Managed Money Reporter Newsletter — Issue 161, July 2000

Editors: Carl Spiess & Allan McGlade

Featured Articles

Protecting Your Estate

Most people spend a lifetime of hard work building their estate: saving their money both inside and outside their RRSP, making prudent investment decisions, owning a home and perhaps a vacation property, etc. What most people don't know, however, is that Revenue Canada is their silent partner when it comes time to distribute their estate to their children and their heirs.

Depending on what types of assets an estate is comprised of, the share Revenue Canada takes for their coffers will vary. At death, all property is deemed to be disposed of for tax purposes: RRSPs are fully taxable in the estate; any investments with unrealized gains are taxable; a vacation property may be partially taxable; and probate, administration, legal and executor fees will be taken from the estate. In the case of property moving from one spouse to another, it can be transferred tax-free; in most other cases (there are some exceptions) it is taxable.

If proper planning isn't done ahead of time, the impact on the estate could be small or it could be devastating. The full value of a particular asset may not be realized in the event of an untimely death. For example, in a bad real estate market, if the children or heirs of an estate do not have enough cash to pay the tax, a home or a cottage may have to be sold below its true value to pay the taxes owing on its deemed disposition. Once the owners of the estate are deceased, it is too late to do any planning.

Creating or preserving an estate through life insurance is a tremendous opportunity for people to protect what they have spent their life trying to create – a valuable estate! Insurance creates a large immediate estate and provides a tax-free benefit upon death. Other advantages of insurance are potential creditor protection, and avoidance of probate fees because it passes outside the estate. This means that the insurance will not be subject to probate and administration fees, or legal action if the Will is challenged or contested.

Preserving an estate through life insurance requires funding. The source of this funding should not be short or medium term savings you will use to buy a car, cottage, clothes, or go on a vacation; it should come from that part of your savings that you will never use in your life-time. Estate preservation is the ultimate long term planning strategy because its benefits are not realized until death.

Building an estate takes a lifetime, but without planning, tearing it down may only take an instant. Insurance has played a prudent and valuable role in protecting many estates. The financial benefits that insurance offers are obvious, but the peace of mind it offers cannot be measured.

Universal Life Insurance

What is Universal Life Insurance?

Universal Life Insurance is a type of life insurance that has an investment component and an insurance component combined within one product. The main features of this type of policy are the opportunities for tax deferral and wealth preservation.

Why should I have Universal Life?

The separation of insurance and investment provides for some flexible planning opportunities. For instance, the policyholder could skip premium payments for whatever length of time desired/needed provided they have enough cash reserves to cover the premiums. This is possible because unlike a whole life policy, the policyholder owns and controls the cash in the policy to invest as he/she chooses. Several investment allocations are available as investment choices to similarly match one's current portfolio allocations. The deposits that come in for the policy go primarily towards covering the insured, the remainder or excess, goes towards the investment component. Another flexible option of the plan is that the holder of the policy can decide what level of premium and payment period is best suited for their specific needs and situation.

How can my taxes be minimized?

The deposits themselves are not tax-deductible, but the investment component of the policy grows tax deferred. This would be attractive for investors who may have used up their RRSP contribution room, and are looking for another investment vehicle. Withdrawals may be partially taxable when withdrawn, preferably during the retirement years when the policyholder is more likely to be in a lower income bracket therefore minimizing taxes. The original death benefit and remaining cash value of the plan will be paid out to the beneficiaries named in the policy tax-free if the policyholder doesn't need to use it. This payout avoids probate and executor fees dependent on provincial laws.

If you would like more information on estate planning and insurance products, please contact our estate and insurance planner Allan McGlade CLU, CFP.


ScotiaMcLeod is pleased to announce that, due to his outstanding service over the past 10 years, 
Carl P. Spiess
has been appointed a Director of the firm. Carl will continue his commitment of service to his select group of clients.

Fund News

Trimark Financial Corporation has recently merged with London based AMVESCAP, parent company of AIM group of funds. We view this partnership as a good fit.

The two fund companies combined will form the second largest investment company in Canada, with assets in excess of $35 billion. In addition to size, the firm will be able to offer a gamut of mutual funds, fully diversified across geographic regions, industries and most importantly, investment styles. The merger marries AIM's growth and momentum styles with the value-oriented style that has made Trimark a household name in Canada. Investors will also benefit from a wide range of domestic and global expertise. From our perspective, this combination of money management and service expertise will allow clients to gain broader access to investments that will suit their long-term goals.

Nova Bancorp has completed its acquisition of Strategic Value Corporation who manage the Strategic Value Series of Funds as well as the O'Donnell Group of Funds. Switches will be available between these funds shortly.

AIC Limited has introduced new funds:

  • AIC Global Technology
  • AIC RSP Global Technology

Synergy Asset Management has also introduced new funds:

  • Synergy Global Growth Class
  • Synergy Global Growth Class
  • Synergy Extreme Cdn Equity

C.I. Group of Funds has had a portfolio manager change. Andrew Waight is the new manager of C.I. Global Health Sciences Sector and the 100% RRSP-eligible version of the fund.


Contact Us

T.  416.863.RRSP (7777)
F.  416.863.7479

ScotiaMcLeod is a division of Scotia Capital Inc., member of CIPF.

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® Registered trademark of The Bank of Nova Scotia, used under licence. ™ Trademark of The Bank of Nova Scotia, used under licence. Scotia Wealth Management™ consists of a range of financial services provided by The Bank of Nova Scotia (Scotiabank®); The Bank of Nova Scotia Trust Company (Scotiatrust®); Private Investment Counsel, a service of 1832 Asset Management L.P.; 1832 Asset Management U.S. Inc.; Scotia Wealth Insurance Services Inc.; and ScotiaMcLeod®, a division of Scotia Capital Inc. ("SCI"). Wealth advisory and brokerage services are provided by ScotiaMcLeod, a division of SCI. Insurance services are provided by Scotia Wealth Insurance Services Inc., the insurance subsidiary of SCI. When discussing life insurance products, ScotiaMcLeod advisors are acting as Life Underwriters (Financial Security Advisors in Québec) representing Scotia Wealth Insurance Services Inc. SCI is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.

The Spiess McGlade Team is a personal trade name of Carl Spiess and Allan McGlade.