Planning Strategies
Ever heard the old saying "Those who fail to plan, plan for failure"? Find out how you can plan for success through effective financial planning. After reviewing this material, feel free to email me with any of your questions or comments to:

Estate planning is an essential part of comprehensive financial planning. The orderly distribution of assets to beneficiaries, payment of creditors, and minimization of taxes is a key objective for most persons who have significant assets. Click on Estate Planning - Creating and Preserving an Estate for more information on this topic. You can also click on Estate Maximization to find detailed information on maximizing estates and reducing taxes, particularly the taxes of beneficiaries.

It is very important to have an updated will. Dying intestate (without a will) can create tremendous difficulties for your heirs or beneficiaries. For a description of the difficulties created when you don't have a will, click here on this link: Dying Intestate Without a Will. For a description of things to consider when drafting a will, click on this link: Issues to Consider When Drafting a Will. For a description of what to consider when selecting or acting as an executor, click on this link: Executors – Selection, Duties & Planning Points.

Powers of Attorney
Powers of attorney are another vital part of good financial planning. Powers of attorney cover those situations where you cannot, either permanently or temporarily, make decisions with respect to your financial affairs or health. In Ontario, there are two kinds of power of attorney: one for finances and one for your personal care or health. Once you become incapacitated, you cannot sign a power of attorney, thus it is very important to have these be in place before such an event. For a more detailed explanation, please click on this link: Powers of Attorney – Uses and Planning Points.

Retirement planning is the cornerstone of all financial planning and no pre-retirement plan is complete without a retirement plan. Although generally called retirement planning, a better description is "financial independence planning" because that is really what we are planning for: the day when you can stop working and live off your capital and have it last the rest of your life. I generally tell people that we are trying to calculate when you could stop working if you choose to but you don't have to. If you continue to work after the point when you could stop, then you are simply increasing your cushion and your estate. Most people however are happy to stop working and look forward to playing golf, travel, or pursuing their hobbies or whatever pleases them. For more information, click on Tips for an Early Retirement and How Much Do I Need to Retire?. Both of these are information pieces from the Institute of Chartered Accountants of Ontario, of which I am a member. For a case study featuring retirement planning, click on CS#2 – Getting Ready for Retirement. For a case study featuring post-retirement planning and aging issues, click on CS#1 – Dealing With Aging.

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Risk Management
In financial planning terms, risk management means finding ways to mitigate the risk of financial loss or hardship due to unexpected events such as death, disability or poor health. Generally speaking, such risks are mitigated by using products offered by insurance companies, such as life insurance, disability insurance, critical illness insurance and long term care insurance.

Life insurance

Life insurance is essentially a way of insuring an income stream. In a family, one or both of the spouses earn an income and they are either mutually dependent, or one is dependent on the other, or there are children who are dependent on their parents for support. Life insurance provides the capital to replace a portion or all of the income which is no longer provided when the insured dies. As in all forms of insurance, all insureds share the risk of premature death and spread this risk amongst themselves. Insurance actuaries use actuarial tables developed using statistical methods to determine what the risks are which are then used to calculate insurance costs. Please click on Types of Life Insurance to get a detailed description of the different types of life insurance. For a description of the principles of risk management, please click on Insurable Risks and the Principles of Risk Management.

Disability insurance

Disability insurance covers the risk of an insured person becoming disabled, either permanently or temporarily. The risks of becoming disabled are much higher than the risks of dying as you can imagine. The financial risk arises from the disruption in a person’s ability to earn an income. Most disability insurance pays a monthly amount if the insured person becomes disabled. This amount will always be limited to a set percentage of the insured person's income (typically at 70% maximum of pre-tax income). This limit is in place to provide an incentive for the insured person to go back to work. For a detailed description of the various types of disability insurance, click on Disability Insurance.

Critical illness insurance

Critical illness insurance is a form of protection that can provide you with a lump sum payment if you suffer from a covered critical illness and the survival period is satisfied. The physical and emotional strain of a critical illness can be severe and when you combine that with the potentially damaging financial impact, the result can be devastating. Unlike traditional life insurance, critical insurance coverage is a fairly recent development.

That's where the critical illness benefit comes in—you are free to spend the money as you wish—such as to help cover lost income, to pay for private nursing or out-of-country treatment, for medical equipment or even to pay off your mortgage. It can help you where you need it most so you can focus all your energy on recovering.

A critical illness can happen to anyone:
  • It is estimated there are over 70,000 heart attacks in Canada each year.
  • There are between 40,000 and 50,000 strokes in Canada each year.
  • An estimated 3,075 Canadians will be diagnosed with cancer every week.
As you would expect, critical illness insurance is more expensive than life insurance because the risk of getting a critical illness is higher than dying (not all critical illnesses lead to immediate or even eventual death). On the other hand, you probably don't need the same amount of critical illness insurance as you would need life insurance. If you collect a lump sum on your policy, you can use this amount to supplement your income, or you can use it to fund treatment in the country, or out of the country. One of the really great features of critical illness insurance is access to Best Doctors, which is a referral service to the best doctors in the world for each covered condition.

There are a wide range of Canadian insurance companies who offer a critical illness policy. The terms and conditions will vary from company to company, but the following ailments are insurable by virtually all insurers (Base Coverage):

  • Heart Attack
  • Coronary Bypass Surgery
  • Prostate Cancer
  • Stroke
  • Breast Cancer
  • Other life threatening cancer

  • In Addition, the following conditions are insured, depending on which insurance company is chosen (Enhanced Coverage):

  • Multiple Sclerosis
  • Kidney Failure
  • Major Organ Transplant
  • Aorta Graft Surgery
  • Benign Brain Tumour
  • Coma
  • Heart Valve Surgery
  • Pre Senile Dementia (Alzheimer's)
  • Motor Neuron Disease
  • Loss of Independent Existence
  • Loss of Speech
  • Parkinson's Disease
  • Paralysis/Paraplegia
  • Severe Burns
  • Balloon Angioplasty
  • Blindness in both eyes
  • Coronary Artery Disease
  • HIV through Blood Transfusion
  • HIV Medical Profession
  • Loss of Hearing
  • Loss of Limb

  • As not all critical illness policies are the same, it is important to seek out professional advice and guidance in choosing your policy.

    Long term care insurance

    Long term care insurance is a type of insurance that covers the risk that you end up in a long term care facility. This type of insurance becomes more expensive the older you get. I once had a client who was over 80 and she was getting worried about the possibility that she would end up requiring long term care. I had to tell her that it was not available at her age. The time to consider ensuring yourself for this is when you are still in good health and in your late 50's to mid 60's. After this, it becomes very expensive. For a longer description of long term care insurance, please click on Long Term Care Insurance.

    Best Mortgages
    When it comes to regular mortgages, for the most part the rates dictate who has the best mortgage. Any good mortgage broker can help you with this. If you have a good relationship with a certain financial institution by all means keep using them, but I suggest you keep them honest by getting quotes from others before you renew. Watch out for the penalties for pre-payments or refinancing. Any company that doesn't allow at least 20% prepayment, I would pass on.

    For the Smith Manoeuvre, the requirements are much more extensive, and there are far fewer suitable products. Keep in mind that they change the programs frequently and new entrants can emerge at any time. At this point, there is no perfect product on the market – in fact, they are all pretty imperfect. For a more detailed discussion of what the perfect Smith Manoeuvre mortgage would look like, and what companies out there are offering mortgages that at least work with the Smith Manoeuvre, click on
    The Perfect Smith Manoeuvre Mortgage.

    Other Planning Topics
    For a discussion of some of the dangers of joint ownership, particularly if the joint ownership is with children (or even worse, friends) click on Why Joint Ownership is Often Bad.

    For a discussion of the merits of owning versus leasing automobiles, click on
    Automobiles – Lease vs. Buy.

    For a detailed discussion of executive compensation, click on
    The 9 Biggest Mistakes Executives Make with Their Compensation**.

    Case Studies
    For a case study on the issues of aging, see CS#1 – Dealing with Aging

    For a case study featuring retirement planning, see CS#2 – Getting Ready for Retirement

    If you have any questions or comments, feel free to email me at
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