Tag Archives: Finance

Investment Transition Planning for Spouses and Children

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*Highlights on Tax Impacts on Heirs.

When someone passes away, understanding what happens to their investments can be confusing , where we have both federal tax rules (CRA) and Quebec provincial civil law. This overview is intended to assist in explaining, in simple language, what happens to registered and non-registered investments after death, and how it tax implications affects your spouse and children.

Quick Comparison Table

Type of InvestmentAt DeathIf Spouse InheritsIf Child Inherits
RRSPFully taxed unless rolled overCan roll into spouse’s RRSP tax-freeFully taxed unless child is dependent or disabled
RRIFSame as RRSPTransfer to spouse’s RRIF tax-freeFully taxed unless child is dependent or disabled
TFSANot taxedSpouse can take over tax-freeChild gets value tax-free, growth taxed
Non-Registered InvestmentsDeemed sold — capital gains taxedGains deferred to spouseEstate pays gains; child taxed on future gains
Joint Accounts May pass to joint holderMay avoid estate delaysRare for children
Life InsuranceTax-free to named beneficiaryFull amount tax-freeFull amount tax-free

Key Points to Understand

  • If your spouse inherits your registered accounts, they can roll them over tax-free. Ensure your spouse is named directly as beneficiary in the account.
  • If your children inherit your RRSP or RRIF, the value is usually fully taxed unless they are disabled or financially dependent.
  • Name beneficiaries directly in the account contract, not only in your will.
  • Quebec uses notarial wills and liquidators instead of probate and executors.
  • Incorrect or missing beneficiary designations can result in higher taxes and delays.

Simple Planning Tips

  • Use a notarial will
  • Review your investment accounts and life insurance policies regularly
  • Set up an RDSP for disabled children
  • Keep all estate documents up to date

More Information

*This article is for informational purposes only and does not constitute legal advice. For advice specific to your situation, consult a qualified legal professional .

Interest Rates Cuts : Impacts and Challenges

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*Samer Majzoub

 Bank of Canada Cuts Interest Rates: Impacts and Challenges

The Bank of Canada recently announced a cut in interest rates, a move aimed at stimulating economic growth amidst prevailing uncertainties. This decision is expected to have several positive impacts, along with some challenges and potential negative consequences.

Expected Positive Impacts

  • Increased Consumer Spending: Lower interest rates generally lead to reduced borrowing costs for consumers. This encourages spending on big-ticket items like homes and vehicles, potentially boosting economic activity.
  • Support for Businesses: Businesses may benefit from cheaper loans, enabling them to invest in expansion, hire more staff, and innovate. This can foster job creation and enhance productivity.
  • Boost to Housing Market: With lower mortgage rates, the housing market could see renewed interest, making home ownership more accessible and stimulating related sectors like construction and home goods.

Possible Challenges Ahead

  • Inflationary Pressures: While lower rates can stimulate growth, they may also exacerbate inflation. If demand outpaces supply, prices could rise, counteracting the benefits of lower borrowing costs.
  • Financial Stability Risks: Sustained low rates might encourage excessive risk-taking among investors, potentially leading to asset bubbles in housing or stock markets.
  • Dependence on Low Rates: An extended period of low interest rates could make the economy overly reliant on cheap credit, hindering long-term growth prospects.

Potential Negative Impacts

  • Impact on Savings: Lower interest rates can diminish returns on savings accounts and fixed-income investments, affecting individuals who rely on interest income, particularly retirees.
  • Debt Accumulation: Easier access to credit may lead to higher levels of consumer and corporate debt, increasing vulnerability to economic downturns if borrowing becomes unsustainable.
  • Currency Weakness: A rate cut may weaken the Canadian dollar, making imports more expensive and potentially leading to a trade imbalance.

In conclusion, while the Bank of Canada’s interest rate cut aims to boost economic growth, it comes with a complex mix of benefits and challenges that policymakers will need to navigate carefully to ensure long-term stability.

Nb: Points mentioned in the article are expectations’ based. The market rules it self.

A quick view on Islamic Mortgage!

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Islamic mortgages are alternatives to standard mortgages on the market and were created to enable Muslim customers to buy real estate using faith based compliant finance products.
The most significant difference is that the loan is not a debt with Islamic Mortgage. Instead, it is a partnership between the borrower and the lender, sharing the profits or losses of the property.
They differ from traditional home loans in that you don’t pay interest as this is forbidden under Sharia law.

PRINCIPLES RELATING TO ISLAMIC MORTGAGES
The four main Islamic finance principles that apply to Islamic mortgages are:
RIBA
Riba refers to usury or interest and is strictly prohibited for Muslims as dictated by Sharia law. Islamic mortgages do not have any interest payment elements.
IJARA
An Ijara mortgage is similar to a rent-to-own scheme. The financier buys the property outright and rents it to you for a fixed term. Over this term you make regular steady payments, which are a combination of rent, repayment of capital, and profit for the financier. At the end of the agreement, ownership is transferred to you. 
MUSHARAKAH
Musharaka refers to joint partnerships where you can make a decision with the bank to own separate shares in the property. As more and more monthly payments are made, thus the share owned by the bank is reduced until the homeowner owns the property outright.
MURABAHA
Murabaha is when the bank buys the whole of the property and sells it back to you for a higher price. The higher price is repaid in instalments and means that the bank can recover its costs, and the homeowner does not have to pay interest on the mortgage loan.

*various sources

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