Julie's Blog

We are pleased to provide a variety of resources on accounting, taxation and other related subjects that we hope will be helpful to both individuals and businesses.

Have a question that isn’t answered here or in our Quick Tools Resources to the right, we can help. Simply contact us by email or give us a call at 705-445-8493. We would be happy to meet with you for a no-obligation consultation.

Joint Accounts with Family Members

It can make sense to have a joint bank account or investment account with a parent in many circumstances.  Some reasons to have a joint account may include:

Probate fees – Probate can be time consuming and costly, during which the assets in question are frozen.  Technically, adding a child to an investment account would not make the joint account exempt from probate, but it would prevent freezing of the account which would allow the sale and transfer of the assets within the account, thus leaving nil to be probated.

Mental Deficiencies – If a parent were to suffer from dementia or any other disease that would disable them from cognitive decision-making, giving signing authority to a child would allow them to continue paying bills and handling the parent’s money on their behalf. 

Travelling - If a parent decides to go off and enjoy their golden years by exploring the wonders of the world, having a child with signing authority on account will allow them to ensure the parent’s financial commitments here at home are still being kept up (ie. property taxes, utilities etc.) are still being paid and kept current.

In adding a child to a parent’s bank or investment account, there are also some important considerations that need to be looked at.

The biggest consideration is that the parent’s control over these accounts can be lost and the child has access to all of their funds regardless of their ability to manage fiscal responsibility.

If the child were to get divorced or be forced into filing for bankruptcy, the account may be exposed to the settlement of these two unfortunate circumstances hence compromising the security of mom or dad’s funds.

From a tax perspective, careful thought needs to be exercised when transferring mom or dad’s assets into a joint account with someone other than their spouse as it could give rise to capital gains. 

Lastly, if the child on the account is contributing their own personal funds into the account, there could be a problem upon the death of the parent in determining how much of the account balance would be or should be shared with other beneficiaries (ie. Siblings.)

In conclusion, it’s important to understand all of the above implications and ensure you are making an informed decision when considering joint account options.  Please feel free to contact us if you have any questions with respect to joint accounts.

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Local Business Spotlight: Collingwood Fine Cars

We believe in small business. And without a strong network of other entrepreneurs and small business owners to work alongside, it would be rather lonely work. Lucky for us, the Collingwood area has a thriving small business community and we look forward to profiling those we've had the pleasure of interacting with in this space.

Collingwood Fine Cars - Steve Gendron

Collingwood Fine Cars - Steve GendronCollingwood Fine Cars specializes in automotive repairs and servicing to German engineered cars, specifically Mercedes, Audi/VW, Porsche and BMW. Owner/Operator Steve Gendron has dealer experience in high end vehicle repair, offers a clean, modern facility with plenty of parking and prides himself on spending the time needed to repair a vehicle properly and honestly. Collingwood Fine Cars is a great alternative to commuting to the city where dealers are typically located; and their clients appreciate the friendly professional service they receive.

Collingwood Fine Cars opened in Collingwood in June 2015 and has been slowly growing its client base while working hard to maintain personalized service for each and every customer. Steve loves running a business in Collingwood as it allows him to be close to home, to work in a community-minded environment where clients value a small business approach.

We wish you all the best in your business venture Steve!

Collingwood Fine Cars
This email address is being protected from spambots. You need JavaScript enabled to view it.
Phone: 705-444-1115

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Perspective on The New Government

With the lengthy election now over, I’m sure all of us Canadians are happy to get back to life as we know it, although it will be interesting times when the House reconvenes. Justin Trudeau and the Liberals have made some election promises that could significantly impact Canadian taxpayers, so we thought we would provide a quick overview of what may lie ahead.

Tax Bracket Changes

Trudeau has vowed to cut taxes from 22% to 20.5% for the middle tax bracket which are those with taxable incomes between $44,701-89,401. Conversely, tax increases are on the horizon for individuals earning more than $200,000 annually. The proposed legislation would see a 4% tax increase from 29% to 33% for those taxpayers.

Tax-Free Savings Accounts (TFSA)

Remember the increase in annual contribution limits that the Progressive Conservatives introduced earlier this year? They increased the annual limit from $5,500/year up to $10,000.

The Liberal government has plans to nix this increase and resume the annual contribution limit of $5,500. The logistics of how and when they will make this change remains to be seen. There is discussion that they could potentially make the change retroactive to 2015, but such a move will create an administrative nightmare and frustration for the Canadian taxpayers who opted to increase their 2015 contributions when the limit increase was announced.

Universal Child Care Benefit (UCCB)

At present, the UCCB provides taxable cheques of $160/month for children under six and $60/month for children ages 6-17. The Liberals promise to replace the UCCB with a new benefit that will be tax-free and income-tested. Thoughts are this new Canada Child Benefit will be of benefit to Canadian families.

Education Tax Credits

Presently, there is a federal non-refundable tax credit for education and textbooks in addition to the tuition tax credit. The Liberals plan to replace these credits with an increase in non-repayable grants, which they feel will better target students from low and middle-income families.

Justin Trudeau’s election platform was one of “Real Change” with a focus on providing more support to middle income families in Canada.The Party also talks of corporate income tax reforms as well, so it sounds like there is change in the air.

If you have any questions regarding any of these changes, don’t hesitate to contact us to discuss how they may impact your particular situation.

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Upcoming Changes to the Taxation of Estates and Trusts

Estates and Trusts are subjects most clients don’t truly understand in terms of the implications and responsibilities related to handling an estate & it’s beneficiaries . There are some upcoming changes to the taxation of estates and trusts – here is a brief primer on how these work and what changes to be aware of.

Once we leave from this earth, a testamentary trust is established (ie. The Estate of John Doe) and in some cases, people have opted to establish multiple trusts in order to accommodate their chosen beneficiaries and individual circumstances. All of our assets pass to this trust(s) on death and then are distributed to all of our beneficiaries by our designated executor based upon our wishes covered in our will. We can’t stress it enough – please make sure you have a will and it is up to date.

From a tax filing perspective, we file a personal income tax return for the calendar year up until the day we pass. Thereafter, if there are income generating assets remaining in a trust (even for a short period of time until given to a beneficiary), a trust return is required to be filed for the estate in order to report the income earned and assess any related income taxes. These trust returns are required to be filed annually up until such a time as all income generating assets are transferred out of the trust’s ownership. We have had several clients who have accepted the role of executor for loved ones and are unaware of this requirement.

Historically, testamentary trusts were taxed based on graduated tax rates for all filing years, exactly the same as individuals (ie. the more income you earned, the higher the marginal tax rate.) We are sad to say this all changes on January 1st, 2016. The Canada Revenue Agency is now initiating a change that will permit only one trust per taxpayer to qualify for these graduated tax rates and only for a 36-month period following death. This legislation presumes that this timeline will, in the majority of cases, allow adequate time for executors to appropriately disperse and settle estate assets.

After that time period has passed, any income generated from testamentary trusts will be taxed at the highest tax bracket which nears 50% at present. There is an exception to this rule if the trust is established for a beneficiary who is a disabled relative.

You may now be asking….how does this change impact me? Let’s give you a couple of examples to ponder. This change will impact anyone who has identified their desire to have multiple trusts created upon their passing as only one of them qualifies for the graduated tax rates. What if you have three children and your will presently states that there will be a separate trust formed for each child upon your death? Which child’s trust will get the graduated rate and which two will be paying tax at the highest tax bracket if they want to keep the assets in the trust? You can see how these changes can give rise to some family discourse down the road. We would suggest being proactive and although no one likes to discuss and review their will, it could save some family conflicts after you are gone. Ensure you review your will and consider amending it if it currently makes mention of multiple trusts being created upon your death.

Also, for those who committed to a friend or family member to be their executor upon passing, take heed of this change and the 36-month time line. Three years sounds like plenty of time to settle one’s estate, but sometimes there are roadblocks encountered that add to this process whether it be time to process through probate, delays in the collection of life insurance proceeds for one reason or another and in some cases court proceedings that crop up out of the woodwork as remaining friends and relatives dispute estate distributions. This timeline adds a further degree of pressure for executors to act in the best interest of the estate and ensure that as much of the estate’s proceeds are distributed as intended without the tax man getting an unexpected share.

This change can also impact bequests to registered charities after your death and the tax benefits of doing so. The new trust and estate taxation rules present a more flexible tax treatment provided the transfer to the qualified charity is done within this 36-month timeline.

There are transitional provisions for testamentary trusts already in existence and vary depending upon the date of death. We can help guide you through those provisions should they apply to you.

As we say, knowledge is power and we hope that passing along the information regarding this legislative change as part of Bill C-43 has been helpful to you. If you require any further information as to how these changes may impact your personal circumstances, please feel free to contact us.

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Changes to RRIF Withdrawal Minimums

Once we turn 71 years old, all RRSP accounts held need to be transferred to RRIFs.  Beginning the year after the RRIF is established, there are minimum amounts that all taxpayers need to withdraw on an annual basis.

In June 2015, new legislation was passed lowering the minimum RRIF withdrawal.  This change was implemented in order to account for the current investment rates of return, rates of inflation and the fact that the population in general is living longer.  The change will permit more funds to remain in the account and result in more income accumulation.

If you are a 71 year old RRIF annuitant and had a $100,000 in your account, under the old rules, you would be required to withdraw $7,380 or 7.38%.  Under the new rules, you are now required to withdraw $5,280 or 5.28%.  The withdraw rates for subsequent years are also reduced accordingly.

Keep in mind, the withdrawal amounts are only the minimum required and you could always opt to withdraw more.If you are an annuitant and withdrew your minimum RRIF amount for calendar 2015 earlier in the year and under the old requirements, CRA is permitting you to re-contribute the excess if you so choose.From an income tax perspective, you will receive a T4 RIF for the total amount withdrawn and an offsetting contribution slip that will both have to be filed on your 2015 tax return.

If you have any questions about these changes, please contact us.

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Our Address:
7 Ste. Marie St. 
Collingwood, Ontario
L9Y 3J9

Telephone: 705-445-8493
Hours of Operation:
Monday - Thursday: 9am to 5pm
Friday: 9am to 4:30pm

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