Insights: Second marriages, RRIF withdrawals, market drivers + gros melons
Good reads:
· How relief recipients can plan for an unprecedented tax season
· Snowbirds, COVID-19 and what to do with your sunbelt property
· Trump deducted $70,000 for hairstyling expenses, but don't expect the CRA to let you do the same
· Some Travelers Miss Flying So Much, They’re Taking Planes to Nowhere
· Amazon jumps into virtual tourism, offering live one-on-one experiences around the world
Best quotes of the week:
“You can tell you ate too much for Thanksgiving when you have to let your bathrobe out.” – Jay Leno
Best soundbites of the week:
Here are some excerpts from an interesting article discussing a few estate planning issues that should be considered when getting remarried. Although it is a US article, the issues are pretty global in nature and there are similar Canadian structures to what are suggested in the article that can be explored. Estate planning can be a touchy subject in the best of times, but it is well worth making sure all your bases are covered.
Failure to protect your children from a prior marriage: You might think to leave assets to your new spouse with the understanding that he or she will provide for your children when you are gone. But this could leave your children at risk financially. One option might be to create a revocable trust that provides flexibility for the financial needs of both your children and spouse. Another strategy worth considering is establishing a separate marital trust to segregate funds for your spouse as opposed to leaving a common pool of assets to benefit your children and your spouse.
Failure to protect against depletion of assets: A person might decide to leave assets to his or her spouse in a marital trust with the intention that the marital trust will pass to the decedent’s children after the second spouse’s death. But those assets could easily be depleted if, say, the spouse suffers a debilitating medical crisis and enters long-term care. To avoid the possibility that your children receive little or nothing, consider a life-insurance policy.
Failure to protect your estate from your first spouse: Even though a signed divorce decree might automatically disinherit your ex-spouse from your estate, you still need to switch the beneficiary designations on your retirement accounts and company life-insurance plans so your assets don’t inadvertently pass to your ex-spouse.
– Barron’s article
Earlier this year, the federal government announced that it was lowering the minimum required RRIF withdrawal by 25% for the year 2020. This has many RRIF investors trying to figure out what to do. Here are some good points to consider:
The decision depends on a client’s personal circumstances. Specifically, “We don’t want to defer taxes from a low-tax year to a high-tax year,” he said. Thus, a client whose income fell this year due to Covid-19 likely shouldn’t reduce their withdrawal. “They’re probably at a lower tax rate than they would be in normal years,” Bowen said.
The client whose income remains at the usual level should consider their potential tax rates for the next few years as well as estate planning, he said. For example, when a RRIF annuitant dies and has no surviving spouse, their RRIF would be included in income on their final tax return, he noted. A high RRIF balance would mean a higher terminal tax bill, reducing the size of the annuitant’s estate.
Another factor is ensuring net income stays below $79,054 (2020) to avoid any clawback of old age security (OAS). Bowen said clients already subject to OAS clawback may ask about a reduced RRIF withdrawal.
– Investment Executive article
A lot of investors have been questioning how the stock market can be doing so well in the midst of a global pandemic and all the economic uncertainty at play. Along a similar vein, they’ve been equally confused as to why there has been so much activity with mergers & acquisitions. Here is a great synopsis on some of the reasons why M&A is booming:
Some of the reasons for increased M&A activity are easy to understand: we have an environment of record-low interest rates and confidence in the economy has rebounded (off of some extremely low levels, mind you). Another important driver we see is the valuation gap between the ‘haves’ and "have-nots". It's no secret that the largest cap companies have been getting all the love of late, while many quality small and mid-cap companies have been left behind. This has led to an M&A environment where some companies are in a position to prey upon others.
– Travis Dowle, Maxim Capital Management
Best visuals of the week:
Continuing the last thought, here is a great chart that further helps explain why the markets continue to do well. The fact of the matter is that markets are driven by corporate earnings and the big publicly listed companies are generally continuing to make money. Until we see a big drop in earnings, the markets are likely to continue trending well.
Beyond the Markets:
Mmm pumpkin pie. It’s one of the best parts of Thanksgiving, second to spending time with family of course! Here are some interesting facts about pumpkins that you can share around the socially distanced dinner table this weekend:
· In 1705 the Connecticut town of Colchester famously postponed its Thanksgiving for a week because there wasn’t enough molasses available to make pumpkin pie.
· The word "pumpkin" showed up for the first time in the fairy tale Cinderella. They used to be called “gros melons” or “pompions”.
· The original jack-o'-lanterns were made with turnips and potatoes by the Irish.
· Germany has claim to the world's heaviest pumpkin weighing in over 2,600 pounds.
· The largest pumpkin pie ever baked weighed 3,699 pounds. Where was my invitation?!
· Pumpkins are actually a fruit.
· The earliest pumpkin pies took on a very different form from today’s version. Pumpkin pie was made by hollowing out a pumpkin, filling the shell with milk, honey and spices and baking it.
· Pumpkins were once considered a remedy for freckles and snakebites.
Sources: History, Good Housekeeping, Farmers Almanac
Wishing everyone a great Thanksgiving weekend!
Cheers,
Kim
Kim Inglis, BCom, CIM, PFP, FCSI, CAFA
Financial Advisor & Associate Portfolio Manager
T: 416.777.6417 (Toronto)
T: 604.654.1160 (Vancouver)
T: 250.979.1803 (Kelowna)
TF: 1.877.363.1024
Assistant: Grace Ayson | 416.777.7006 | grace.a.ayson@raymondjames.ca
www.inglisprivateinvestmentcounsel.com
The opinions expressed in this newsletter are those of the Financial Advisor Kim Inglis, BCom, CIM, PFP, FCSI, CAFA and not necessarily those of Raymond James Ltd. (“RJL”) or Raymond James (USA) Ltd. (“RJLU”). Statistics, factual data and other information presented are from sources, believed to be reliable but accuracy cannot be guaranteed. It is furnished on the basis and understanding that Raymond James Ltd. and Raymond James (USA) Ltd. is to be under no liability whatsoever in respect thereof. It is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. Raymond James Ltd. and Raymond James (USA) Ltd. financial advisors may only transact business in provinces and/or states where they are registered. Follow-up and individualized responses involving either the effecting of or attempting to effect transactions in securities, or the rendering of personalized investment advice for compensation, will not be made to persons in provinces or states where the financial advisor is not registered. Raymond James Ltd. is a member of the Investment Industry Regulatory Organization of Canada (IIROC) and the Canadian Investor Protection Fund. Raymond James (USA) Ltd., member FINRA/SIPC. This provides links to other Internet sites for the convenience of users. Raymond James Ltd. is not responsible for the availability or content of these external sites, nor does Raymond James Ltd endorse, warrant or guarantee the products, services or information described or offered at these other Internet sites. Users cannot assume that the external sites will abide by the same privacy policy which Raymond James Ltd adheres to.