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Volume 26, Issue 4 Winter 2011 Looking Back, Looking Ahead; 2010 A Year in Review Looking back over the past year, we remember the many client events and seminars we hosted. From all the feedback received, it may have been a tie for a favourite 2010 event. Perhaps it was the private viewing of Toy Story 3? Or maybe it was The Annual Children’s Christmas Party held at the Museum of Nature? We plan on continuing to have many of these fun-filled events in 2011, along with several of our varied and informative series of seminars. In 2010, we bared witness to Greece’s continued financial crisis unfold. This negatively impacted the value of European currency, and saw an entire continent devise a single plan in an attempt to lift a country from potential financial bankruptcy. We had air travel and trans-Atlantic trading stalled due to volcanic ash from Iceland’s Eyjafjallajökull (AY-uh-fyat-luh-YOE-kuutl) volcano. We had the single the largest accidental marine oil spill in the history of the petroleum industry when British Petroleum’s offshore drilling unit exploded in the Gulf of Mexico; from which the environmental effects can still be felt today. We watched countries unite to pledge aid as Haiti was pummeled by one of the deadliest earthquakes in recent history. We saw and continue to see growth in the world’s emerging markets countries. We saw riot and revolt at the G8 and G20 Summits, right here in our own backyard; and we watched in awe as all eyes were on Canada in our spectacular display of patriotism and pride as hosts of the 2010 Olympic Winter Games. In the financial world, our recovery from the 2008/2009 economic crisis had rebounded quite nicely, and it now seems to be recovering at a pace slower than expected. Unemployment is still relatively high, and MANULIFE SECURITIES INCORPORATED the outlook on the economic future is met with varying uncertainty. In Canada, the economy contracted, MANULIFE SECURITIES INSURANCE INC. stocks tumbled, unemployment jumped more than two percentage points to 8.5 per cent, 321,000 jobs were destroyed and personal income fell. Oddly enough, real estate markets in Canada largely escaped Michael A. Prittie, CFP, CPCA, CIM, FCSI the crushing home price correction that hit virtually every other Western country. Compare that with the Senior Financial Advisor, United States, where housing prices are down roughly 30 per cent from their peak. Even in Europe, Life Insurance Advisor values are off an average of 6 per cent. Manulife Securities Incorporated Manulife Securities Insurance Inc. Global food prices met their highest level ever and prices of many commodities reached new record 1565 Carling Avenue, Suite 610 highs. Rising inflation had become a key concern around the world. The problem was especially Ottawa, ON K1Z 8R1 pernicious in emerging markets, where food consumption accounted for a larger share of families’ Telephone: (613) 728-0101 expenditures and where a surge of capital inflows had added and continues to add to inflationary Toll-free: 1-888-870-4443 pressures. When the general price levels rise, each unit of currency buys fewer goods and services. This Fax: (613) 728-4075 phenomenon can discourage investment and savings, and may lead to shortages of goods if consumers Email: begin hoarding out of concern that prices will increase in the future. Michael.Prittie@manulifesecurities.ca In all, markets go up and markets go down. You cannot expect any market in the world to stay at the apex Janet Nunn or to project only a single rise or a single fall. Ups and downs are inevitable. From the point of view of Executive Assistant economics, investment by society is the capital of enterprise, and profit of enterprise is the income or Telephone: (613) 728-0101 Ext.228 return on investment for society. We can never predict what will happen in the short term, but if we set Email: goals, stay disciplined and set our emotions aside to stay the course, things in the longer term have a Janet.Nunn@manulifesecurities.ca funny way of working out as expected. With the RRSP deadline for 2010 now behind us, this is a great time of year for us to get together to review your financial plan and to do a check-in on your net worth. We can also help you with your 2010 INSIDE THIS ISSUE tax returns, which is a service we provide at the branch level. If you would like to take advantage of this low-cost privilege, let us know as soon as possible. Tax filings are due at the end of April. As always, I’m 1 2010 A Year in Review always available to discuss the topics in my newsletter, or any other financial inquiries you may have. 2 RRSPs/RRIFs & Your Estate Sincerely, 3 Buying U.S. property? 4 Tax Season Preparation 5 Technology & Health & Wellness Michael 6 Client Profile 7 Calendar of Events Volume 26, Issue 4 Winter 2011 Registered Savings Plans and Your Estate What you may not know about RRSPs and RRIFs The RRSP or RRIF issuer must be informed that the transfer is to take place Most Canadians are familiar with the tax advantages of using registered before December 31 of the year after the year of death. Further, the actual savings plans to save for their retirement years. Contributions to Registered transfer of the RRSP or RRIF must be completed in the year the survivor Retirement Savings Plans (RRSPs) are tax-deductible and any growth or income received the deceased's RRSP or RRIF, or within the first 60 days of the next earned on the underlying investments inside an RRSP or Registered year. Retirement Income Fund (RRIF) is not taxed until withdrawn. If this occurs, the surviving spouse of common-law partner will report the What may be less clear is what happens on the death of an RRSP or RRIF value of the deceased's RRSP or RRIF on his or her tax return for the year. owner. Here are some frequently asked questions with answers to provide The surviving spouse or common-law partner will then receive an offsetting more clarity in an area that may not be entirely understood. deduction for the qualifying transfer to his or her own RRSP or RRIF and will be taxed on any withdrawals made in the future. If the transfer does not Why am I receiving a T4RSP or T4RIF? take place during the required timeframe, the full value of the RRSP or RRIF can still be included on the surviving spouse or partner's tax return, but no Under Canadian income tax laws, an individual is deemed to have disposed of offsetting tax deduction will be allowed. his or her assets, including RRSPs and RRIFs, for their fair market value at the time of death. A T4RSP or T4RIF will be issued to indicate the fair market value In the case of a RRIF, a successor annuitant may have been named in the of an RRSP or RRIF at the date of the owner's death. plan or the will. This means that the existing RRIF continues on and the surviving spouse or common-law partner simply receives the same periodic It is the responsibility of the estate, and ultimately the estate beneficiaries, to payments as the deceased had received from the RRIF. No special taxation pay income taxes on the RRSP or RRIF assets even though those assets may issues arise on death when a successor annuitant is named; instead, the have been paid directly to a beneficiary named on the registered savings plan. successor is taxed on any payments made to him or her each year from the If you are a Canadian resident, there are no taxes withheld on amounts paid RRIF. out of an RRSP or RRIF on account of death. Financially dependent minor child or grandchild What are the income tax implications? If an RRSP or RRIF is left to a minor child or grandchild who was financially The value of the RRSP or RRIF, as indicated on the T4RSP or T4RIF slip, must be dependent on the deceased, the value of the RRSP or RRIF is not taxed in included in the owner's income for the year of death. This amount is fully the hands of the deceased. Instead, the minor child or grandchild can use taxable as regular income. However, as discussed later, there are ways to the RRSP or RRIF to purchase a term certain annuity. The maximum term achieve a tax-free rollover of this taxable income from an RRSP or RRIF upon for the annuity is a period equal to 18 years minus the age of the minor at death. the time of purchase. How can the income tax bill on death be reduced? Depending on the age of the minor child or grandchild, this may only defer tax for a short time period. It is possible to minimize the RRSP or RRIF income inclusion on death if your However, since the minor may have little or no other sources of income, RRSP or RRIF is left to a "qualifying beneficiary." The beneficiary of an RRSP or this may provide the opportunity to have the income taxed at a lower tax RRIF can be named directly on the plan or in your will. If the beneficiary is a rate than it would have been on the deceased's final tax return. qualifying beneficiary, it is possible to have the value of the RRSP or RRIF taxable to the beneficiary. What happens if an adult child is named as beneficiary? Who is a qualifying beneficiary? If an RRSP or RRIF is left to an adult child who is not mentally or physically infirm, there is not tax deferral available. The RRSP or RRIF will be fully A qualifying beneficiary includes a: taxable on the final tax return of the deceased and will be passed directly to the adult child named as beneficiary. • Spouse or common-law partner What happens if the estate of the deceased is named as beneficiary? • Financially dependent infirm child or grandchild • Financially dependent minor child or grandchild If the estate is named, as beneficiary of the RRSP or RRIF, generally the fair market value of the RRSP or RRIF is included in income on the deceased's Spouse or common-law partner final tax return. However, where an amount is paid from an RRSP or RRIF to the estate and a person who is a qualifying beneficiary is named as If the beneficiary of the RRSP or RRIF is a spouse or common-law partner, it is beneficiary in the will, the legal representative of the estate, along with the possible to transfer the assets directly to that person's RRSP or RRIF as a tax- beneficiary, may file a joint election to treat the RRSP or RRIF proceeds as free rollover. If the surviving spouse or partner is under age 71, the RRSP or being paid directly to that qualifying beneficiary.* RRIF can be transferred to that survivor's RRSP or eligible annuity. Source: Fall Edition 2010 Solutions Magazine Volume 26, Issue 4 Winter 2011 Buying U.S. property? Know the rules Get all your documents. Canadians are taking advantage of a unique convergence of events to You won’t be able to get a mortgage loan unless you provide snap up vacation properties in popular Sunbelt destinations. numerous financial documents. These are not bank rules; they are new government regulations which have been brought in to reduce the chances of another mortgage fiasco. You’ll need mortgage statements The high loonie, which has been flirting with par for the past few on your Canadian property, tax returns, employment information, asset weeks, combined with depressed U.S. real estate prices has ignited a statements (e.g. brokerage accounts), and bank statements (all buying frenzy of unprecedented proportions. In 2009, Canadians pages). Get a list from your lender of choice. purchased more than $2 billion worth of real estate in Florida alone. The total value of all Florida property owned by Canadians now exceeds $50 billion, making us the number one country in terms of Check and double-check title. foreign ownership. There have been cases of people putting money down on a property The party isn’t over yet. There are still tremendous values to be found only to discover the seller did not have clear title. The well-publicized in the Sunshine State. A friend of mine recently looked at a unit in an foreclosure mess, in which some banks have been accused of upscale development in Bonita Springs that would have sold at close falsifying documents, has complicated matters. Title insurance is a to $600,000 at the height of the property boom. Today, the place must but it is not foolproof. Make sure that the title search covers all would go for around $250,000, fully furnished. The owner was previous owners of the property, from the time it was built to the desperate to sell at almost any price. present. Deal only with well-known, reputable companies. In Florida, Lawyers Abstract & Title and First American Title are among the largest. But before you take action, you need to be aware of the new realities of buying a U.S. property. I met recently with John Irons, regional mortgage manager of RBC Bank (USA) based in Naples, Florida. RBC Be cautious with condos. became a major presence in the U.S. south after buying Centura Banks in 2001 for $2.3 billion. It now has 425 branches in six states, The speculative building boom that preceded the market meltdown with 90 in Florida alone. saw the construction of thousands of condominium units that were never sold. As a result, some condo associations are strapped for After my conversation with Mr. Irons, I did some additional research cash, if not already bankrupt. Units that have never been occupied can and developed the following list of tips for anyone interested in buying be found for what seem to be absurdly cheap prices. However, the Florida property. Although I am not familiar with the situation in other condo association bills that follow once you take ownership may Sunbelt states such as Arizona and California, I am sure most if not all produce a severe case of financial shock. Not all condo associations of these guidelines will apply there as well. are in trouble but don’t even consider a purchase without verifying the financial situation of the one you’re considering. Choose a lender carefully. Things have become so bad in the condo world that RBC won’t even consider a mortgage loan on a condo, co-op, or similar property. Between 60% and 65% of Canadians buying in Florida pay cash. But if you need mortgage financing, keep in mind that American banks regard Canadians as foreign nationals and obtaining a loan from them Consolidate cash. can be difficult — if they’ll consider you at all. Your best bet is to deal with a Canadian bank with which you already have a relationship. If you plan to pay cash for your vacation home, make sure all the They have easy access to and accept Canadian credit ratings. Plus, money is in a single account for at least 90 days before closing. Money they offer a wide range of cross-border services such as money laundering and anti-terrorism laws now require verification of the transfers and on-line bill-paying. source of large amounts of money coming into the U.S. If you show up at closing with cheques written on several different accounts, the In Florida, RBC and TD Bank, which has 71 branches, are the most tracking process will almost certainly put everything on hold. accessible. Harris Bank, which is owned by Bank of Montreal, also has a small presence with branches in Sarasota, West Palm Beach and Obviously, there are a lot of hurdles to deal with when buying a U.S. Naples. property. But the billions of dollars being invested in Sunbelt real estate by Canadians prove that many people think it’s worth the Allow adequate time to close. hassle. The bargains are still available; there is no question about that. But the window of maximum opportunity appears to be closing. So if you’re interested, move now but be ready to jump through some hoops Buying a property in the U.S. is much more complicated than in to acquire your dream home. Canada, especially with the new rules now in place that require several levels of verification. Mr. Irons advises allowing a minimum of 45 days between the time of the offer and the closing date. Article printed from 50Plus.com: http://www.50plus.com Volume 26, Issue 4 Winter 2011 What is Skype? Health & Wellness Skype is a Voice over Internet Protocol service (or VoIP for short). (VoIP, is the general term for technologies that let you talk over the internet Mark Glen, a registered dietitian at the Mayo Clinic offered his top picks rather than a traditional phone line). of health foods. All of his choices met at least three of the following requirements: Specifically, Skype is a software application that you can download for • A good source of fiber, vitamins, minerals and other nutrients. free onto your computer. You can then use the software to make calls to • High in phytonutrients and antioxidant compounds, such as other computers or cell phones with Skype, and even to land lines. vitamins A and E and beta-carotene. Skype also includes features that would cost you extra on a landline (or • May help reduce the risk of heart disease and other health you might not get at all) like video and conferencing. conditions • Low in calorie density, meaning you get a larger portion size Why would you want to try it? with a lower number of calories. The biggest draw is the potential to save money by dodging long Here, in alphabetical order, are the top 10 picks for healthy foods: distances charges since all “Skype-to-Skype” calls are free. In other words, you can place a call from your computer to another computer with Apples: Apples are a good source of pectin, a fiber that can lower Skype anywhere in the world and not have to pay any long distance cholesterol and glucose levels. They are also a good source of vitamin C fees. — an antioxidant that protects your body’s cells. Vitamin C also keeps your blood vessels healthy and aids in the absorption of iron and folate. It’s not just for individuals — these calls are free for businesses too. Many budget-conscious companies are using this service to connect with Almonds: These nutrient-packed nuts contain fiber, riboflavin, clients, suppliers, telecommuters and travelling employees. magnesium, iron, calcium and vitamin E, a natural antioxidant. They’re also good for your heart. Most of the fat in almonds is monounsaturated Another advantage: you can talk up to 150 in a group instant message fat, which can help lower cholesterol levels when substituted for other chat, or a conference call of up to 25 at once. It’s an alternative way for fats. businesses to conduct a meeting, or for individuals to plan events with friends and relatives. Broccoli: Besides providing calcium, potassium, folate and fiber, broccoli contains phytonutrients — compounds that may help prevent It sounds simple enough, but making the free calls is going to take some diabetes, heart disease and some cancers. Broccoli contains the coordination. It’s not like a regular phone line where you can antioxidant beta-carotene and is also an excellent source of vitamin C. spontaneously pick up the phone and someone will answer at the other end. If you’re calling computer to computer, you want to make sure Blueberries: Blueberries are a rich, low-calorie source of fiber, someone is at the other computer to answer. antioxidants and phytonutrients. Regular intake of blueberries may improve short-term memory and reduce the cellular damage associated What you’ll need with aging. Here’s what you’ll need to get started; Microsoft Windows, 2000, XP or Red beans: Small red, pinto and dark red kidney beans are an excellent Vista, Mac OS X or later or Linux. low-fat source of antioxidants, protein, dietary fiber and copper. They’re You’ll also need a certain amount of space and available system also a good source of iron, magnesium, phosphorus, potassium and resources too (like 256 MB of RAM and 1GHz processor). thiamin. • Broadband internet connection (high speed is required.) Salmon: This fish is an excellent source of omega-3 fatty acids, which • Web camera (built in or external) if you plan to use the video are believed to provide heart benefits. Salmon is also low in saturated fat features. and cholesterol and is a good source of protein. If possible, choose wild • Microphone (built in or external). Chances are your computer salmon, which is less likely to contain unwanted chemicals such as has a microphone built in — but take a look at where it is. mercury. The cons? Spinach: This leafy green is high in vitamin A and is a good source of calcium, folate, iron, magnesium, riboflavin and vitamins B6 and C. The There are some disadvantages to Skype. You cannot use it to make plant compounds in spinach may also boost your immune system and emergency calls. Also, because Skype is a software application that runs help prevent certain types of cancer. on your computer and your modem/router, you won’t be able to use it if there’s a disruption to your internet service or if the power goes out. Sweet potatoes: The deep orange-yellow colour of sweet potatoes Skype’s website is quick to point out that the service isn’t meant to indicates that they’re high in beta-carotene. Sweet potatoes are also high replace a home phone. in vitamin C and a good source of fiber, vitamin B6 and potassium. And they’re fat-free and relatively low in calories. What about privacy issues? Vegetable juice: Tomato juice, and vegetable juices which include Critics of VoIP systems claim that calls are about as secure as tomatoes, are good sources of lycopene, an antioxidant that may reduce everything else that goes over the internet (in other words, the the risk of heart attack and certain types of cancer. Be sure to select the information could be compromised). Sensitive details like business or low-sodium varieties. personal information should always be handled with caution. Wheat germ: Two tablespoons provide a good source of thiamin, folate, Overall, Skype isn’t for everyone but it can be a big money-saver, it’s magnesium, phosphorus, iron and zinc. Sprinkle over cereals, yogurt free to try and you can cancel it and uninstall the service at anytime. and salads, or use it in muffins, cookies and pancakes. Source: www.skype.com Source: Mayo Clinic Volume 26, Issue 4 Winter 2011 The Volunteer Experience In our Fall 2010 newsletter we shared with you the volunteer experience of a long time client, Russ. In this Winter 2011 edition, we are happy to profile another client, Bob P., who also volunteers with the Ottawa Children's Treatment Centre. OCTC is a leader in providing specialized care for those with multiple physical, developmental, and associated behavioural needs, focusing on our Region's children and youth. In addition, Bob volunteers at Perley and Rideau Veterans' Health Centre. The centre is a home for the elderly and known for innovation and leadership in geriatrics, specialization in dementia programming and exceptional Volunteer, Recreation and Creative Arts services. Opened in 1995 the Perley Rideau is home to 450 residents, 250 of whom are veterans, offering long-term, short-term, respite, and convalescent care. Bob P., Orleans, ON Volunteer woodworker for the Ottawa Children's Treatment Centre & Perley and Rideau Veterans' Health Centre. Nancy: What exactly does your volunteer role entail? Bob: I spend up to 30 hours per week at the OCTC building furniture for children with special needs and two six hour days per week at the Perley preparing parts for seniors to use in rehabilitation. Nancy: How long have you been volunteering? Bob: I'll be starting my 10th year with the OCTC in January 2011 while I started volunteering at the Perley Veteran's Hospital just this past summer. Nancy: How did you get involved? Bob: I found both organizations in the Ottawa Citizen. Nancy: How long have you been retired? Bob: 14 years. Nancy: What was your occupation prior to retirement? Bob: I retired in 1996 as a Superintendent in the RCMP with just over 40 years of service, 11 of which were spent in London, England. Nancy: Do you have any other interests or hobbies? Bob: Cooking and woodworking. Nancy: Describe how volunteering has enriched your life and the benefits you derive from it. Bob: Being a volunteer woodworker enables me to use my skills while contributing something of value to the community. Working with the staff and other volunteers has been very rewarding. The letters of thanks I have received from parents and children have affected me more than I can say. We would like to thank Bob for taking the time to speak with us; we appreciate being able to share your story. To learn more about volunteer opportunities within your community, visit the Volunteer Canada website and view the hundreds of positions available today: http://volunteer.ca/ If you or someone you know is interested in sharing their story, email or call Nancy and your story could be profiled in an upcoming newsletter. Volume 26, Issue 4 Winter 2011 Tax Season Preparation Other It's never too soon to start organizing your tax return file. As many of Spousal or child support received you know, we provide in-house taxes return services to our clients. Property tax or rent paid (if family net income < $40,000) Employment expenses (auto / supplies / home office) We have prepared the following checklist to help you assemble the (form T2200 required - signed by employer) information required. Moving expenses (T1M) if you moved 40 km closer to new place of work RRSP Home buyer information Details of any foreign income General Last year’s tax return Details of changes to personal status such as marriage, separation, births, new address, telephone number, disabilities, death Amounts paid by installments T-Slips T4 Employment income T5 Interest or dividends T3 Mutual fund income T600 Canada Savings Bond interest T4OAS Old Age Security (age 65) T4A(P) Canada or Quebec Pension T4A Pension, retiring allowance, scholarships T4RIF Registered Retirement Income Fund T4RSP Withdrawal from a RRSP T5007 Workers compensation, social assistance T5013 Partnership income T4E Employment Insurance Benefits T4PS Profit Sharing Plan Deductions RRSP contribution slips Professional fees or union dues (if not on T4) Donations Medical expenses ( drugs, dental, glasses, therapy, private health plan premiums) (Summarize by family member and exclude any amounts reimbursed) Child care information Tuition fees/education amounts Interest on money borrowed to earn investment income Safety deposit box (if you own investments) Investment management fees Public transit passes Labor sponsored tax credits Spousal or child support paid Political contribution receipts Investments (excluding RRSP accounts) Stocks - Capital gains summary report (from broker) or transaction slips/details Mutual Funds - Annual statement showing gains/losses Real estate - agreement of purchase and sale (for both original purchase and sale) (If investments are jointly owned with your spouse, details of % split. For all investments sold, switched or exchanged during the year.) Volume 26, Issue 4 Winter 2011 Winter Activities CALENDAR OF EVENTS Winterlude FLOW THROUGH PRODUCTS February 4 – 12, 2011 1525 Carling Ave, Lower Boardroom www.canadascapital.gc.ca/winterlude January 26, 2011 6:30-8pm Taste of Winterlude January 27 – February 21, 2011 http://winterlude.gc.ca/taste-of-winterlude/ RRSPs 101 1525 Carling Ave, Lower Boardroom Rustic Wine and Cheese at Clos Baillie Winery, Aylmer February 5, 2011 (Saturday) January 28, 2011 & February 4, 2011 9:30am-11:00am $35 for three wines, six cheeses and presentations http://www.canadascapital.gc.ca/taste-of-winterlude/?id=136168 COMFORT KEEPERS (INDEPENDENT LIVING) Broadband Jazz Master classes Series, NAC Shari Westman, President February 8, 2011 1525 Carling Ave, Lower Boardroom Free admission 12Noon-2pm March 2011 http://www.nac-cna.ca/en/whatson/event.cfm?ID=6431 6:30-8pm TOOLS OF THE TRADE; Reuters, Morningstar, Paltrak Family Day Michael Prittie & Duane Francis February 21, 2011 1525 Carling Ave, Lower Boardroom Most schools and businesses are closed. Check with local museums and April 2011 galleries for reduced rate admission fees. 6:30-8pm Ski for Kids, Mooney's Bay February 21, 2011 Family cross country ski day (Family Day) with proceeds going to The Children's Wish Foundation. Ottawa Public Library Borrow a Privilege Card and gain free admission to: Gatineau Park cross-country skiing Museum of Nature Science & Tech Museum Ottawa Museum Pass (Civilization, War & Postal Museums) Artpass Renfrew County Museum Pass Be sure to check our website often for updated information on Seminars http://biblioottawalibrary.ca/en/main/library/card/using/passes/privilege & Client Events: http://www.michaelprittie.ca/index.html Please direct any questions to Nancy Smith, Business Relations 613 728-0101 ext 226 firstname.lastname@example.org Manulife Securities Incorporated is a member of Canadian Investor Protection Fund. Manulife Securities and the block design are registered service marks and trademarks of The Manufacturers Life Insurance Company and are used by it and its affiliates including Manulife Securities Incorporated and Manulife Securities Insurance Inc. Michael Prittie and Manulife Securities Incorporated and Manulife Securities Insurance Inc. ("Manulife Securities") do not make any representation that the information in any linked site is accurate and will not accept any responsibility or liability for any inaccuracies in the information not maintained by them, such as linked sites. Any opinion or advice expressed in a linked site should not be construed as the opinion or advice of Michael Prittie or Manulife Securities. The information in this communication is subject to change without notice.
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