You have questions. We have answers.
Our clients are family members, business owners, employees and parents. We are working on continually providing resources that might be helpful in dealing with your financial situation. Check out here frequently Asked Questions. Below you will find answers to all of the most common questions we get at ZLC Financial. If you don’t see what you’re looking for, don’t hesitate to reach out to us.
Can I take advantage of lump sum payments?
Yes, the design of your structured settlement can include lump sum payments in the future to provide for purchases beyond your monthly expenses.
How does a reduced life expectancy affect my annuity?
If you have a reduced life expectancy due to health reasons you may qualify for a higher monthly income. If applicable, medical information is submitted prior to the design and purchase of the annuity.
I am a single mom with 2 kids and I work as an accountant. Why would I need critical illness insurance?
As a single parent with 2 children, I am certain that your daily routine is quite busy. Between your career, running the household, and kids activities, there is probably not a lot of spare time! Imagine the impact that a serious illness such as cancer, heart attack, or stroke could have on that routine.
Critical Illness insurance can provide you with the peace of mind and flexibility to be able to control your treatment and recovery process. It can provide the money required to pay for alternative treatments or procedures not covered by your basic medical or extended health plans, as well as the many indirect costs that need to be considered such as childcare, accommodation, and transportation to and from medical facilities.
Another concern is the recovery and rehabilitation period. Should getting back to work in order to be able to pay the bills be your first priority? Or would you prefer to have the flexibility to take the proper time and care to ensure that you are truly ready to get back to your normal day to day life.
Consider the following:
- Do you know anyone that has suffered from cancer, heart attack, stroke, or other life threatening illness?
- Did they plan on it happening to them?
- Were there unplanned emotional or financial stresses on their family or business?
- Would cash have helped?
Call today to meet with one of our critical illness insurance specialists. We will design and implement a plan suited to your individual needs.
How does a reduced life expectancy affect my annuity?
The most important questions to ask in determining which type of insurance you need are:
“What are my greatest financial risks?” and “When do I need to be protected?”
Loss of income is arguably the most significant risk people face. Other risks encountered on a regular basis include the need for liquidity to pay estate taxes, fund a shareholders agreement, or provide for future generations.
Loss of income is caused by the inability to work due to three factors: accident, illness, or premature death. In all three of these situations, you can be protected. Disability insurance can replace a portion of your income; critical illness insurance can provide financial assistance with medical and living costs; life insurance can provide capital to replace your income in the event of premature death.
In each of these situations, insurance is likely needed on a shorter-term basis for a fixed dependency period, therefore level cost term insurance makes the most sense.
Estate planning goals are longer term in nature. Protection for the short term is combined with planning for the future. Permanent life insurance, universal life, or whole life insurance is used to meet these needs.
By determining your greatest financial risks and the time frame over which they may occur, you can determine the right type of insurance to meet your needs.
What happens to my Registered Retirement Savings Plan (RRSP) when I retire?
When you retire you have 3 options when it comes to your RRSP. The first option would be to cash it in. If you do this you will receive the entire value of your RRSP portfolio. You will; however, have to pay income tax on the full amount of the withdrawal in the year that you take out the funds.
The second option would be to purchase a life or term annuity. The annuity would pay you an amount of income for either a predetermined number of years or for the rest of your life. Only the amount of income that you take in any given year will be taxable.
The third and most common option is to convert your RRSP to a Registered Retirement Income Fund (RRIF). You can continue to invest funds in your RRIF the same way it was invested in your RRSP. The only difference is that a RRIF requires that you withdraw money from the plan every year. The percentage you are required to take out increases every year.
It is important to note that if you retire and do not need the income, you can wait until you are 71 years old before you are required to pick any of the options discussed above.
Should I pay down my mortgage or put money into my RRSP?
Do both, and get two bangs for the same dollar!
By contributing to your RSP (or your spouse’s RSP) you instantly benefit by reducing your taxable income and receiving a tax refund. You also benefit long term as your RSP then compounds tax free, so your retirement nest egg grows larger.
When you get your tax refund do something significant with it. Paying down debt is a great choice, but consider all your debt, not just your mortgage. With mortgage rates so low, you may be better off using your tax refund to pay down higher interest credit cards or personal loans (unless they are for investment purposes).
The power of investing early is significant. Those who focus on paying off their mortgage first, then contributing to their RSP later, often find they can never catch up. I.e. investing $5,000 per year @ 8% for 10 years ($50,000 total) then leaving it 10 years, would provide $169,198. If you delayed investing for 10 years (while you paid off your mortgage) even investing twice as much; $10,000 per year @ 8% for 10 years ($100,000 total), you would only have $152,455.
Make your money work as hard as you do.
In today’s economic environment, how do companies maintain a valuable benefit program while controlling the rising cost?
During challenging economic conditions, companies look to improving on their “return on investments”, and this also includes greater value from the monies they spend on their “employee benefit programs”. Greater focus has been to provide the right plan, at the right price.
Many companies look to market surveys to seek lower costs for their existing benefit programs. This option is often the easiest, but usually for a temporary period of time, approximately 12 – 24 months. What some companies may not know is there are hidden costs when changing providers. And while market surveys may be a temporary solution, companies should also look towards plan design changes, which typically provide longer term solutions to rising costs.
Changing the plan design is a form of “cost shifting” or “cost sharing” with employees. It’s a challenge for companies to persuade employees of the financial necessity to share in the cost of providing their benefit plans; however premium sharing or a user pay plan design change will maintain a plans integrity.
In order for a user pay design to be successful, it will depend on the company’s ability to effectively communicate the facts that employee mutual participation is fundamental to the survival of the employer’s benefit programs.
Since advice is only as good as the people you ask, companies should be partnering with independent advisors who have the experience, personnel and expertise to work with them to achieve their corporate goals.
How can I provide my employees with a comprehensive, yet cost-effective prescription drug plan?
Communicate with employees on cost-saving ideas that they can use both at the doctor’s office and at the pharmacy:
Special Authority. Ensure employees are aware of Fair Pharmacare and the Special Authority plan. Encourage them to sign up for Fair Pharmacare and if they are taking any expensive medications, to discuss Special Authority coverage with their doctor to see if the drugs can be covered.
Generic Drugs. Many people feel that a brand name drug is “better” than a generic drug; however, generic drugs provide the same therapeutic benefits as brand-name drugs – usually at a lower cost.
Dispensing Fees. These and drug costs vary from pharmacy to pharmacy. In Canada, dispensing fees can range anywhere from $4 – $16 per prescription filled. Set up a deductible for prescription medication that is equal to the dispensing fee. This will encourage employees to shop around for a lower fee.
Recurring Prescriptions. In order to save on dispensing fees, recommend that maintenance medications be dispensed in three-month supplies.
Most people have no idea how expensive benefit plans are. By educating employees, making them aware of the costs associated with the plan, they may think twice before getting a brand name drug or filling their prescription at a pharmacy with high dispensing fees.
By having the employee play a role in their drug plan, it now becomes partly their responsibility.
Business Family Succession
What Is Business Succession Planning?
Business succession planning is a process to arrange for the successful transition of a business to a new owner that maximizes the value while minimizing taxes and costs. And at the same time reducing the stress and emotional turmoil that often accompanies such a transition.
It differs from a common sale of the business in that the successor/buyer is usually pre-determined years in advance. The successor/buyer may be a partner or key employee but could also be an heir – usually a son or daughter, or other family member. The latter is usually the case where the enterprise involved is a family business with one or more generations of a family represented amongst the employees or shareholders.
It is important that there be a team approach in design and implementation of a business succession plan. This team should include professionals from the fields of accounting, legal, investment and insurance. To have a truly effective succession strategy the team members should also have a great deal of experience in working with these types of plans or at the very least have access to resources to assist them.
There are many benefits to business owners who undertake this planning, including a smooth transition of the business, enhancing the estate left to the heirs, and maximizing the value of the business.
It is never too late to start planning for business succession but often it is left much too late.