Values form the bedrock of a compelling marketing plan. By amplifying your values, you attract clients seeking advice from someone who shares their principles and beliefs. When clients see themselves reflected in your values, they are more likely to entrust you with their financial well-being. Prioritizing your values allows you to foster deeper connections and form long-lasting partnerships. In a world where financial decisions can have profound implications, strategies rooted in values are not only ethical but also sustainable. Values serve as reference points, guiding our decisions and ensuring that our actions align with what we hold dear. When our strategies respect our values, they gain meaning and relevance, fostering trust and loyalty among clients and team members alike. But how do you know if you’ve uncovered your core values? A Step-by-Step Process to Uncover Core Values Step 1: Reflect on Your Happiest Moments. Think back to times in your career and personal life when you felt genuinely happy and fulfilled. What were you doing? Who were you with? What factors contributed to your happiness? Note your thoughts and observations. Step 2: Recognize Moments of Fulfillment. Consider instances when you felt most fulfilled and satisfied, both professionally and personally. What needs or desires were fulfilled during these experiences? How did they contribute to your sense of meaning and purpose? Record your reflections. Step 3: Acknowledge Challenges. Reflect on times when you faced adversity or felt at your lowest. What made these moments challenging? What did you learn from overcoming these obstacles? Note your insights and lessons learned. Step 4: Determine Your Top Values. Based on the notes and reflections from Steps 1-3, select words and phrases that resonate with you and reflect your deepest values. Aim to identify 10-12 values that align with your vision for your practice. Step 5: Prioritize Your Top Five Values. From the list of 10-12 values, prioritize the top five that you believe are the most essential to your practice’s ethos. This step is probably the most difficult because you’ll have to look deep inside yourself. It’s also the most important step, because these are the rules the business will live by – what the business holds in high regard and what it expects. Step 6: Reaffirm Your Values. Regularly revisit and reaffirm your core values to ensure they remain aligned with your vision and goals. Consider how living these values consistently can impact your business, your clients, and your team members. By anchoring your practice in these values, you create a firm foundation upon which to navigate the complexities of the financial advising landscape with confidence and purpose. In the family market, acting on values isn’t just a business strategy – it’s a moral imperative. As financial Advisors catering to the needs of families, your responsibilities extend far beyond managing finances. You are entrusted with safeguarding dreams, securing futures, and fostering trust that transcends generations. In this pivotal role, your values serve as the cornerstone of your practice, guiding every decision you make and shaping the relationships you build with your clients and team members. Values are not just lofty ideals; they are the bedrock upon which sustainable and successful strategies are built. They serve as the compass that steers your practice towards ethical and meaningful outcomes. By aligning your actions with your core values, you create a practice that is not only successful but also meaningful and enduring. As an Advisor, you can embark on this journey with integrity, guided by the values that define you and the families you serve. For more information, please contact your local PPI Collaboration Centre.

With the increase in the capital gains inclusion rate from 1/2 to 2/3 effective June 25, 2024, passive investment income could be higher in your client’s corporation. Now is the time to revisit the potential reduction to your client’s small business deduction. What are the Changes? The new rules set a threshold for how much passive income a Canadian-controlled private corporations (CCPC), as well as the corporations associated with it, can earn without the passive investment income reducing the corporation’s small business deduction. Basically, a CCPC can earn up to $50,000 per year and maintain the full $500,000 Small Business Deduction (SBD). Every dollar of passive income above the $50,000 per year threshold will reduce the corporation’s SBD by $5 completely eliminating it once passive income is over $150,000*. A simple example: A business with a $1 million portfolio that generates $50,000 of passive investment income, is onside and within the threshold. On the other hand, a business with a $2 million portfolio generating $100,000, would have its SBD reduced by $250,000. Share and Learn More To learn more about how this will affect your client’s small business, be sure to share the client-friendly version of this article, as well as the Passive Investment Income Calculator. For more information on the increase in the capital gains inclusion rate, read After June 25, 2024, Your Client’s Tax Liability on Death May Have Increased! Time to Revisit How to Fund the Tax Liability and if you have any questions, be sure to contact your local PPI Collaboration Centre. *The provinces also have an SBD and mirror the federal SBD reductions for passive income. However, Ontario and New Brunswick do not mirror the federal rules with respect to the reduction to the SBD so for these provinces, there is only the federal reduction and no corresponding reduction to the provincial SBD.

An article by PPI’s Planning Services team, a group of lawyers, accountants and actuaries who provide tax and estate planning support to Advisors affiliated with PPI. Effective June 25, 2024, the 2024 Federal Budget in Canada proposed to increase the capital gains inclusion rate to 2/3 from 1/2 for corporations and most trusts* and for individuals for capital gains over $250,000**. This means for individuals and certain trusts, the first $250,000 is at a 1/2 inclusion rate and above $250,000, the inclusion rate is now 2/3. In B.C., the tax rate on capital gains is 26.75% on the first $250,000 but 35.67% over $250,000. This is an 8.92% increase (the other provinces differences range from an increase of 7.92% to 9.13%). The Budget stated that the $250,000 threshold was introduced so that only the wealthy would be affected. Well, this is not the case when someone passes away – the middle class will have their tax liability on their death increase by 33 1/3% for capital gains over $250,000. On death, a taxpayer is deemed to have disposed of their capital assets at fair market value. This will result in a capital gain where the deemed proceeds exceed the adjusted cost base of the asset. Many clients will have investment portfolios with unrealized gains, rental properties, a family cottage or shares in a private company. Now the gain on these assets is taxed at the 2/3 inclusion rate for capital gains over $250,000. If clients have assets in an alter-ego, spousal/common-law partner or joint spousal/common-law partner trust, there is also a disposition of assets at fair market value on the death of the relevant beneficiary. For the capital gains that arise in these trusts the inclusion rate is 2/3 since these trusts do not get the 1/2 inclusion rate on the first $250,000. Case Study Let’s assume that Jane passes away with a cottage that she purchased for $50,000 and that is now worth $1.5 million. She had public securities with a fair market value of $500,000 and a cost base of $150,000. The capital gain on her death would be $1.8 million ($2 million -$200,000). Using B.C.’s highest marginal tax rate, there would be additional tax of $138,260*** to pay on the capital gain as a result of the increased inclusion rate. Now what if Jane had her own company? The company is an active business and was valued at $5 million on her death. The cost base of her shares is nominal so there is a significant capital gain on her death (Jane is not married so she can’t defer the tax on death by rolling the shares to her spouse on a tax deferred basis). Since the 1/2 inclusion rate on the first $250,000 of capital gains would already be used with her other assets, the full $5 million capital gain would be at the 2/3 inclusion rate resulting in tax of $1,783,500 which is an increase of $446,000! Budget 2024 proposed to increase the lifetime capital gains exemption for qualified small business corporations to $1,250,000 which would reduce the tax liability to $1,337,500 if her company qualified. Consider Life Insurance Life insurance is a tax efficient method to fund the tax liability on death and with these budget changes, the use of insurance should be reviewed with your clients to determine if existing insurance coverage needs to be increased or for those that do not have insurance, purchase new insurance. The postmortem planning that should be completed to avoid double tax on death when a taxpayer owns shares of a private company must also be reviewed for Jane. The use of corporate owned life insurance to eliminate double tax has become even more tax efficient with the increase in the capital gains rates since the gap between the tax rates on capital gains and dividends is narrowing. For more information on the postmortem planning alternatives, please read PPI’s Tax Bulletin, Postmortem Planning Alternatives. Impact on a Corporation We have discussed the effect that the increase to the capital gains inclusion rate will have on the assets Jane holds on her death but attention also needs to be drawn to the taxation of capital gains inside her company while she is still alive. As mentioned earlier, corporations do not receive the 1/2 inclusion rate for the first $250,000 of capital gains. This makes earning capital gains in a corporation more costly than if the capital gains were earned personally. Usually, there should not be a difference if an individual earns income directly or through a corporation (that pays a dividend to the individual) – a concept called integration. It is not perfect but is generally achieved. However, with corporations having the 2/3 inclusion for the entire capital gain, the effective tax rate is 12.66% (using B.C. rates) higher for capital gains under $250,000 if earned in a corporation rather than if earned personally. The other concern is that since Jane’s corporation likely uses the small business deduction, which taxes the active business income in the corporation at favorable rates, the increase in the capital gains inclusion rate will result in the passive income in her corporation growing faster. When there is passive income in a corporation, the amount of income to which the small business deduction may be applied is ground down $5 for every $1 of passive income over $50,000 and completely eliminated for passive income over $150,000 (use the Passive Investment Calculator to determine the impact of the passive investment income inside your corporation). In addition to the benefit of funding the tax liability on death and eliminating double taxation on death, investment income earned inside a corporate owned life insurance policy is not included in determining passive income that grinds the amount of income to which the small business deduction may be applied.  This may be another benefit of corporate owned insurance. With the increased capital inclusion rate, it is a good time to revisit your client’s estate plan and their insurance needs to ensure that they have sufficient coverage to fund the increased tax liability. Contact your local PPI Collaboration Centre. * The Notice of Ways and Means Motion tabled on June 10, 2024, proposes that, similar to individuals, the 1/2 inclusion rate will continue to apply to the first $250,000 of capital gains in a year for graduated rate estates and qualified disability trusts. ** The capital gain is net of capital losses, capital losses carried forward, the lifetime capital gains exemption, the new Canadian Entrepreneurs Incentive exemption (also announced in the Federal Budget) and the temporary $10 million exemption for transfers of businesses to an Employee Ownership Trust. *** The tax under the old 1/2inclusion rate would have been $481,500 ($1,800,000*26.75%). The tax under the new 2/3 inclusion rate would be $619,760 (($250,000* 26.75%) + ($1,550,000*35.67%)) for an increase in tax of $138,260 (28.7% increase). This document is for general information purposes and Advisor use. The information contained in this document must not be taken or relied upon by the reader as legal, accounting, taxation, financial, actuarial or other advice made to them, or to any other person or firm, by PPI or any of its affiliates. Please refer to insurance company illustrations, policy contracts and information folders regarding any insurance matters referred to in this document. Readers must seek independent professional advice with regard to the verification and use of the information contained in this document. Copying or reproduction of this document is not allowed without the express prior written consent of PPI.

Whether your clients are planning a retirement that takes them to top destinations around the world, or like most of us, allows them to continue enjoying their current lifestyle with peace of mind, planning ahead is the best way to know where they’re going and how to get there. With the Retirement Calculator, your clients can set their retirement income based on their retirement lifestyle goals and see quickly if they’re on track, then explore several options for reaching or expanding their retirement goals, including adjusting pre-retirement annual investments, rates of return, and retirement age and income. The Retirement Calculator is designed to help your clients get wherever it is they’re headed, on time.

Do your clients understand their group disability benefits? Do they know that benefits are paid as a percentage of regular income, and that depending on their plan, they may only be covered for a couple of years—especially if they’re qualified to do any kind of work at that time? This easy-to-use calculator can be a great way to start important disability insurance conversations. Your clients can quickly see how much income they’d require in the event of a disability when they include their household income and expenses. They can even include things like planned savings and debt repayment to make sure they stay on-track no matter what. Once they know their income needs, you can review any coverage they have in place and discuss whether they’d be able to meet their financial obligations and goals in the event of a disability and offer insurance solutions that may strengthen their safety net.

What kinds of financial burdens would your client need to carry in the event of a serious illness? Fortunately, as Canadians, we have access to government healthcare coverage and potential group or personal disability coverage to cushion what might otherwise be grave financial burdens during hard circumstances. But, what about those other expenses these plans don’t cover? This calculator will help you and your clients to consider many of the financial consequences of serious illness that aren’t covered by their medical and disability plans. Help fill any critical illness insurance gaps in your compliant insurance sales practice by sharing this calculator with your clients to start important conversations about the short and long-term financial impacts of serious illness. Talk to them about how critical illness insurance may strengthen their insurance safety net and help secure their financial future.

In the 1830’s, the English novelist Charles Dickens published a series of stories called “The Pickwick Papers”. One character, the larger-than life Joe, was known for his prodigious appetite and large build with an ability to fall asleep quickly and often during the day. In 1956, an astute medical researcher named Burwell and his colleagues published an article in the American Journal of Medicine titled, “Extreme obesity associated with alveolar hypoventilation-a Pickwickian syndrome”. This was the first modern day presentation of a sleep-related breathing disorder now known as obstructive sleep apnea (1). What is obstructive sleep apnea, also known as OSA? Apnea means to stop breathing, and in the context of OSA this happens while asleep. That sound you hear is the often loud snoring that accompanies these episodes of breathlessness. The obstructive part is in the upper airway system caused by the inadequate function of the tongue muscles or surrounding muscles that keep the airways open (2). Before we consider how serious OSA might be, we know that this is the most common sleep-related breathing disorder, affecting an estimated and staggering 936 million people and by far, mostly men, worldwide (3). However, it is estimated that only 1 in 5 cases are diagnosed (4). Think about it. Is a supposed disorder associated with snoring and maybe gasping for air at night a problem? Maybe the client is a little tired during the day, even falling asleep often and quickly just like Joe? Think again. Most cases of OSA, diagnosed or not, occur in ages 50 and higher and particularly among the overweight/obese, smokers, and those who may be genetically predisposition to this condition. Untreated OSA can increase the risk of developing everything from Type 2 diabetes to kidney disease and heart failure (5). We have left the best for last as we answer how OSA is diagnosed and treated. Polysomnography is a sleep study that can be done in a clinic or at home and will measure a number of things, but most important, the number of times the patient stops breathing (apneas) or reduces breathing (hypopneas) over the course of an hour. If the result is 5-15  apneas/hypopneas per hour (AHI), mild OSA is present. An AHI of 30 or more is severe disease. The risk of complications is that much higher with severe OSA. The good news is that OSA has a number of treatment options that can include weight loss, alcohol reduction or even simply sleeping on your side more often than on your back. For most cases of OSA, the only effective treatment is to keep the airways open by applying continued positive airway pressure (CPAP). Current generation CPAP appliances not only keep the airways clear but provide usage data confirming AHI, oxygen saturation and other metrics that confirm the efficacy of the treatment. These usage data reports can make even severe OSA cases fall into the most favorable underwriting decision categories. For those with suspected OSA, get tested. For those with confirmed OSA, use CPAP, if prescribed. This makes clients, you as an Advisor, and underwriters sleep well and breathe easy. For more information on this Risk Bit and the underwriting process, contact your local PPI Collaboration Centre. Ferriss, J. Barry. Obstructive sleep apnea syndrome: the first picture? Journal of the Royal society of Medicine. 102(5) 201-202. May 1, 2009. Park, John G. Updates on Definition, Consequences, and Management of Obstructive Sleep Apnea. Mayo Clinic Proceedings. 86(6): 549-555. June 2011. Ling, Vanessa. Sleep Apnea Statistics and Facts You Should Know. National Council on Aging Adviser. October 4, 2023. Benjafield et al. Estimation of the prevalence and burden of obstructive sleep apnea: a literature-based analysis. Lancet Respir Med. 7(8): 687-698. July 9, 2019. Ling, Vanessa. Sleep Apnea Statistics and Facts You Should Know. National Council on Aging Adviser. October 4, 2023.

Rolling-over taxable assets to a spouse is simple. But transferring taxable assets to other heirs can have tax consequences. If your client should die without a living spouse, its as though they liquidated all their assets the moment before their death, and any taxes due must be paid by their estate. Their heirs will receive only what remains. Fortunately, in most circumstances, your clients can pass along their principal residence to their heirs without paying tax, but if they have registered investments, stocks, mutual funds, a cottage, other real estate, or a business, a significant portion of their estate may be eroded by taxes. The good news is they can do something about it now. Share this calculator to start conversations about estate taxes so you can show your clients how to transfer their estates to their heirs intact.

If your client is a business owner, insurance can help provide them with not only protection, but opportunity when it comes to growing their business. Life insurance policies can help protect shareholders and their family members, the corporation itself, as well as key persons to the business. It can also help enhance cash flow to the corporation by assigning the policy as collateral for a loan. The client friendly article linked below reviews the importance of shareholders’ agreements, as well as other uses of corporate-owned insurance such as key person insurance, use of insurance as collateral, charitable giving, estate protection and estate equalization. Share the link and help your clients recognize that their life, their family and their business all deserve protection, and that insurance can not only provide that protection but can also help to build assets in a tax effective way for their retirement and estate plan. For more information on how your client can safeguard their business, share the client-friendly versions of The Importance of Corporate Insurance for Your Client, Policy Transfers: The Importance of Planning in Advance and SMART TALK… how insurance can help your clients build their business. Have questions? Reach out to your local PPI Collaboration Centre – we’re here for you!

There are many reasons in the corporate context to have one company (a holding company or a sister company) own the life insurance policy on a shareholder and have the operating company as the beneficiary.  One very important reason is that the separation allows for the operating company to fund the buy out of the shareholder’s estate on the death of the shareholder pursuant to a shareholder agreement. Other reasons include: protecting the policy cash surrender value (CSV) from the operating company’s creditors; maintaining the qualification of the operating company for the qualified small business corporation exemption (since the CSV is not an asset used in active business and could put the company offside); and if the operating company is sold, having another company own the policy avoids onerous tax consequences that could result from the transfer of the policy to the shareholder. The question that arises is which company should pay the premium, the operating company since they are the beneficiary or the holding company since they are the owner and entitled to the rights to the policy on surrender. This issue was the subject of a recent Federal Court of Appeal tax case, Gestion Roy v The King (2024 FCA 16). The Federal Court of Canada confirmed the Tax Court of Canada’s decision and assessed a benefit to the holding company and a sister company respectively, as Opco had paid for the premiums on the policies of which it was the beneficiary. While the insurance industry may not agree with this decision, it is the law. In many cases, instead of the operating company paying the premium (like in the Roy case), the operating company could pay a tax-free (if certain requirements are met*) inter-corporate dividend to the holding company, which would then enable the holding company to pay the premium. While the facts in this arrangement aren’t the same as in Roy, the CRA has stated in past Technical Interpretations that it could still possibly assess a benefit. We believe the CRA view can be countered with a number of technical arguments. To review the CRA’s past positions on the payment of insurance premiums when there is a separation of ownership from beneficiary and review a summary of the Roy case, please read the Tax Bulletin, Corporate Life Insurance Premiums – How to Avoid Taxable Benefits. And for more information on the tax consequences of transferring a policy see the Tax Bulletin, Transferring Life Insurance – What You Need to Know or visit the Professional Resource Centre. Contact your local PPI Collaboration Centre if you have clients that could be affected by the Roy decision. *The holding company must own more than 10% of the operating company and there must be sufficient safe income (tax paid retained earnings) on the shares

The process of obtaining insurance is no small feat. From the application process, to medicals, to policy payments and more, there are many steps involved in securing insurance for your client and their family. Here is a great article for you to share with your clients; something to explain in detail the full process of acquiring insurance. Of course, you will need to follow up with a phone call and perhaps a meeting, but this article is a good way to start the insurance conversation and provide your clients with a roadmap to what they can expect during this time. For more articles on how insurance can provide your clients with financial security and peace of mind, read/watch, then share Avoid Underwriting Surprises, SMART TALK… about insurance and INFOCLIP: Building Lifetime Protection. And if you have any questions or would like to learn more on how to kick start those important conversations with clients, contact your local PPI Collaboration Centre.

Throughout your client’s lifetime, they may set many goals for themselves and their family. But what would happen if your client encountered an unexpected life event or financial emergency that could prevent them from achieving their goals? A premature death could eliminate the income your client’s family needs to put towards their savings goals. An accident or unexpected illness could significantly reduce their income or dramatically increase their expenses. In either of these events, how could your client access capital in order to ensure their family’s financial goals can still be achieved? Watch this video, part of our INFOclip series, to find out what strategies your client and their family can implement during or before a financial emergency. And for similar articles about income replacement strategies, be sure to share the CI and DI: Enhancing Your Client’s Benefit Package article and our Strengthening Your Client’s Safety Net with Critical Illness Insurance tool.

Having a drink, taking a shot, chugging a brew are familiar synonyms for alcohol consumption. This is neither new nor regional. Humankind the world over has been fermenting beverages for millennia with the oldest verifiable brewery located near Haifa in modern day Israel (1). Whether imbibing baijiu in Shanghai, sake in Tokyo, ouzo in Athens or a stunning variety of wines in the Mediterranean countries, the cultural and geographical blueprint for alcohol use runs deep and broad. France even has wines named after some of its’ most famous regions as any proud denizen of Champagne or Bordeaux will boast. Today’s spirited debate is not about alcohol abuse. There is an acknowledged acceptance that too much ethanol, the toxic compound in alcoholic drinks, is unhealthy in the best case and potentially lethal in the worst. It is estimated there are nearly 3 million deaths worldwide annually related to alcohol misuse, half of those deaths due to injuries and digestive diseases like cirrhosis of the liver (2). This article explores the question of whether any alcohol is good for us, or at least non-harmful. For several decades, a popular school of thought was that some alcohol, maybe 1-2 glasses of red wine daily, might be a good source of the antioxidant, resveratrol. This polyphenol found in the skin of red grapes was thought to protect the heart and lower the risk of coronary heart disease. More recent research disputes this claim. It is now more accepted that moderate wine use may be just one indicator of a healthy lifestyle such as good diet, regular physical activity, and psychosocial fitness that provide a framework for promoting longevity. More recently, the question of whether any alcohol use is healthy or even safe has resurfaced. The American Heart Association tells non-drinkers not to start drinking (3). Guidance published in Canada is more direct declaring the only health benefit from alcohol is to avoid drinking altogether. The same guidelines acknowledge that 2 drinks a week is not risky but that even 3-6 drinks weekly raises the cancer risk. Seven drinks a week begins to adversely impact the risk for stroke and even heart disease, a rejection of the argument that 1-2 drinks a day is good for the heart. Every drink beyond seven per week adds to the more immediate risks associated with alcohol misuse such as injuries, violence and the digestive diseases mentioned earlier (4). What is the underwriting takeaway? Not much right now. Curious underwriters almost always ask about alcohol use and those applicants having 1-2 drinks a day are not a concern in underwriting. Still, thoughtful underwriters look at the big picture of information in the case file and an elevated liver enzyme or two coupled with a less than stellar driving record may get a second look at the stated alcohol use. We’ll keep an eye on this topic with a glass half-full (or maybe less) perspective. History of alcoholic drinks. www.Wikipedia.org. N.D. Poznyak, Vladimir and Rekve, Dag. Global status report on alcohol and health 2018. World Health Organization (WHO). September 2018. American Heart Association. Is drinking alcohol part of a healthy lifestyle? American Stroke December 30, 2019. Canadian Centre on Substance Abuse and Addiction. Canada’s Guidance on Alcohol and Health: Final Report. ccsa.ca. January 2023.

New Year celebrations have come and gone, but don’t worry, it’s not too late for your client to make an RRSP contribution for 2023. The Income Tax Act allows an RRSP contribution that is made within the first 60 days of the following year to be used either in the year of contribution or in the year prior. So, if your client makes an RRSP contribution by February 29, 2024, the contribution can still be used as a deduction from their 2023 income. Definitely some good news to share with your clients! The maximum amount your client can contribute to an RRSP for 2023 is 18% of the earned income that they reported on their 2022 tax return or $30,780 – whichever is less. However, your client may have unused RRSP contribution room that has been carried forward from prior years so they could potentially make a larger contribution. The maximum contribution they can make for 2023 (including any carry forward) is stated on their 2022 Notice of Assessment. So, if your client forgot to make an RRSP contribution for 2023, or after reviewing their total income for 2023 they think they might need to make an additional RRSP contribution, the first step is for them to check their 2022 Notice of Assessment to determine the maximum they can contribute and then look at the tax bracket they are in for 2023 based on their income. Remember that it’s advantageous for your client to make an RRSP contribution when they are in a higher tax bracket than they expect to be when drawing their retirement income. Share this RRSP Tax Savings Calculator with your client to help them in their calculations. For additional information on RRSPs you can share with your clients, check out the video INFOclip: RRSP vs TFSA and the article ABC’s of Spousal RRSP, as well as the Optimizing Your RRSP and Tale of Two RRSP’s calculators. For more information on RRSPs and other investment options, be sure to contact your local PPI Collaboration Centre.

The time for your client to file their 2023 personal income tax return is just around the corner. Need a reminder about how Canadians are taxed, including something to share with your clients… read on. Individuals who reside in Canada are taxed on the worldwide income they receive in the calendar year. There is a federal layer of tax and a provincial layer of tax. The tax rate your client pays depends on the amount of the taxable income they received in the calendar year and the tax brackets they fall into. The 2023 Federal tax brackets are shown in the table below (which are indexed each year for inflation). Each province also has its own tax brackets and rates. Federal Tax Bracket Rate Up to $53,359 15.00% $53,360 – $106,717 20.50% $106,718 – $165,430 26.00% $165,431 – $235,675 29.00% $235,676 and over 33.00% As you can see, the rate your client pays will be a blended rate depending on their taxable income for the year. They pay Federal tax at 15% on the first $53,359, then the rate increases to 20.50% for income above $53,359 etc. Once their income is over $235,676, then every dollar after that will be at the 33% Federal tax rate. With provincial taxes added on, the top combined income tax rate ranges from 44.50% in Nunuvut to 54.80% in Newfoundland and Labrador. Have your client check out these links for the combined Federal and Provincial tax rates for the province in which they reside: E&Y (rates and a personal tax calculator), KPMG (tax rates and brackets), as well as this Tax Calculator. There is an alternative minimum tax (AMT) that could apply if your client has certain preference items. A taxpayer pays the higher of AMT and regular income tax. There are changes to the AMT for 2024 which are outlined in our Advisor Talk article Alternative Minimum Tax Changes – What Your Client Needs to Know – don’t forget to share this with your clients. Some types of income are more tax efficient than others. If your client earns capital gains, only 50% of the gain will be included in their taxable income, while their employment and investment income will be fully taxed. Withdrawals from your client’s RRSP or RRIF are also fully taxable. Dividends receive preferential tax treatment through the use of the dividend gross-up and tax credit. There are two types of dividends: eligible and non-eligible dividends. Non-eligible dividends are taxed at a higher rate than eligible dividends. Usually, dividends your client receives in their investment portfolio would be eligible dividends (dividends from publicly traded securities). While your client prepares their 2023 tax return, have them review the types of income they earned and evaluate if they should make a change to the types of income they are receiving. However, remind them to not let the taxation of the income be the only reason for changing an investment – type of income should match their financial planning goals. Certain expenditures are deductible from your client’s income and there are also tax credits that can reduce their tax liability. The CRA’s website has a page that describes the deductions and tax credits that are available that can reduce your client’s tax liability. To be applied to your client’s tax return, the expenses must have been incurred by December 31 of the tax year in question (except for RRSP contributions which can be made 60 days after year end and still reduce the prior year tax liability – so for the 2023 tax year, RRSP contributions can be made up to February 29, 2024). For employees, there are less deductions than for those who are self-employed. The most common deductions are for RRSP contributions, childcare expenses, capital losses and investment related expenses. New for 2023 is the first home savings account (FHSA). The contribution limit for this account is $8,000 and is tax deductible. For more information on how this account works, have your client consult CRA’s First Home Savings Account (FHSA) page. The most common credits are for medical expenses, charitable donations and tuition fees. Of course, there are also ways for your client to save taxes on income in the long-term by investing in a tax-free savings account (TFSA) or registered education savings plan (RESP), for example. While contributions to these types of plans don’t result in a deduction on your client’s tax return, the income earned in the plans are not taxable while in the plan. For TFSA, there is no tax for your client on withdrawal. For RESP, the funds are taxed in the hands of the student. The TFSA contribution limit for 2024 is $7,000. If your client has not made a TFSA contribution in the past, the contribution room carries forward. For example, if they were 18 years or older in 2009 and have never contributed to a TFSA, they could contribute $95,000 to a TFSA in 2024. For more information on how TFSAs work, read How Your Client Can Use a TFSA to Get Better Investing Results. For more information on RESPs, check out Helping Your Client Maximize their RESP, SMART TALK… about registered savings plans (RESPs) and this Start Education Planning Now calculator. NOW is also an opportune time to check in with your clients and review their overall financial and estate plan which would include your client’s wills, power of attorney and representation agreements, life insurance needs as well as critical illness and disability insurance. If you have any tax related questions, be sure to reach out to your local PPI Collaboration Centre for more information – we’re here to help!

As the year comes to an end and we look forward to the new year, let’s revisit some of the insurance and investment related articles, videos, calculators and tools that were on your clients’ favourites list in 2023 – check them out and be sure to share them with new clients and prospects. INSURANCE Do Younger Canadians Need Insurance? Does your client think they are too young to purchase insurance? Help them discover all of the compelling reasons why they should consider purchasing insurance early in life. Be sure to share this client-friendly article! The Importance of Insurance Reviews – Things Your Client Should Consider Share why NOW is the perfect time for your client to review their insurance needs and make sure that they and their family have the adequate protection in place. Be sure to share this client-friendly article! Learning From Experience: The Carte’s Story It’s important for your client to discuss the transfer of their estate with their family in advance – share this story about the Carte family and how they managed (or mismanaged) the transfer of their family cottage. Be sure to share this client-friendly article! VIDEOS INFOclip: Building Lifetime Protection Is your client’s life insurance plan designed to last a lifetime? Share this video, part of our INFOclip series, to demonstrate an insurance strategy to help build a lifetime of protection for your client and their family. Be sure to share this client-friendly article! INFOclip: Gifting Your Life Insurance If your client no longer needs their life insurance, have they considered gifting their policy to charity? Share this video with your client to help them understand their options, and the caveats involved, in donating their insurance to charity. Be sure to share this client-friendly article! INFOclip: Transferring Wealth to Future Generations Share this video with your client to show how using “cascading insurance” can help provide financial protection, while also creating a tax-efficient vehicle to enhance and transfer wealth to future generations. Be sure to share this client-friendly article! CALCULATORS Tale of Two RRSPs Is your client interested in RRSPs? Share this calculator to compare and contrast contribution amounts, frequencies, and timing to help them find the best strategy for meeting their goals. Be sure to share this client-friendly article! GIC Laddering Your client can benefit from attractive GIC rates without locking in their entire investment for a long duration. Have your client try this calculator to see the potential advantages of GIC laddering. Be sure to share this client-friendly article! Charitable Donations Calculator Share this calculator with your client to help them estimate the after-tax cost of charitable donations during their lifetime or upon their death. Be sure to share this client-friendly article! TOOLS The Value of Taking Risks When interest rates and inflation are high, have your client consider the value of taking risks to increase their purchasing power – share this tool to demonstrate that value. Be sure to share this client-friendly article! Strengthening Your Client’s Safety Net with Critical Illness Insurance Insurance works as a safety net to meet financial obligations in case of unforeseen events. But does your client’s safety net have any holes in it? Share this tool to help them find out and learn about the many benefits of critical illness insurance. Be sure to share this client-friendly article! Exploring Your Client’s Life Insurance Options Your client already knows that life insurance provides them with a lump sum benefit payable to their beneficiary, but not all life insurance plans are created equal – this tool is a 101 of life insurance options for your client. Be sure to share this client-friendly article! And if you have any questions or would like to know more about any of these topics, contact your local PPI Collaboration Centre.

Everywhere you go Take a look at your T5 and T4, or you may soon be poor With all the taxes at your door. It’s that lovely time of the year when everyone is full of cheer (the 2023 brand of cheer, that is!) And now, tax season is just around the corner. But that’s no reason to fret! You still have time to act and ensure your taxes are a delight and not a downright fright. That little extra time may just be enough to pay off that pony you just bought little Tony. So, here’s a little gift to get your season started right whether you’re a toy building elf, a gift giving saint, or a retired snowman, there’s a tax guide for you.   Tax Planning Guides TaxMatters – from Ernst & Young Year-End Tax Tips for Personal Taxes – from KPMG Year-End Tax Tips for Owner-Managers – from KPMG Year-End Tax Planner – from PwC Managing Your Personal Taxes 2023-24 – A Canadian Perspective | EY Canada

Every dollar counts when your clients are working hard to meet their financial obligations while also saving for retirement. This calculator shows how they could increase their expected tax refund and use it to increase their planned RRSP contribution, significantly enhancing their short and long-term RRSP savings. Your clients have options to temporarily fund their additional contribution using an out-of-pocket strategy or a conservative short-term RRSP loan strategy (until they recoup it from their expected refund). Share Optimizing Your RRSP with your clients to show them how they can make the most of their RRSP. Questions? Contact your local PPI Collaboration Centre.

Lars and Nora knew how to set their employees up for success, whether they were coming or going.  Read about how their creative insurance planning benefited their employees and their business. At just the right time, their Overhead Expense coverage and Wage Loss Replacement Plan gave them the breathing room they needed to envision a corporate restructure that set the company and key employees up for sustained growth and long-term success. Share their story with your clients to help start new conversations about creative corporate insurance planning. For more information on group and individual disability insurance, read our articles:  Disability Insurance: Is Employee Coverage Enough? and Insuring Your Client’s Greatest Asset with Disability Insurance. Questions? Contact your local PPI Collaboration Centre.

The 2023 Federal Budget proposed changes to the existing Alternative Minimum Tax (AMT) rules with draft legislation released on August 4, 2023. These revised rules will apply beginning January 1, 2024. What is AMT? The AMT was introduced in 1986 as a parallel tax to the regular tax system and applies to individuals, but not corporations. The AMT requires certain “preference” items to be added back into income to determine the alternative tax. There is an exemption amount that is currently $40,000 so if the taxable income for the year calculated under AMT does not exceed this amount, AMT will not apply. A taxpayer client pays the higher of AMT or regular tax and the additional tax paid under the AMT can be carried forward as a credit to offset regular tax for seven years. AMT does not apply in the year of death of a taxpayer. Under the existing AMT rules, the most common situations where AMT could apply is where a taxpayer has large capital gains and especially if the lifetime capital gains exemption was used on a sale of qualified small business corporation shares or qualified farm and fishing property. What are the changes? The 2023 Federal Budget has proposed changes to broaden the tax base subject to AMT, increasing the tax rate but also increasing the exemption amount. The following table highlights some of the proposed changes. To review all the changes, be sure to contact your local PPI Collaboration Centre. Existing AMT Proposed AMT Tax rate 15% 20.5% Exemption amount $40,000 $173,000 Capital gains Include 80% Include 100% Capital gains using QSBC/QFFP Include 30% Include 30% Capital gains on donation of public securities Include 0% Include 30% Capital gains on donated property Include 50% Include 100% Interest and carrying charges to earn property income Deduct 100% Deduct 50% Many non-refundable tax credits (including the donation tax credit) Full credit 50% of credit What does your client need to do? These proposed changes could result in AMT applying if your client’s taxable income (calculated for AMT purposes) is in excess of $173,000. In addition to being aware of the implications of AMT when there are large capital gains in a year (and planning for it), starting in 2024 your client will need to consider the implications of significant interest deductions (for example, if using a leveraging strategy) or large donations (especially gifts of capital property, as these donations not only have the 50% limitation on the donation tax credit, but also 100% or 30% of the gain, depending on the type of property, could be included in your client’s taxable income for AMT). It is essential that you work with your client and their professional advisors to help them prepare the calculations to determine if AMT will apply, and determine their planning options.