©WEALTH VIEWPOINT: MAXIMIZE YOUR FINANCIAL POSSIBILITIES 1

WINTER 2018 • PERSONAL FINANCE VERSION 1095

The widow population over the ageof 65 is one of the fastest growingdemographics facing poverty! Seniorwidows outnumber widowers fourto one and represent about 45% ofall women aged 65 and over. Thebaby boomers make a large part ofthis populace. Many widows arefacing living in an impoverishedretirement because their familyfinances needed to be bettermanaged.

"Senior widows saw their medianincome decline continuously in thefive years following the loss of thespouse. On the other hand,widowers' median income washigher five years after the wife'sdeath when compared to the yearbefore that event." StatisticsCanada

It is wise to engage in financialplanning and become financiallyeducated early on in life jointly with your partner.Otherwise, one may begin to ask the following questionsor find out the facts too late after a partner dies.

Is there any life insurance on mypartner?

Don’t assume that a company groupplan provides for life insurance. If itdoes, it may be a paltry amount —not enough to meet your needs,especially if you still have dependentchildren. A group plan's lifeinsurance can end once a personretires and no longer works at acompany where there earlier was lifeinsurance.

What about the policy we boughtwhen we were younger?

Many personally owned lifeinsurance plans are set up as terminsurance renewing every five or tenyears which increase feesdramatically over time. Thus,

people might opt out of these plans or convert to amuch smaller lifetime benefit. Or the life insurancemay not carry on after age 65 or may never have been

Wealth ViewpointMaximize Your Financial Possibilities

Why widows need a financial plan

Toll Free: 877-211-2633Direct: 587-316-2336Cell: 403-614-5789Email: stephanie@affluencepartners.comWebsite: www.affluencepartners.com

Stephanie StewartCEA, CIM, CIWM, DMS, FMA, FCSIDirector & Financial Security Advisor

Affluence Partners Inc.

Suite 308, 11420 27 Street SE,Calgary, AB, T2Z 3R6

renewed or was replaced by acompany insurance benefit whenyour partner began a new job.

When the children no longerneed to be supported, lifeinsurance purchased for thefamily can be reduced. However,the face amount of the necessarydeath benefit needs to be reviewedso as not to trim the coverage sofar that it no longer covers thespouse’s current capital needs.

If your partner owned a business

Life insurance is often bought forbusiness partnership needs. Thecompany partners are generallythe beneficiaries of any buy-sellagreement in order to purchasethe deceased shares. If the spousewas a partner of a company it willpay to have a lawyer examine any existing life insurancecontract and the buy-sell agreement. Key-man insurancegives surviving company partners beneficiary status byagreement.

A bank or lender is generally the beneficiary of businessdebt insurance assigned to the financial institution.

Is there a balance on the Home Mortgage?

Often the spouse does not consider that if her partnerdies, she may have remaining mortgage payments and anongoing need for income into retirement not yet saved inthe traditional way of using Registered RetirementSavings Plan (RRSP) or Tax-Free Savings account(TFSA).

There may be a balance on the mortgage and a very largeHome Equity Line of Credit (HELOC) debt which hasdrastically reduced the home equity. Home additions, adream vacation or spending home equity for monthlyexpenses paid by HELOC debt can spell financialtrouble later. The lending institutions do not make it apractice of educating clients on the dangers of HELOCdebt. That can be explained by a financial advisor.

Who was my partner's advisor?

Many realise too late, the need toget involved with their partner toplan their future together. Oftenthere is secrecy around financialplanning. Some may not knowwho advised their partner orwhether a financial advisor,banker, lawyer or accountant hasany information for themanywhere! A widow may not evenbe able to find any paperwork oran existent life insurance policyonce the partner dies.

Note: What affects the widowpopulation can also affect thewidower or any common-lawpartner in a relationship, and mayor may not depend on only onepartner's relationship to financialplanning responsibilities.

Does the Canada PensionPlan (CPP) offer a deathbenefit?

The CPP may offer a small death benefit but is generallynot designed for providing a retirement income, orlooking after a surviving spouse as he or she ages.

Your spouse or common-law partner may be eligible toreceive the CPP survivor’s pension, and your dependentchildren may be eligible to receive the CPP children’sbenefit. However, there may be certain restrictions withregard to CPP provisions so beware that you should talkto an advisor.

CPP and Business Owners

Business income and any other income such as businessinvestments, rental income, etc., may affect CPPpayments. It is important for business owners to pay asmuch as possible into their CPP while working as thiscan make a big difference later in their CPP pension

Finance for Life. Wealth for Living.©

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Finance for Life. Wealth for Living.©

income. Small business owners earning a low income,may have a reduced CPP benefit during retirement.Small business persons who try to maximize their RRSP,may undiscernibly leave little net-income to enable agood CPP contribution.

What is the CPP's Child-Rearing Provision?

If you stopped working or received lower earnings toraise your children, you may be able to use the "child-rearing provision" to increase your CPP benefits.

Caring for young children can mean leaving theworkforce or working fewer hours. If your earningsstopped or were lower because you were the primarycaregiver raising your children under the age of seven,you can request the child-rearing provision.

If you are deemed eligible, the child-rearing period willbe excluded from the contributory period whencalculating your CPP benefit amount, ensuring that youget the highest possible payment.

Primary caregiver For the CPP, the primary caregiver isthe person who was most responsible for the day-to-dayneeds of the children for the specified periods.

Am I eligible? The child-rearing provision may apply toyou if:

• you have children born after December 31, 1958;• your earnings were lower because you either stoppedworking, worked fewer hours or took a lesser payingjob to be the primary caregiver of a dependent childunder the age of seven; and• you or your spouse or common-law partner receivedFamily Allowance payments or were eligible for theCanada Child Tax Benefit (even if you did not receivethe benefit).

Either spouse or common-law partner can request thechild-rearing provision, but it cannot be used by bothparents for the same period of child-rearing.

Why should I request the child-rearing provision? Youshould request the child-rearing provision because it mayincrease the amount of your CPP benefit.

The child-rearing provision could also help you meet theeligibility requirements for a CPP Disability Benefit,should you need it. In the event of your death, it couldhelp you meet the contributory requirements to providebenefits to your estate and survivors.

How can I request the child-rearing provision? Youshould request the child-rearing provision when you applyfor any CPP benefit with a special application form.

If you are already receiving a CPP benefit, you can stillrequest this provision.

What documents do I need to provide? You mustprovide one of the following for each child:

• the child's name, date of birth, and Social InsuranceNumber; or• the child's birth certificate (the original or a certifiedtrue copy)

You may also be required to provide proof of the date ofentry into Canada for children born outside Canada.

Source: CRA, Canada.ca

The RRSP Review 2017-18

What is your RRSP/PRPP deduction limit?

Your Registered Retirement Savings Plan (RRSP) andPooled Registered Pension Plan (PRPP) deduction limit,often called your “contribution room” is:

• the amount that you can contribute to your RRSP,PRPP, or SPP (specified pension plan)• the amount that you can contribute to your spouse orcommon-law partner’s RRSP or SPP• the amount your employer can contribute to yourPRPP• the maximum you can deduct on your tax return,reducing your tax obligation for that year

What RRSP, PRPP, or SPP contributions can youdeduct on your tax return?

You can claim a deduction for:

• contributions you made to your RRSP, PRPP or SPP

©WEALTH VIEWPOINT: MAXIMIZE YOUR FINANCIAL POSSIBILITIES 3

• contributions you made to your spouse’s or common-law partner’s RRSP or SPP• your unused RRSP, PRPP or SPP contributions from aprevious year

You cannot claim a deduction for:

• amounts you pay for administration services for anRRSP• brokerage fees charged to buy and sell within a trusteedRRSP• the interest you paid on money you borrowed tocontribute to an RRSP, PRPP, or SPP• any capital losses within your RRSP• employer contributions to your PRPP

What is the deadline to contribute?

Contributions made to your RRSP, PRPP or SPP or toyour spouse's RRSP or SPP can be contributed up toMarch 1, 2018.

Can contributions be made on behalf of a deceasedindividual?

No one can contribute to a deceased individual’s RRSP,PRPP or SPP after the date of death. But, the deceasedindividual’s legal representative can make contributionsto the surviving spouses or common-law partner’s RRSPand SPP. The contribution must be made within the yearof death or during the first 60 days after the end of thatyear. Contributions made to a spouse’s or common-lawpartner’s RRSP or SPP can be claimed on the deceasedindividual’s tax return, up to that individual’sRRSP/PRPP deduction limit, for the year of death.

What is not considered an RRSP, PRPP, or SPPcontribution?

The following are not considered to be an RRSP, PRPP,or SPP contribution for the purpose of claiming adeduction on your tax return. Find out the special rulesthat apply if you:

• repay funds that you withdrew under the HomeBuyer’s Plan • repay funds that you withdrew under the LifelongLearning Plan

How is your RRSP/PRPP deduction limit determined?

The 2017 annual Maximum RRSP limit is $26,230 (seeRRSP limit Table).

The Canada Revenue Agency generally calculates yourRRSP/PRPP deduction limit as follows:

The lesser of• 18% of your earned income in the previous year, and• the annual RRSP limit

Minus • your pension adjustments (PA) • your past service pension adjustments (PSPA)

Plus • your pension adjustment reversals (PAR), and• your unused RRSP, PRPP, or SPP contributions at theend of the previous year

Source: CRA

Finance for Life. Wealth for Living.©

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MAXIMUM ALLOWED CONTRIBUTION

Tax Year Contribution

2017 $26,230

2018 $26,500

Source: CRA