Find out what Canadians are saying about debt…

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Homeowners indicate they are more comfortable with debt than their parents were, Manulife Bank of Canada survey shows

Waterloo – Four in ten homeowners (39 per cent) indicate they’re more comfortable with debt compared to their parents, versus just one in eight (13 per cent) who feel they’re less comfortable. The perceived gap in comfort level was greatest among homeowners in their fifties, who were five times more likely to indicate a greater degree of comfort than their parents, compared to those in their twenties and thirties, who were only twice as likely. Read more

Homeowner Debt Report

About Manulife Bank’s Debt Research

Manulife Bank believes that, by managing debt more effectively, many people could save money, become debt-free sooner and achieve more of their financial goals.

Effective debt management is a key contributor to financial health and, by conducting surveys and research into debt management, we’d like to:

  • Inform and encourage a public discussion of consumer debt, in a way that helps people understand the role that debt plays in their financial health.
  • Educate Canadian consumers on effective debt management by providing information and insights.
  • Encourage Canadians to discuss debt management with their families and financial advisors and look for ways to manage their debt more effectively.

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Manulife – Reduce your taxes and keep more of your money

There are a variety of ways to reduce the amount of income tax you pay and keep more of your money at tax time. By taking advantage of all possible tax deductions and credits, you’ll free up more money to put towards your investments, your emergency savings, or other important goals.

Federal income tax rules provide you with a number of potential tax credits and deductions. You must claim them when filing a tax return. Note that the Canada Revenue Agency (CRA) will not inform you if you miss a deduction that you could be eligible for.

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Tax deductions will reduce your taxable income so the reduction will be reflected at your marginal tax rate. Non-refundable tax credits can also reduce your tax owing, but are generally calculated at the lowest tax rate.  Each year’s federal budget introduces at least a few new deductions as well as tax credits for taxpayers. Familiarize yourself with these so that you can claim any that are applicable to your situation.

Filing your tax return

We all have to pay income tax, but there are ways to minimize the taxes we pay. Here are a few of the things to keep in mind when preparing to file your annual income tax return:

  1. Any income earned in a Registered Retirement Savings Plan (RRSP) is exempt from tax as long as the funds remain in the plan.
  2. RRSP contributions have to be reported on your tax return, but do not have to be deducted in the year they are made. You can carry forward your contribution indefinitely and use it when you like – for example, when you’re in a higher income bracket and need the deduction.
  3. Don’t skip filing a tax return, even if your income is low. Filing assists CRA in tracking your RRSP contribution room, which can be carried forward indefinitely and used in the future when needed.
  4. The income earned in a Tax Free Savings Account (TFSA) is tax exempt. However, over contributions in a year will be subject to tax consequences assessed by the CRA.
  5. Capital losses from selling shares in a non-registered investment (except your TFSA) can be applied to any of the previous three years or carried forward indefinitely. These can be applied against any capital gains, reducing your total income.
  6. Carrying costs incurred to earn income on your investments can be deducted from your income. Fees paid for managing your investments, other than commissions, are also eligible.
  7. Single parents receiving child care benefits could be eligible for additional tax benefits.
  8. Do you regularly travel to work by bus, train, subway or ferry? You or your spouse1 may be able to claim the cost of your transit passes to take advantage of the public transit tax credit.
  9. Are you self-employed? You could benefit from a number of tax deductions.

1Includes a spouse or common-law partner as defined by the Income Tax Act (Canada).

Are you missing out on tax deductions and tax credits?

If any of the following situations apply to you, you could be eligible for certain tax deductions and tax credits when filing your return – consult a tax professional for advice.

  • You made RRSP contributions in the current tax year, or within the first 60 days of the following year
  • You paid union dues or payments to a professional organization
  • You had payments for childcare, including after school programs
  • You made payments for alimony or spousal support
  • You supported dependents at any time during the year
  • You or your spouse or partner1 are age 65 or older
  • You or your spouse or partner receive a pension income
  • You or your spouse or partner have dependents that are disabled
  • You paid interest on a student loan or paid tuition fees
  • You made donations to a registered charity or political party
  • You borrowed money for investment purposes and paid interest on the loan
  • You paid a professional a fee to manage your investments
  • You bought investments and sold them at a loss
  • You changed employment and moved closer to your work
  • You used your personal vehicle for your work or received an allowance from your employer for work related expenses
  • You had a home office, or paid for office supplies or other work expenses as part of your work arrangement
  • You were paid in full or in part by commissions
  • You paid legal fees to enforce payment of any support payments, or to defend an employment contract
  • You paid for medical expenses or made payments to a health plan at work or privately
  • You lived in a same sex relationship, were married, or living common law
  • You are self-employed
  • You have deductions carried forward from prior years such as RRSP contributions, charitable donations, student loan interest, home office expenses, or capital losses

Consult your tax consultant for further information and professional advice on how best to reduce your taxes by utilizing all available deductions and tax credits.

1Includes a spouse or common-law partner as defined by the Income Tax Act (Canada).

It’s a good idea to be pro-active when it comes to reducing your income taxes. A little advance planning early in the year could shave a significant amount off your annual tax bill.

Secrets to writing a will

Get peace of mind and protect your most important valuable assets — your family — with a will.

You know you should have a will. You know you should keep it updated. Problem is, there’s always something more fun to spend your time and money on.

While it’s unlikely you’ll ever enjoy writing your will, with a little preparation the process can be less painful and expensive than you might think. By putting aside a few minutes to think over and discuss the following issues you’ll spend less time with your lawyer and be happier with the final result.

1. Choose the right people

Janet Sim, past chair of the Canadian Bar Association’s National Wills, Estates and Trusts Section, says your executor and, if you have minor children, their guardian, are central figures. You need to choose these people carefully and should discuss their roles with them before writing them into your will:

2. Executor

The executor manages the estate, making sure all debts are paid and overseeing who gets what. Most people choose their spouse as executor with a close family member or friend as a backup. Sim says it’s a good idea to choose someone with a personal knowledge of your family because they will need to manage money on behalf of your children.

3. Guardian

Because this person will take over the care and upbringing of your children, his or her selection is crucial. Sim recommends considering the following:
• Where do you want your children to be raised? They will likely move to the guardian’s place of residence rather than the other way around.
• What is your philosophy on issues such as child-rearing, schooling and religion? Choose someone who shares your beliefs as closely as possible.
• Select someone who will work well with your executor. Sim points out the two will have to make many decisions together so compatibility is important.

4. Choose the right payout age

Unless you state otherwise, the law decides when your children will receive their inheritance. This may be sooner than you had in mind — for example, under Ontario law a child gets all the money at age 18. Sim advises setting up an installment payout: for example, half at age 25 and the balance at 30.

Your children won’t suffer in the meantime. It’s the executor’s job to dole out money as needed for living, education and other expenses. Sim likens it to parents of older children writing cheques to support their children through university without completely handing over the financial reins.

5. Consider writing a memorandum and a letter of wishes

Personal effects can have significant value, both sentimentally and financially. Think of family heirlooms like a grandfather clock, Grandma’s piano or collections of art or jewelry. While Sim says you can write these items into your will, it may be better to put together a memorandum outlining who gets what. This way you can make changes without having to rewrite your will.

She says that for guardians, a letter of wishes has a similar effect. While not legally binding, it provides guidance about your hopes for your children and, like a memorandum, can be easily changed to reflect changing circumstances.

6. Talk about it with your kids

While death (especially your own) may not be the first thing you want to discuss with your children, Sim says a family conference can be useful, especially for families with older children. She says potentially thorny issues, such as who gets the family cottage, can sometimes be cleared up simply by having an open discussion and letting your children express their wishes ahead of time. “There may be one or two who really want [the cottage] and one or two who don’t,” Sim explains, “so you set it up that A and B get the cottage but C and D get something else of equal value.”

7. Get the final word

Make sure you have yours. Don’t avoid making a will. If you’ve been putting it off because you don’t have a lawyer, ask a friend for a referral or visit the Canadian Bar Association’s lawyer referral site.

8. Is it expensive?

If you’re not sure how much it’ll cost, just ask, Sim says. Prices vary depending on your location and the complexity of your will, but any lawyer will tell you up front whether they will charge a set or hourly fee and what their hourly charge is.

“It’s money well spent,” says Sim. “If you get it done properly it should be a document that will last you, more or less, a lifetime.” She adds that the peace of mind it affords you and the way it makes your family feel to know you thought of them are two of the best reasons to have a will.

Your financial preparedness checklist

Your legacy is more than a bank balance. It’s the impact you make on your community and your family. Here are six tips for turning a nice thought into a powerful reality:

Get organized
Ensure your personal information – bank account and investment contract numbers, insurance policies, tax information, etc. – are up to date and stored somewhere safe and accessible by your advisor, attorney, beneficiaries or family members.

Check your will
Make sure you have a will and it reflects your current intentions. Do the same with any power of attorney or other legal documents. If you don’t have a will, or need to change it, contact your advisor to obtain the name of an estate legal advisor who can help draft yours.

Name names
Select an executor for your estate and ensure that all beneficiary designations complement those outlined within your will.

Consolidate your finances
Streamline your investments and bank accounts to simplify administration. Having joint accounts makes it easier to ensure resources are readily available.

Minimize taxes
Consider investments and strategies that allow your estate to bypass probate and minimize the tax bill for the next generation.

Discuss your plans with family
Keeping them informed can help them understand your decisions.