quadrantadmin, Author at Quadrant

Do I pay tax on dividends after I withdraw my fund from a TFSA?

Anything you draw out of the TFSA, whether it is capital gain, interest, or dividend income, is all tax-free. If the investment is held elsewhere in a non-registered account, then the dividend income is considered taxable. In the example, because the high-paying dividend stock is in a TFSA, the dividend income isn’t taxable. Another advantage of holding this type of investment in a TFSA is the possibility to avoid some clawback issues due to the 38% dividend gross-up. This happens as a result of the gross-up being applied to your income prior to benefits such as the OAS, age credit, and GIS being calculated. The dividend tax credit will reduce your income back at the end of your tax return, but the timing of the credit may have resulted in reducing your benefits.

Talking to kids about money: An age-appropriate guide

There is a lot that kids need to learn to develop a healthy relationship with money. The recent introduction of personal finance in elementary and high school is a great start, but parents can also help teach kids. The guide offers a number of age-appropriate lessons to show kids at home. For children between ages 4-6 years old, it’s an ideal time to introduce them to how money buys things, how some people who have more share with others, and how money is earned. Playing games, purchasing small items, handling coins and introducing the concept of charity are all great at this stage. As they get older, more complex concepts will help them develop more financial skills to better prepare them for when they need to manage their own money.

Avoiding tax and probate when passing down a rental property

If you own a rental property and you’re trying to reduce taxes and probate upon your death for your heirs, then you’ll need to look at the implications of some of the different options you have available. For instance, gifting a property now would trigger a capital gains tax for you now. The property also can’t be passed to your heirs at a low valuation when you pass and would instead be transferred at fair market value. One solution to avoid probate fees and future capital gains appreciation is to setup a trust. Capital gains taxes would still need to be paid, but there will be no probate fees later on. The downside is that a trust can be $5,000 or more for the initial setup, with $1000/year on-going costs.

Key Takeaways:

If you claimed depreciation on your rental property over the years, all this depreciation is “recaptured” in the year of sale – or in this case, the year of death. This is taxed at your regular tax rate, which could be as high as 54%.
Every province has different probate fees payable to validate a will and allow the executors to distribute the assets.
It’s important to prioritize your main goals. If it’s stopping future capital gains tax from accruing, you may need to incur some tax today. If it’s avoiding probate fees, a trust could work, but you need to figure out whether you want the rental income solely for yourselves or to be available for your heir.

“Consider your own retirement needs first and foremost and then get advice from a professional with strong estate and tax knowledge.”

Understanding your net worth statement

Taking it in its simplest terms, your net worth is the equivalent of all your assets minus all of your liabilities, or debts. While it sounds simple, not all your assets are equal. Liquid assets, for instance, is defined as assets that can be readily be converted to cash. At first glance, bonds and stocks may appear to be liquid, but often due to maturity dates or current market conditions, they may not be equal to their presumed face value. The same holds true for items of worth, such as jewels, which may be given a certain value on paper, but its resale value would be less. As a result, one should never assume a stated value is what they will fetch in the open market. Debts are the sum total of what you owe creditors and loan entities. It constitutes the residual amount owed on your mortgage, for example. Understanding your net worth is a good place to start when planning for your financial future.

10 ways for investors to be more boring —and successful

While it might be tempting to invest using some unorthodox strategies, consider reigning in the impulse. The truth is that the more mundane and proven methodologies work better in the long-term and should be embraced. Some things to keep in mind are: Don’t try to outsmart the markets as most stocks are fairly priced. Past performance isn’t necessarily an indicator of future performance. Selling too early is a common misstep so invest for the long-term. Remember that there are proven factors to help achieve a good return on investment. Diversification, avoiding market timing and not investing based on emotion are all ways to invest better and achieve a better return on your securities. In short, it is not necessary to remake the wheel and there are guidelines in place that are proven and will make investing easier.

Willful Neglect: Too many Canadians are dying without a will

If you die without a will you leave your heirs at the mercy of legal proceedings without any consideration for what your intentions might have been. Despite this, more and more Canadians are dying without having a will in place. If you want to make sure your assets go where you intend them to go, minimize tax burdens on your heirs or even make sure your children are taken care of, you need to take the time to create a will.

Key Takeaways:

Most people think they don’t have to write a will until they reach their senior years.
No one has the automatic right to deal with your estate after your death.
Without a will, a court estate administrator will decide how to divide the money and it may not be what you wanted.

“You might be equally surprised that over half of Canadian adults don’t have a signed will.”

What to do if the CRA gets you in its crosshairs and reviews or audits your taxes

If you find a dreaded audit or review notice from the Canada Revnue Agency (CRA) in your mailbox, you need to take immediate action. With an increase in audit activity, Canadians may find that it is often as a result of something unusual in your filing that triggered CRA to want to take a closer look. It’s also important to make the distinction between a review, which is usually a request for additional information, and an audit, which is a more serious and deeper look into your numbers. Responding to their request and co-operating by sending in the documentation they request can generally resolve most investigations. If you’re unsure what they’re asking or require assistance, then be sure to have all your receipts and documentation or check with a professional before you respond.

What to know about mortgages from alternative lenders

Since the new “stress test” rules were introduced in January, many Canadians who fail to qualify for a bank mortgage are turning to alternative lenders. While these alternative lenders can help Canadians without other financing options, it’s important to read the fine print. These contracts will generally have terms with higher interest rates and a 1 percent lender’s fee for closing, which means a higher closing cost. You should ask a broker how tolerant a lender would be if you are late with one of your payments, and look for sale-only clauses, which can be a red flag. If you already have financial problems and you go to a lender who is not flexible, you might make the situation worse.

TFSAs Vs. RRSPs 2018: How To Know Which Is Right For You

TFSAs and RRSPs are similar products and excellent investment choices for Canadians. Depending on your income level, savings goals, and long-term plans, one may be better than the other. Both are designed for savings, but the RRSP is more a long term concept. For instance, if you tend to make withdraws for short-term needs, then a TFSA (or Tax Free Savings Account) would be the better option. Withdrawing from an RRSP will add to your income for that year and is subject to a 10 to 20 percent withholding tax. Provided it’s not the same year you put the money in, a TFSA has a nominal tax, doesn’t count towards your income and comes without penalty.

Why old-fashioned bank drafts could leave you on the hook for big bucks

A bank draft is a secure form of payment. Think of it as a guaranteed cheque by the bank. The problem is with any form of payment, if someone never gets it, or if the wrong person cashes it, then it’s done. Even though the bank secures it, once it leaves their hands then it isn’t as secure as you may think. Depending on why you require a bank draft, an Electronic Fund Transfer will probably prove to be better in the long run. They’re person-to-person and like a bank draft, and secure. They’re also rising in popularity as services like Paypal and Venmo gain traction.