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March/April 2009

Commentary - Hans H. Mathisen

Benefits of naming beneficiaries - is the very relevant topic of LIFE LETTER for March. Most of us want our assets to be passed on to specific persons. Maybe it's time for you to review your beneficiary designations?

Financial plans and marriage breakdown - Unfortunately, many (maybe most?) who read this have experienced, or will experience, a marriage breakdown close to home. LIFE LETTER for April provides useful information for those who find themselves in this unfortunate situation.

LIFE LETTER MATURE - deals with joint ownership and the high cost of long term care. How long can we afford to pay $2,500.00 or more per month for long term care?

THE STOCK MARKETS - Starting in March, all major indexes increased. As of March 31, 2009, year-to-date performance of the S&P TSX was at -2.97%; the Dow Jones registered -13.30%; SP 500 stood at -11.67%; and NASDAQ at -3.07%. In Europe, Germany's DAX registered -15.08%; France's CAC 40 -12.76%; and England's FTSE 100 -11.67%. In Asia, the situation was: Hong Kong's Hang Seng -5.64%; Japan's NIKKEI -8.47%; and India's SENSEX + 0.63%.

Where do we go? My advice, and the advice of most other analysts, is: Stay where we are. It seems that the worst is over, and the markets are starting to react to the very substantial stimulus packages of the U.S., Canadian and European governments. Such initiatives take time to work their way into the various economies. The performance of the indexes listed above proves that Canada is a very good place to be invested in.

Hans Mathisen





Benefits of naming beneficiaries.

In the broadest sense, a beneficiary is a natural person or other legal entity who receives money or other benefits from a benefactor. While it seems an easy task to name a beneficiary, in many cases that's not true at all. Let's take a look at naming a beneficiary on financial products:

Many financial products allow for the naming of a beneficiary. The most common, of course, is life insurance. The option is also available for Registered Retirement Plans and pensions. Beneficiary laws are decided at the provincial level. As such, only a few provinces currently allow for the naming of a beneficiary on Tax-Free Savings Accounts (TFSAs).

Provincial beneficiary rules are applied broadly. It is important to note that financial products provided by a life insurance company almost always allow for the naming of a beneficiary because of federal legislation. This applies to life insurance, of course, but also to all deposit products, including TFSAs and non-RSP plans.

The ability to name a beneficiary on your financial products can eliminate the costs and delays of proceeds settled through your estate. Naming a beneficiary should not be taken lightly. Make sure your wishes are clear by following these important steps:

Decide who gets what - In many cases this is quite obvious; for example, Ron and Kate are married and name each other. It can be more complex if either has been married before or they have other obligations.

Name names - It is very important to use full legal names as well as relationship to the insured. If a designation is not clear, the proceeds may be paid into court causing delays and extra costs.

Use percentages - With multiple beneficiaries, proceeds will be distributed equally unless you specify otherwise. If you want unequal distributions, be clear on the percentage amounts.

Avoid naming your estate as beneficiary - This can delay the distribution of proceeds and add costs. It can also expose certain proceeds unnecessarily to creditors, or require income taxes be paid when they could be postponed. Keep your personal financial affairs private as the details of proceeds through a Will become part of the public record.

Consider contingent beneficiaries - A contingent or secondary beneficiary, available only through life insurance companies, receives proceeds if your primary beneficiary dies before or with you. Be careful naming minors as you will also need to name a trustee to look after the proceeds until the child reaches the age of majority. Get your trustee's permission before naming them.

Keep designations up-to-date - Most people don't want to leave proceeds to an ex-spouse, and basic life changes could require that you re-evaluate your beneficiaries. Review beneficiary choices regularly.

For information purposes only and not intended as specific beneficiary advice.

Time to review your beneficiary designations?

Call Hans Mathisen today at (306)242-7042.
or email -

Copyright © 2009 Life Letter. All rights reserved

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Financial plans and marriage breakdown.

Statistics show that about half of marriages end in divorce. Ed and Liz are ending theirs and are concerned about changes that will have to be made to their financial and estate plans. Some considerations, also in common-law relationships, are:

Life Insurance - The first thing that needs to be done is review beneficiary designations. If there are children, they may be the new beneficiaries. Trustees will be needed if they are minors. This affects both personal plans and group benefits. When one parent is responsible for child support payments, new life insurance may be needed to cover this obligation.

After the sale of their house, Ed and Liz may each buy a new home with their share of the proceeds as the down payment. A new mortgage will need life insurance to cover it.

If either remarries, a complete review of their life insurance needs will be in order. If the various needs and obligations are not adequately provided for, a long and costly legal battle may follow.

Wills - Ed and Liz will each need to make new wills. Provisions will need to be made for both child custody and support obligations. It is best to have a lawyer prepare the new wills, as do-it-yourself will kits are inadequate.

Unless a will is specifically prepared in anticipation of a marriage, new wills need to be done again after either remarries. Prior obligations still need to be provided for in the new will.

Disability Insurance - Both Ed and Liz will no longer be able to rely on each other should either become disabled. Group benefits, if they have them, may 'not be sufficient to meet their needs. Personal disability insurance may be needed to provide for every day needs and other obligations should illness . or injury prevent either from working for a period of time. A complete review and analysis of their disability needs should be done.

Critical Illness Insurance - This insurance provides a lump-sum tax-free benefit if the insured survives a heart attack, cancer, stroke, or other listed serious illness. If either Ed or Liz suffers a critical illness, money should be the least of their worries.

Registered Retirement Savings Plans - If one spouse has more in their RRSP than the other, the divorce settlement may require an equalization of funds. Canada Revenue Agency (CRA) allows tax-free transfers between RRSP plans of one spouse to the other due to a marriage breakdown. RRSP beneficiaries need to be changed as well.

Provision for the tax liabilities on death needs to be considered. Life insurance can be a very economical way to pay the taxman and assure the full value of their RRSPs goes to the beneficiaries.

A relationship breakdown is very disruptive for the whole family. Future disruptions can be minimized by dealing with financial and estate plans today. A little time and a few dollars now can avoid months of delays and thousands in expenses later.

Want help with your financial and estate plans?

Call Hans Mathisen today at (306)242-7042.
or email -

Copyright 2009 Life Letter. All rights reserved

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335 Redberry Road
Saskatoon, Saskatchewan S7K 4W5
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