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The Citizen, 2003-02-19, Page 16PAGE 16. THE CITIZEN, WEDNESDAY, FEBRUARY 19, 2003. Financial 2003 Is estate planning necessary for you? Maybe you are thinking that estate planning really doesn’t pertain to you. After all, many come to think it’s a process reserved for the rich and famous. Could your bank account, three- bedroom home and modest investment portfolio really be considered an estate? Most definitely. In fact, “estate” is defined as all of the assets a person possesses — like real estate, bank accounts, mutual funds, collectibles and personal property. How much any or all of your assets are worth is not really the issue in determining if you need an estate plan. According to the GE Centre for Financial Learning, having any assets at all is enough to consider having one. A simple form of estate planning is a will. This directs how your property will be distributed upon your death. Lacking a will, your property is distributed according to law, which does not necessarily take into account your wishes. And remember, estate planning is an evolving process. As your financial situation changes or you go through major life events, like marriage, inheritance or birth/adoption, you’ll need to update your estate plan to accommodate these changes. To simplify the estate planning process, here are a list of items you should consider to see if you’re on track with your planning. Does your estate plan: • Include an up-to-date will? • Name a guardian to care for your minor children? • Name an executor (or personal representative) and trustee you are confident will carry out your wishes? • Take into consideration any special medical or educational needs certain family members may have? ‘ • Include provisions for long-term health care for you and your spouse, and/or other dependents should the need arise? • Take advantage of the benefits of lifetime gifts? • Include charitable gifts? • Provide investment assistance for family members who may need help managing their inheritan-ces? • Provide for a smooth and tax­ advantaged transfer of your business interests at your retirement or death or if you become disabled? Deadline to contribute March 3 Making RRSPs work Looking for a great way to both save for retirement and lower your current taxes? Look no further than a Registered Retirement Savings Plan (RRSP). “One of the best ways to save for a comfortable and secure retirement in the future is with an RRSP, especially if you don’t belong to an employer- sponsored pension plan or deferred profit-sharing plan,” said Dave Sinclair, a chartered accountant in Pickering. “An RRSP contribution also provides a substantial tax break in the present because it is tax deductible.” Money invested in an RRSP compounds, tax-free, until it is withdrawn. “If you contribute $’0,000 a year to an RRSP for 30 years, and you earn 10 per cent annually on your investments, you will accumulate a pre-tax total of $1,809,434,” says Sinclair. “If you make the same $10,000 investment annually for 30 years outside an RRSP, and if you are in a high marginal tax bracket, you will end up with just $697,607.” Investing in an RRSP will also provide substantial savings if you are in a lower tax bracket, Sinclair adds. - Brought to you by the Institute of Chartered Accountants of Ontario. Do you want to reduce your 2002 income taxes by making a contribution to your Registered Retirement Savings Plan (RRSP)? If so, you must put money into your RRSP by March 3. (Because March 1 falls on a Saturday, the deadline has been extended to the following Monday). “Most people wait until the last minute to make their RRSP contribution, but you can contribute at any time of the year,” says chartered accountant, Dave Sinclair. “It’s also a good idea to make your contribution early in the year if you can afford to,” adds Sinclair. “Making your 2003 RRSP contribution early in 2003 means you will take advantage of a full year of compounding, tax-free. Not only will you maximize your tax- sheltered earnings inside your RRSP, you will also avoid the February 2004 rush.” - Brought to you by the Institute of Chartered Accountants of Ontario. Group RRSPs good idea Carry forward your unused contribution Have you made your maximum Registered Retirement Savings Plan (RRSP) contribution in past years? If not, you can still make up the shortfall. “Your unused RRSP contribution room is carried forward into future years,” explains Dave Sinclair, a chartered accountant in Picker­ ing. “For example, if you were allowed to contribute $5,000 for the 2001 tax year, but contributed only $3,000, you can contribute the remaining $2,000 in the 2002 tax year or in future years.” The amount you contribute is eligible for a tax deduction in the year you make the contribution. You can carry forward unused RRSP contribution room indefinitely. “But the sooner you make up for lost time, the further ahead you will be,” advises Sinclair. - Brought to you by the Institute of Chartered Accountants of Ontario. How to choose your RRSP investments If you are putting money into a Registered Retirement Savings Plan (RRSP), how do you determine which investments best meet your needs? “Eligible RRSP investments include most conventional securities, including mutual funds that invest most of their assets in Canadian securities,” says chartered accountant Dave Sinclair. “Guaranteed Investment Certificates, Canadian-listed stocks and Canadian bonds also qualify.” When choosing your RRSP investments, Sinclair suggests considering them in the context of your overall retirement plan. “Determine your long-term goals,” advises Sinclair. “It’s also important to assess your tolerance for financial risk.” Still have questions? Ask a chartered accountant for assistance. - Brought to you by the Institute of Chartered Accountants of Ontario. Employers are beginning to realize that group Registered Retirement Savings Plans (RRSPs) can help attract and retain employees. “Group RRSPs are a collection of individual RRSPs,” explains chartered accountant Joe March­ ello. “Employees contribute a set amount on a pre-tax basis via payroll deductions. Employer contributions to the group RRSP are voluntary, but the employer has control over employee eligibility and the authority to adjust contribution amounts.” The benefits of a group RRSP include instant tax savings for employees, since the employer can take the RRSP contributions into account when determining how much tax to withhold from their paycheques. “Group RRSPs are also a deductible expense and a taxable benefit if the employer decides to match employee contributions,” adds Marchello. “As well, because the employees will be making regular RRSP contributions from their paycheques, they will avoid the RRSP rush in January and February each year.” Marchello adds that the employees own the assets and make all the investment decisions. “An advisor is usually appointed by the employer to help employees understand the financial options that are available to them.” - Brought to you by the Institute of Chartered Accountants of Ontario. 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