TOTAL FINANCIAL PLANNING What We REALLY Do

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TOTAL FINANCIAL PLANNING What We REALLY Do!!
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What do we REALLY do for people?

• We look after these "contingencies"!!

Live too long!
Die too soon!
Get sick or hurt!
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TOTAL FINANCIAL PLANNING

• Everything we do falls into the scope of estate
  creation or preservation
• Build a solid asset base!
• Keep as much as you can now!
• Leave as much as you can later!

A plan can only be called a plan if it takes into
account all the contingencies in life.
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THE THREATS

• Die too soon!
• Live too long!
• Get sick or hurt along the way!

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THE DREAM - LIFETIME
Go Up

Stay Same
Target Net Worth Retirement
Go Down
Delayed retirement???
The Dream
The Reality

• Death
• Disability
• Critical Illness
• Care for a Disabled Child or Elderly Parent

Statistics indicate that on average, 1/3 of us
will have to access our savings in order to deal
with a need for additional income as a result of
one of the events.
Age 55-65
Now
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1. DIE TOO SOON!
Life insurance is used to "create" an estate for
your family, BUT It also allows them to
"preserve" the family home and possibly to
continue to grow wealth for the future!
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FAMILY MARKET - NEEDS

• Replacement of income
• Pay off mortgage
• Final expenses and debts
• Children's education
• Save for future
• Healthcare benefits

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Over your lifetime, you'll make a fortune
M 35 N/S
40,000/year x 30 years With a 2 annual
increase 1,622,725
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BUT
What will happen if your income stopped?
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What would cause your income to stop?
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Die too soon
Live too long
Get sick
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225 K
1,500/m x 20 yrs.
Debt reduction
25 K
Income replacement
Final expenses
Die too soon
Live too long
Get sick
RRSP PAC supplement retirement

10K CI
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This total does not include the monthly fees of
4.40 1.50 premium taxes
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• Let's Recap
• We have 100/m commitment
• Coverages provided
• 25,000 permanent insurance final expenses
• 225,000 T20 debt reduction (for 20 years)
• 1,500/m for 20 years income replacement
• 10,000 AHC critical illness insurance

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• Total monthly premiums 78.81 with 21.00 to
  spare you can start a monthly pac towards
  retirement savings

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LIVE TOO LONG! ASSET ACCUMULATION

• Many Canadians are successful in building their
  asset portfolio through investments, a business,
  real estate or RRSP's

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ASSET ACCUMULATION

• Why do we build wealth??

For retirement
For our heirs
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ASSET ACCUMULATION

• BUTwith this "success" comes a
• Deferred Tax Liability

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WHERE WILL YOUR ESTATE GO?
Your estate
To Your Family
Not CRA
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LIVE TOO LONG - TAXATION at DEATH

• Two major areas of taxation WILL ARISE at the
  time of death
• Tax on capital gains
• Tax on RRSP/RRIF balance

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CAPITAL GAINS TAXATION

• Assets such as a stock portfolio, mutual funds,
  shares of a private corporation or non-principal
  residence real estate
• Taxed on sale of asset during lifetime or when
  asset passes to non-spouse beneficiary (e.g.
  children) at death

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CAPITAL GAINS TAXATION

• 50 of capital gain is taxable
• tax of 23,000 for every 100,000 of growth (_at_
  46 tax bracket)

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CAPITAL GAINS TAXATION

• For example rental real estate
• Cost 200,000
• Value at time of death 800,000
• Capital gain 600,000
• Taxable amount 300,000
• Tax _at_ 46 tax bracket 138,000
• Also, possible recapture of Capital Cost
  Allowance would give rise to taxation

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RRSP or RRIF TAXATION

• Taxed as income during lifetime
• Taxed on balance of RRSP or RRIF when assest
  passes to non-spouse beneficiary at death

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RRSP or RRIF TAXATION

• For every 100,000 of RRSP or RRIF balance
• 46,000 of tax arises
• (_at_ 46 tax bracket)

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DEFERRED TAX LIABILITY

• Would people really want to see a significant
  part of their estate be lost to taxation?
• Is there an alternative?

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WHO IS AFFECTED?

• Couples or surviving spouse
• Estates include capital or registered assets
• Good cash flow
• Would keep estate intact for heirs if a
  "reasonable" solution available

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ESTATE PRESERVATION

• If you could leave most or all of your estate
  intact for your heirs and not jeopardize your
  current lifestyle
• would you be interested?

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PAYMENT of TAXES

• How will your estate liabilities be paid?

For your estate
From your estate
OR
TAX
Estate
Estate
Which would you prefer?
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Options To PAY Tax Liability

• From Your Estate
• Save Money Sell Assets Borrow

For Your Estate
Estate Preservation Fund
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BUT

• What are the consequences of the alternatives

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CASE STUDY - "MODEL" INVESTORS

• Risk averse
• Preserve capital (now and for heirs)
• Discretionary assets or income
• Want access to funds
• Reduction of taxes

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CASE STUDY

• Dennis, 62 and Judy, 60
• 3 children, 1grandchild
• House, 450,000
• GIC's 50,000
• RSP 175,000
• Cottage 75,000
• Antique car 20,000
• Boat 15,000
• Open account 182,000
• Pension income - 63,000/yr.

Estate value 967,000
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CASE STUDY

• Estimated estate liabilities
• RRSP 90,000
• Open account 28,000
• Cottage 11,250
• Funeral and final expenses 20,750
• (including debts)

150,000 for Estate Clearance purposes
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LET'S COMPARE

• Selling assets or using current
• estate liquidity
• and
• establishing an
• estate preservation fund

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FROM YOUR ESTATE

• Many people will say that their estate can sell
  off assets to create liquidity
• That's fine, but what will it cost your heirs?

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ACTUAL COST FROM YOUR ESTATE

• If capital or liquid assets are sold or used, the
  actual cost is
• Lost capital
• Lost revenue
• Lost growth

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ACTUAL COST FROM YOUR ESTATE

• 150,000 at 8 would grow to
• 323,838 in 10 years
• 699,143 in 20 years
• OR
• provide an annual before tax income of 12,000
  forever

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ACTUAL COST FROM YOUR ESTATE

• That's the "lost opportunity" for your heirs and
  for future generations to come!!

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ACTUAL COST FOR YOU, THE PRODUCER

• If you lose the capital amount by not working "up
  front" with the heirs
• Lost revenue from future fund values

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ALTERNATIVE STRATEGY

• Establish an
• Estate Preservation Fund!

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SUCCESS TAXES
Company While Alive At Death of Survivor
Desjardins Pay 158/month Estate receives
150,000 to pay taxes
Jones Mutual Premiums deferred Pay
150,000 from estate assets
150,000 Joint Last to Die Foundation
male,62, N/S Female, 60 N/S
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RECOMMENDED SOLUTION

• Joint last-to-die life insurance coverage
• Benefits received when major liabilities arise
• Economical coverage

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2. LIVE TOO LONG!.... and health becomes an
issue
You've built a nest egg for retirement so you can
live
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THE "GOOD LIFE"
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However, the new reality is this
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PEOPLE ARE LIVING LONGER
There is a 35 chance that a 65 year old person
will reach age 90
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and this will lead, for at least some of your
retirement years, to this
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HEALTH CARE ISSUES
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HOME CARE
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FACILITY CARE
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and each of these comes with a price tag!
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MAJOR ISSUE
Could you possibly outlive your income??
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This is why healthcare is now an extremely
important issue as people approach
retirement! The greatest threat to depleting
your wealth is your health!!
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DFS LTC SOLUTION
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3. GET SICK OR HURT!

• What if you get sick or hurt?
• How will you pay your bills?
• Will your income (if any) last?
• Will you use up your savings?

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DID YOU KNOW THAT
37 of mortgage foreclosures are a result of the
borrowers' inabilities to make their payments
due to an illness
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WITH DI COVERAGE
your clients will continue to receive an income
in the event of a disability and allow them to
"preserve" the family home and possibly to
continue to grow wealth for the future!
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DFS DI SOLUTION
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IF YOU WERE

• diagnosed with a heart attack, cancer or stroke
  between now and your age 65 or 70 and your
  paycheque is reduced, or totally disappears
• would you rather "lose your home"
• OR
• "lose your mortgage"?

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MORTGAGE PROTECTION

• Did you purchase the
• "right kind of mortgage protection"?

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Investment Insurance
OR How to keep an investment portfolio together
in the event of diagnosis of a critical illness!
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IS IT POSSIBLE

• that you, as an investor (real estate owner,
  business owner etc.) from "your city"
• could be diagnosed with a heart attack, cancer or
  stroke between now and your age 65 or 70?

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IF THAT WERE TO HAPPEN

• Would you go to "any length" to try and get
  better?
• Would you seek treatment outside of Canada
• IF you could get diagnosed and treated quicker?
• IF you didn't have to get on a lengthy "waiting
  list"?
• IF it would save your life?

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IF YOU WOULD

• Where is the first place you would look to cover
  the costs that WILL arise?

Investments!
Real estate!
RRSP's!
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IF YOU WERE

• diagnosed with a heart attack, cancer or stroke
  between now and your age 65 or 70 and your
  investment portfolio (or other asset base) is in
  jeopardy of disappearing

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• Would you like me to pay your health care costs
  while you concentrate on getting better,
• AND
• you retain your investments for a future
  retirement income?

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and

• These funds would be received by you
• TAX FREE!!

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The Real Cost
RRSP
163,900
B - Keep in RRSP
A - Withdrawal
100,000
163,900
Will Grow To
39 marginal tax rate
525,650
6 compound annual rate of return over 20 years
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DFS CI SOLUTIONS

• Consumer Critical Illness
• T10
• T20
• Health Care Advance
• Health Care Advance
• Health Care Advance 65
• Enhanced T10

• Harmony
• T10 (New)
• T20 (New)
• T65
• T75 Paid-Up
• ROP12 (whole life)
• Executive Health Savings Plan
• New Generation (children)

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THE THREATS and SOLUTIONS

• Die too soon!
• Life insurance
• Live too long!
• Life insurance and LTC
• Get sick or hurt along the way!
• DI and Critical illness protection

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• Thank you!