FOCUS ON INSUraNCe

Make it a family affair

pay for final expenses when your parents die — such as funeral costs, probate, executor fees, legal fees, and capital gains taxes. In many cases, in the age of extend-ed life spans, your parents will live until you are nearing retirement yourself, making this a form of retirement financial planning and also a way for them to leave more of an estate for all of their heirs (not just you).

You are allowed to buy life insurance for your parents, but be aware that they typically must have medical exams and sign the application. Note that there may be coverage limits, which we can discuss. We can also recommend the proper amount of coverage and the right type of policy. n

Using life insurance to secure your family’s financial future can some-

times require creative planning. Providing your parents with a life insurance policy is one way to give everybody the peace of mind that insurance is designed to bring.

The fact is many retirees have minimal life insurance coverage or no insurance at all. Often they’d like to have more, but can’t afford the premiums. Taking out a policy on your parents will relieve them of the concerns of paying premiums or increasing coverage and meet the same objectives as if they purchase insurance themselves.

The proceeds of a life insurance policy can meet any number of financial objectives. A policy can provide funds to

Independent Financial

Concepts Group Ltd. Langstaff Road - Concord Office:

1700 Langstaff Road, Suite 1001 Concord, ON L4K 3S3 Telephone: (905) 202-8430 Fax: (905) 695-0507 Holly Street - Toronto Office:

20 Holly Street, Suite 207 Toronto, ON M4S 3B1 Telephone: (416) 486-3989 Fax: (416) 486-4061

Website: www.ifcg.com It’s summer — a time to relax and get away from it all.

That relaxed feeling is a great reminder for why you should take the worry out of your financial future. Whether you’re planning for a stress-free retirement or simply want the peace of mind that comes from knowing today’s financial needs are taken care of, it’s important to be confident in whatever lies ahead.

So while you might take a summer vacation, your money never should. We’re committed to helping you find innovative ways to make investments work harder for you.

The world is full of investment oppor- tunities. However, many of them are in

countries that you might not have ventured into, investment-wise. Not being familiar with the financial markets in certain countries can prevent you from taking advantage of investment potential outside Canada.

However, there is a simple and effective way to invest in countries that can add some spice to your portfolio, while benefitting from expert advice and professional manage-ment: “single-country” segregated funds.

The advantage of a concentrated focusSingle-country funds specialize in invest-ments in companies located in a particular country. They are an effective alternative choice to wider-ranging “geographic area” funds that typically include investments in a number of countries.

Single-country funds provide exposure to narrower — yet potentially lucrative — slices of the global market to which you normally wouldn’t have access, or where you might be reluctant to venture through individual securities. With one investment, a single-country segregated fund lets you hone your international focus while increasing portfolio diversification.

The advantage of accessThese funds help overcome the difficulties you might have investing in individual securities in these countries. Many foreign markets can be difficult to navigate because of language barriers, a lack of research material available to individuals, and difficulties trading securities from Canada.

Canadian segregated fund organizations offer a selection of single-country funds, including those that focus on China, Japan, and India. These funds are managed by

fund managers in these countries who know their economies, financial markets, circumstances and individual companies in their target countries.

Segregated fund portfolio management teams comb these markets for attractive investment opportunities that meet each fund’s individual objectives. Their expertise turns what the average investor might sees as a barrier into an opportunity for investors in a single-country fund.

The advantage of diversificationWith one investment, you instantly have a stake in a wide selection of holdings. This level of diversification can be extremely difficult to achieve through individual investments in foreign countries.

It may also be costly, since buying and selling stocks on foreign exchanges is typically more expensive than trading on those of North America.

However, some caution is warranted. While single-country funds can often be leading performers, they can also be volatile. Global investments may be subject to market and economic forces that differ from those in North America. For these reasons, single-country funds should be a supplement to a “core” segregated fund strategy, not your principal investment focus.

Who are single-country funds for? Investors who have a specific interest in one country, or who want to build a broad-based international fund portfolio through a series of country and regional funds.

Talk to us. We can work with you to explore the world of single-country funds and help select the right investments for your segregated fund portfolio. n

For more opportunities, take your portfolio on a trip

Segregated FUNdS

Just one destination? expect higher risk, higher potential reward

Source: Globefund 15-year segregated fund reviewAverage return of all funds in group for a one-year period, reflecting a reinvestment of dividends, and subtracting management fees and expenses.

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

-50

-40

-30

-20

-10

0

10

20

30

40

50

60

70

80

JapanBEST

21.9%

ChinaBEST

70.7%

ChinaWORST

-42.0%Japan

WORST-30.1%

The potential returns make single-country funds very attractive…

…but you need to be able to tolerate the possible declines.

The MONEY fileT I P S A N D T A C T I C S T O H E L P Y O U G E T A H E A D

WHat YOU Need tO KNOW aBOUt...

Preferred shares in segregated fundsIn today’s environment of erratic bond yields and low interest rates, it can be a challenge to put together an effective mix of income-generating investments. Preferred shares and the segregated funds that hold them may provide an attractive alternative.

What are they? Preferred shares are a class of a company’s shares

that have preference over common shares when itcomes to paying dividends. They typically do not have voting rights. Preferred shares provide the potential for income as well as capital appreciation. Like common shares, they represent ownership in a company. Unlike common shares, they generally pay a fixed dividend.

What are the caveats? Dividends may not be guaranteed, so the income stream can end. Another thing to note is that a

number of preferred shares are redeemable, which means that the issuing company has the right to call in the shares at a certain price. A company may do this if market rates fall below the rate the shares were issued at, at which point they might repurchase them from investors and issue new shares at a lower rate.

Preferred shares tend to be less volatile than common shares. The preferred dividend offers some protection from equity market downturns, but may also limit price appreciation. Preferred shares are also affected by changes in interest rates (though to a lesser degree than bonds); when rates go down, prices go up, and vice versa.

Who are they for? If you are looking for relatively low volatility but decent yield, segregated funds that include pre-

ferred shares may have a useful place in your portfolio. Many Canadian income funds focus on preferred shares. In addition, if keeping your income tax lower is a priority, dividend income from preferred shares issued by Canadian companies benefit from the dividend tax credit. This favourable tax treatment applies to dividend income earned by segregated funds and distributed to unitholders.

The range of preferred share features adds to the complexity of investing which is one reason many people prefer to invest through a professionally managed segregated fund. We can help you sort through the possibilities.

INVESTMENT PLANNING

Keep more for yourself and your partnerIf you and your spouse have an income gap, you may be in an ideal position to take advantage of one of the few income-splitting opportuni-ties available for Canadian couples: the spousal investment loan. This strategy gives you the potential to reduce your total income taxes as a couple — and increase investment returns. The reason now’s a good time? The interest rate prescribed by the Canada Revenue Agency is the lowest it’s been in years, just 1%! The rate can be locked in for the life of the loan. Here’s how it works.

Through a spousal investment loan, a higher-taxed spouse lends money to a lower-taxed spouse, who then uses the funds to invest. Income earned from the investment is taxed in the hands of the spouse with the lower tax rate. This results in lower combined taxes for a couple than if the higher-taxed spouse does the investing.

Interest on the loan must be paid by the end of January every year for the previous calendar year. There is no obligation to repay the principal. The borrowing spouse receives a tax deduction for the interest and the lender pays tax on interest income.

We can help you decide whether it makes sense for you and your spouse to use this income-splitting strategy and help you choose a suitable investment. n

EDUCATION PLANNING

Learning goes beyond the classroomA Registered Education Savings Plan (RESP) isn’t only about saving for your child’s post-secondary education. It’s also about using the funds wisely. Here’s how to best help your child draw and use the money in the plan.

To start, once your child is registered in a qualifying post-secondary program, funds from an RESP are made available through Educational Assistance Payments (EAPs).

The most a child can receive for the first 13 weeks of an educational program is $5,000. After that time, the funds that can be made available are limited only by the actual costs of study. Remember, as the plan “subscriber” you get to maintain control over the RESP. This is where the real planning comes in. Together, we need to ensure that the money is distributed so it lasts throughout the time it’s required.

It’s also important to manage your child’s expectations. RESP beneficia-ries should be aware that you control the funds, and should be part of a discussion about how much they’ll receive and when. Your child should

also know that he or she might be responsible for income taxes as a result of payments received (although in reality taxes are usually minimal or non-existent). We should also discuss how your child can successfully manage education finances. n

Q:Q:A:A:

Q:Q:A:A:

Q:Q:A:A:

life insurance

start spreading the newsDO THE PEOPLE who matter most to you know about your life insurance policy? After all, your coverage is designed to benefit your loved ones. While we may have the details of your coverage, it’s also essential to educate your family or other beneficiaries about your insurance.

This will spare them the anxiety of not knowing what to do when the time comes to deal with policy proceeds. It will also ensure that they benefit as soon as possible.

We recommend creating a list of essential information that can be distributed to important family members. Leave a copy with your lawyer and with us. It should include:

• Details of your life insurance policy.• Details of where your policies and

wills are kept. Consider leaving copies of policies with family members.

• The names and contact information of your financial advisors, insurance agent, and lawyer, and how they can be contacted.

• Details of other insurance policies, including: employee benefits, disability policies, special liability policies, and auto and home coverage.

It’s a good idea to have a discussion with key family members and beneficia-ries about your insurance coverage. When they understand your motives when you purchased coverage — including who you named as beneficiaries and why — it can help prevent problems down the road.

Talk to us. We can assist you with a strategy to educate your loved ones about your insurance coverage. n

insurance PlanninG

L ike all aspects of your finances, insur-ance needs can change. We should

regularly review your insurance coverage to ensure it offers the best possible protection.

Your evolving insurance needs depend on your current and changing life situation and your financial goals. Our review should be based on an exploration of the key aspects of your life. Here are three to consider.

1. Life eventsSome of the key developments that can call for insurance changes include marriage, divorce, birth of children, change in income, and a sudden change in your wealth.

For example, perhaps you need to increase coverage because your family is larger and you want to leave more for your heirs. Alternatively, perhaps you no longer have a need for as much insurance because you’ve built up wealth, paid off the mortgage, and your kids have finished their post-secondary education.

A review might even reveal how we can save you money on life insurance coverage. For example, if your health picture has changed for the better — perhaps you’ve lost a great deal of weight or your high cholesterol has dropped — we might be able to take advantage of the breaks on premiums some insurers offer under those circumstances.

2. BeneficiariesOne thing we should always review is your beneficiaries. Since they’re the ones who

receive the proceeds of your policy, it’s important that we always make sure they’re who you want them to be, and that you’re taking care of them in the best way possible.

You may want to make beneficiary changes as you go through life, to accommodate new children or grandchil-dren, or even to leave insurance proceeds to your estate so they can be distributed through your will. It depends on your current and changing situation and your financial goals.

3. Your financial situationWe should explore your insurance coverage in relation to your overall financial picture. Remember, insurance is just one part of a long-term financial strategy, which means the coverage that’s right for you depends on other aspects of your financial life.

If your life insurance policy includes an investment component, we can explore how it fits in with your overall plan. We’ll examine its investment performance and consider the best ways to use the cash value.

Together, we can determine whether the types of policies and the levels of coverage you already have are still appropriate for you and your family. If changes are appropriate, we’ll make recommendations.

Let’s discuss your life insurance coverage at least once a year. Then you’ll have the peace of mind that comes from knowing you’re well covered. n

Taking the pulse of your coverage

This newsletter has been written (unless otherwise indicated) and produced by Ariad Custom Communications. Vol. 25, No. 4 2011 Ariad Custom Communications. This newsletter is copyright; its reproduction in whole or in part by any means without the written consent of the copyright owner is forbidden. The information and opinions contained in this newsletter are obtained from various sources and believed to be reliable, but their accuracy cannot be guaranteed. Readers are urged to obtain professional advice before acting on the basis of material contained in this newsletter. Readers who no longer wish to receive this newsletter should contact their financial advisor. ISSN 1205-5840