Contributions to CPP While Receiving Benefits and Working

The negative change for seniors is that according to the new rules if you are under age 65 and in receipt of CPP payments and are still working, you and your employer will have to contribute to CPP (which was not the case before). On the bright side, these contributions will increase your CPP benefits starting in 2013.

If you are age 65 to 70 and work while receiving your CPP benefits, you can choose to contribute to CPP and these contributions will increase your benefits starting in 2013 as well.

If you are under the age of 65 and are receiving early CPP retirement benefits and are also working and earning employment income, you will be required to once again contribute to CPP as of January 2012.

By Alan Wainer, CA, CPA (Illinois), Partner in Assurance & Advisory at Soberman LLP, Chartered Accountants

What topic do business owners or entrepreneurs love to talk about the most? Their business, of course!

What topic do they seem to avoid talking about? Succession planning!

Where there is a dearth of discussion on succession planning by business owners, the media has more than filled the glut on this topic. I am sure that you have seen a plethora of articles in the financial pages stressing that only 30% of intergenerational business transfers are successful and that only 3% make it to the third generation.

So why is it that the topics of Succession, Retirement and Estate Planning (I like to use the acronym SuRE) are such difficult subjects to broach with entrepreneurs?

There are two basic facets to succession planning: the financial (tax, legal and investing) aspect and the emotional aspect. The focus of this article is on the latter, and in particular, the emotional aspect of planning for retirement. Time and time again, I have found that until the personal side of succession is tackled, the financial side becomes somewhat secondary.

As a professional advisor to clients in this area, I hear a number of reasons why the emotional hurdle of discussing succession planning and retirement is hard to overcome. These include excuses such as: “I’ll have to deal with my own mortality, including signing a will and powers of attorney,” “I am no longer in control” and “I am used to doing things on my own and if I retire now what I am going to do to occupy myself?”

So, what is the solution to a problem that appears to be reaching epidemic proportions? I don’t mean to disappoint, but there is no magical elixir. The answer is simply a willingness to plan and communicate such plans. If you have come to the conclusion that the time is right to pass on your business to someone else (even if you have not), and you wish to avoid many of the pitfalls that entrepreneurs face in transitioning into retirement, below are a few ideas for your consideration.*

1. Understand the Retirement Process

Have you ever sat down and given some thought about what retirement would mean for you? Just as when you started your business, you did not have all the answers, nor will you about retirement. I am sure you asked your advisors a lot of questions as your business grew and so should you about retirement. Do you see a pattern here? Retirement is just another chapter in your life. You can make it as fulfilling as the previous chapter. So let’s start with some of those questions:

• Are you tired of the demands of running the business?
• Do you wish to continue to do the same type of things as you have done for the last number of years?
• Have you recently received an offer for the business to good to pass up on?
• Are there stresses on the home front when coupled with stresses at work making your day intolerable?
• Has a recent life experience changed your view of your life?
• Are there legal requirements such as a shareholders’ agreement that addresses mandatory retirement?
• Are there other goals outside of your business that remained unfulfilled?
• Are you ready to let go and to what degree?

Whether you speak to advisors who specialize in this area, one of your existing advisors or a close friend (your spouse?), it is up to you to take that first step in this process.

2. Set Goals

Just as you have done in running your business, setting goals is no less relevant. A goal is defined as “the result or achievement toward which effort is directed.” Ask yourself these questions: what do you wish to accomplish in the next phase of your life and how do you wish to spend your time? It could be as simple as taking up a hobby that you always wanted to try or as complicated as starting a second career. The possibilities are endless.

3. Replace the Things You Enjoy Doing Today

Where do your talents lie? Why do you enjoy coming to work every day? Why not retain the positive aspects of your working life as part of your retirement lifestyle? If sales is your passion, you could work on the fundraising committee of a not for profit organization. If you like being in charge, you could consider joining a board of a public company. If you are an excellent communicator, consider teaching or doing presentations.

4. Consider Your Family

You may have heard the expression that the key to a successful marriage is that both spouses work. Retirement presents a whole different dynamic on the home front. To ensure that the success continues, communicate your retirement goals and plans with your spouse. Talking about the issues will help alleviate the stress that change brings.

Your children should also be included as part of the process. It may create an opportunity to spend more time with them or your grandchildren.

5. Do a Dry Run

More and more businesses are developing contingency plans in the event that the owner-manager is absent for a prolonged period of time due to illness, disability or even death. Could the business continue to run in your absence? Who would handle your day to day responsibilities? What better way to find out than by a having a dry run at it after the plan has been completed? Consider taking a month off from work. And by that I mean stay completely out of the picture. Aside from being able to evaluate the plan and the people you have entrusted to run the business in your absence, it will give you an opportunity to get a glimpse of what retirement will be like and help you assess if now is the right time to let go. Is it the right time for the business and the right time for you?

How you define retirement is up to you. Either follow the literal meaning of the word or embrace this new chapter of your life, by setting goals, planning your transition and communicating your plans with the appropriate people in your life. By taking that first step to overcome the emotional hurdle of retirement and by taking charge of the timetable for your retirement, you can be SuRE that it will be a rewarding one.

* Alan is indebted to The Canadian Institute of Chartered Accountants, The Estate Planning Toolkit for Business Owners, (Toronto: CICA, 2009), pp. 154-156.

About the Author

Alan Wainer is a Partner in the Assurance & Advisory practice at Soberman LLP, Chartered Accountants. In 2003, Alan completed the Canadian Association of Family Enterprises (CAFÉ) Family Council Facilitator program. Alan is the Facilitator of Soberman’s Family Business Services Group and he and his fellow partners in the group are frequent authors and speakers on issues such as succession planning, retirement and estate planning.

Alan can be reached at 416 963 7121 or awainer@soberman.com. To learn more, visit www.soberman.com.

• The maximum RRSP contribution limit for 2010 is the lower of 18% of your 2009 income or $22,000.
• The maximum RRSP contribution limit for 2011 will increase to $22,450 and for 2012 will increase to $22,970.
• If you are a member of a deferred profit sharing plan or company pension plan the above maximum allowable contribution limits will be reduced by your pension adjustment as specified in box 52 of your T-4 slip.
• You have until March 1st 2011 to make your 2010 contributions.
• Don’t wait until the last minute and consider making monthly RRSP contributions to take advantage of dollar cost averaging and get a head start on your 2011 RRSP contributions.