Affiliated with Sentinel Life & Sentinel Financial Management Corp.
Commentary - Hans H. Mathisen
issues of LIFE LETTER are enclosed, The topics are important: Why not
get an Education Grant for your children or grandchildren? The Government
of Canada will give you a 20% subsidy towards the education of your
young ones. Please call me for the "fine print".
Get a Government
Grant For Your Kids!
An RESP allows you to set up a tax sheltered account to accumulate savings for future education. Up to $4,000 a year per child can be deposited in his or her RESP to a maximum of $42,000 over its life. Though contributions are not deductible, its growth is tax free.
Few of us dispute the value of education. We want our children, and grandchildren, to maximize their potential. The new rules help make higher education a reality instead of just a dream.
John, for example, is planning to start an RESP as soon as his child is born. Assuming a conservative investment fund growing by an average of 8% each year and annual deposits of $2,000, the grants alone will have grown to $14,980 by his child's 18 birthday. Over the same time frame, his annual deposits will grow to $74,900. A substantial education fund for his child's future.
When John junior goes to a post-secondary school, the money needed will be withdrawn from his RESP. The past growth will then become taxable in his hands. Assuming he earns little or no. income while going to school, the tax bite on his withdrawals will be minimal or non-existent.
Parents and grandparents have avoided RESPs in the past because if the child did not go on to university or college, the income their deposits earned was forfeited and only the deposits were returned. Now, as long as the plan has been in place for at least ten years and the child is over 21, up to $40,000 of gains can be rolled into the contributor's (or spouse's) RRSP. That is, of course, if they have the contribution room. And, as the CESG is intended for children, the grants will have to be paid back.
Alternatively, if the child does not go on to post-secondary education, the beneficiary of the RESP can be changed. It can be another child or grandchild, or even the contributor or contributor's spouse. So, if John junior decides to weave baskets in Nepal after high school, his siblings, or even his Mom or Dad can upgrade their education. As above, the CESG will have to be repaid.
As education for just one year, 1998, including room and board, costs $6,485 at the University of B.C., $7,498 at the University of Alberta, $6,648 at the University of Saskatchewan, $3,115 at the University of Winnipeg, $10,219 at the University of Toronto, $8,590 at McGill, $5,826 at the P.E.I. University, $7,464 at the University of New Brunswick, and $8,883 at Dalhousie, the future cost for even a four year degree can be substantial. Obviously, it makes sense to start saving today.
If you think the cost of education is high, consider the cost of going without.
Copyright ã 1999 Bowen Financial Inc. and Donald F. Poolay, Inc, All rights reserved. Illegal to copy without written permission
You Afford a Critical Illness?
Medical advances have improved the odds for us to recover from a medical crisis like a heart attack, cancer or a stroke. But some of the associated costs are not medical in nature and are therefore not covered by a health plan.
Most of us have some form of disability income insurance; either a group plan, a personal plan, or a combination of the two. But only if an injury or sickness prevents you from working will this insurance provide an income. And then, only for as long as you are unable to work.
Your disability income insurance is there to provide the cash needed to pay your mortgage, auto payment, utilities, food, etc. But a critical illness can bring additional, often heavy, expenses.
Cathy was told she had cancer during a routine annual exam. While she was being treated, she received an income from her disability income policy, but it wasn't enough to cover the considerable and unexpected extra costs of child care.
Andrew became paralyzed and was confined to a wheel chair. His disability income plan provided him with an income, but it wasn't sufficient to cover the costs of renovating his Home for wheel chair access. He also required a special vehicle in order to get around, which was not covered by his insurance.
Fortunately, there is now Critical Illness Insurance. If you contract one of the diseases or injuries specified in the policy, you receive between $25,000 and $1,000,000, tax free. The exact amount depends on the policy and the insurer.
This type of plan does not replace, but supplements your disability income insurance.
Unlike your disability income policy, Critical Illness Insurance pays a benefit even if you are still able to work. There are no restrictions placed on the use of the insurance money. You decide how to spend it. If you don't need it for new or unexpected expenses, maybe a cruise or other vacation will make you feel better. Or you may decide to invest the money for your future use.
There are a number of plan choices you can make - basic or comprehensive protection; premiums on a 10 year renewable or level basis; additional benefits like Waiver of Premium or Return of Premium. Your insurance professional can help you decide which plan is best for you.
*Source: The Heart And Stroke Foundation and Canadian Cancer Society.
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