The Three Certainties

by | Dec 14, 2017

 

At the end of the year, things get undeniably gloomy – particularly on the southern west coast, where we like to brag about our summers and lack of snow, brushing aside any mention of the solid six to eight months of grey skies and relentless rain that can only come from living in a temperate rainforest.

Since we’re going to naturally feel a little bleak anyway (unless you’re an avid party-goer, then you can wait until January), why fight it? Let’s dig deep into the murky, somberness of the season, and talk about the Three Certainties: Death, Taxes, and Change.

#1: Death

Why not get the Big One out of the way? There’s a reason why every estate planning lawyer I know is slammed before the holidays: people are trying to get their wills done before the artificial finish line of the calendar year end.

Hey, use any deadline you want. Wills are one of the most frequently delayed recommendations in a financial plan. It’s a lot to think about it, and on top of that, you end up spending a large chunk of money on planning for an event that you don’t really want to happen.

As I mentioned in November, if you love even one person (or dog, or cat, or fish), getting your estate plan in order is undeniably worth it, even if you don’t get any immediate reward for it.

Things to think about when it comes to your death:

  • Yes, it’s going to happen.
  • There are people who will be sad when it does happen, and one of the most loving things you can do to help them through this horrifically difficult time is to leave them a well-thought-out plan that they can work with.
  • Families fight. Even your delightful, oddly functional family, and especially during the loss of a family member. Remember when you were a kid and in a bad mood? Who was the easiest person to take it out on? That’s right: your sibling. Even better: your step-parent. When your children experience the loss of you, they’ll go through some pretty tough stuff in managing their grief. One of the stages of grief is anger. Guess who is going to get a full frontal assault? Give them fewer reasons to get mad and more reasons to come together. Talk to your estate planning professionals and talk to your family about your plans.

#2: Taxes

Arrrrrgh. This has been one of the most aggravating years of my career when it comes to Certainty #2. Taxes are certain, but when it comes to private corporations, there’s still a metric ton of uncertainty.

Here’s what we do know:

  • The Federal Small Business Tax Rate will be reduced to 9% (currently 10.5%) by 2019
  • They don’t seem to be touching the Lifetime Capital Gains Exemption after all
  • Income sprinkling to family members is still an issue
  • Passive investment income is still an issue. According to the release on October 18th, 2017:
    • “All past investments and the income earned from those investments will be protected;
    • Businesses can continue to save for contingencies or future investments in growth;
    • A $50,000 threshold on passive income in a year (equivalent to $1 million in savings, based on a nominal 5-per-cent rate* of return) – an amount that is exceeded by only about 3 per cent* of corporations – is available to provide more flexibility for business owners to hold savings for multiple purposes, including savings that can later be used for personal benefits such as sick-leave, maternity or parental leave, or retirement;
    • Incentives are in place so that Canada’s venture capital and angel investors can continue to invest in the next generation of Canadian innovation.”

*This is how they wrote it in their announcement – two different ways in one sentence. Don’t shoot the messenger.

If you own a private corporation, please get in touch with your professional tax advisor before the calendar year end to make sure you’re taking any action they deem necessary prior to 2018. We are expecting more news on how the reform will actually be implemented, so they may not have a lot of planning at this point, but they’ll likely have some.

For individuals and families, the tax news is a touch rosier and more certain. The Canada Child Benefit (CCB) will have annual cost of living increases starting in July 2018, two years ahead of schedule. The Working Income Tax Benefit is also being enhanced starting in 2018.

Personal income tax and benefit amounts have seen some changes as well, which you can view here. Note that, unfortunately, we didn’t get a boost in our TFSA contribution room for 2018, so your contribution room increases by $5,500 in January.

For U.S. Citizens living in Canada, our neighbours to the south are also working on tax reform, on a much broader scale. The Tax Cuts and Jobs Act is currently working its way through the system and may see significant changes between now and the end of the road, so we don’t have clarity yet on how or if this will impact you. I’m sure we’ll learn more in 2018. Or next week. Or something.

For individuals with disabilities, please check with your province for changes to the income you may receive in 2018.

#3: Change

What can I tell you about change? Change is going to happen. Honestly, Certainties #1 and #2 are just different kinds of Certainty #3.

I often find that, somewhere between six and nine months after you receive your financial plan, some kind of change comes along and blows a few things we thought were going to happen right out of the water.

Our job, and the job of all of your professional advisors, is to help you right your ship when the winds of change come through to mess you up. Not one of us can predict the future – even in the markets… especially in the markets – but we can make educated guesses, prepare for the worst that we can imagine, and make decisions that are the most sensible, given what we know.

I didn’t expect several feet of snow last winter, and neither did the rest of Vancouver as evidenced by the Great Salt Shortage, but we managed and we survived**. I’m ever-hopeful that the horrid white stuff stays in the mountains, where it belongs, but I’ve picked up a shovel this year, snow tires, and a few bags of salt, just in case. It’s unlikely I’ll leave the house if it happens again though.

Your 2018 is unlikely to be reflected perfectly in the plans that we create together, but regardless, you’ll have the information, advice, and tools you need to make great decisions – and we’ll be here for you to make adjustments when those winds of change hit.

**You might have thought we wouldn’t have survived, given all the whining. Especially the whining from me.

Julia Chung

Julia Chung

Co-Founder, Sr. Financial Planner at Spring Financial Planning
With twenty years' experience in the financial services industry, education in both personal and corporate finance, business and family law, cross border planning, family dynamics, insurance, risk management, operations management, and strategy, Julia is a powerhouse financial planner and the co-founder of Spring Financial Planning.
Julia Chung

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