Residence Requirements At a minimum 10 years (since reaching age 18) - 40 years to qualify for the maximum benefit 10 years - since reaching age 18 10 years - since reaching age 18 Other Requirements None Must be receiving an OAS pension to qualify for the GIS The spouse must either be deceased or receiving both OAS and GIS Means Tested No - pension is available to anyone who meets residency requirements Yes - benefit is only available to low income elders Yes - benefit is only available to low income elders Taxable Benefit Yes No No Funding "Pay as you go" program "Pay as you go" program "Pay as you go" program Indexed Yes - quarterly based on changes in the CPI Yes - quarterly based on changes in the CPI Yes - quarterly based on changes in the CPI Reductions High Income elders have benefits clawed back Benefits are reduced as "other income" increases Benefits are reduced as "other income" increases Retroactive Benefits Yes - for a maximum of one year Yes - for a maximum of one year Yes - for a maximum of one year Payable Outside Canada Yes - so long as the elder has 20 years of residency since age 18 Yes - but for a max of 6 months Yes - but for a max of 6 months 1 – 5.5 Changes to Old Age Security The Government of Canada, in the 2012 Budget, announced three changes to Old Age Security: The for Old Age Security (OAS) pension and the Guaranteed Income Supplement (GIS) will gradually increase from 65 to 67 over six years, starting in April 2023. The ages of eligibility for the and the will also gradually increase from 60 to 62. As of July 2013, a of the OAS pension allows you to delay receipt of your OAS pension by up to 60 months after the first date of eligibility in exchange for a higher monthly amount. An process will eliminate the need for many seniors to apply for the OAS pension. This change is being phased in gradually starting in April 2013. 1 – 5.6 New Age of Eligibility Starting on April 1, 2023, the age of eligibility for OAS and GIS benefits will be gradually increased from 65 to 67, with full implementation by January 2029.
Table 1 – 9 Canada Pension Plan Survivor Benefits (2015) If the survivor is: Then the benefit is: Maximum Survivor Pension Amount Age 65 or over 60% of the deceased's retirement pension (subject to adjustment based on other CPP benefits received*) $639.00 Age 45 to 64 A flat amount, Plus 37.5% of the deceased's retirement pension (subject to adjustment based on other CPP benefits received*) $581.13 Under age 45 and either disabled or raising a dependent child A flat amount, Plus 37.5% of the deceased's retirement pension (subject to adjustment based on other CPP benefits received*) $581.13 Under age 45 - not disabled and not raising a dependent child As above – minus 1/120 for each month the survivor's age is below age 45 at the time of the contributor's death Under age 35 and not disabled and not raising a dependent child No payments until the surviving spouse reaches age 65 or becomes disabled 1 - 8 CPP DISABILITY BENEFITS Working elders between the ages of 55 and 65 are three times more likely to be disabled than workers 54 years of age and under. Canada Pension Plan disability benefits are therefore of particular interest to this group. The Canada Pension Plan pays a monthly benefit to people who have contributed to the Plan and who are disabled according to Canada Pension Plan definitions. A monthly benefit is also available to the dependent children of disabled pensioners. In order to qualify, an individual must: Have contributed to the Canada Pension Plan for a minimum number of years Be considered disabled according to Canada Pension Plan definitions Be under the age of 65, and Apply in writing A disabling condition can be either physical or mental. According to Canada Pension Plan
2 - 6.5 Other Planning Factors Among the other factors which must be taken into consideration are: At what age does the elder want to retire? What is the elder’s current net worth? What is the elder's current budget? What is the present income flow? Can the elder save money? What - if any - family obligations exist? 2 – 7 ELDER SPECIFIC The good news is that Canadians are living a lot longer. Unfortunately this is also the bad news. Historically the biggest financial threat that Canadians faced was "dying too soon." Today, however, the greatest risk to Canadians might very well be "living too long." In short, people are retiring earlier and living longer. In order to manage, retirees either have to set aside more money, or ensure that the money that they do have is working more efficiently. 2 - 7.1 Cautious Investors Past history and investment logic clearly dictate that most long-term investors should own equity investments (i.e., common stocks, mutual funds, etc.). And yet, most elder investors still maintain a high percentage of their money in fixed income assets like GICs, term deposits and government savings bonds. There are a number of reasons for this phenomenon. Most savers, for example, do not understand that they are assuming risk. The major long-term risk they face is the loss of purchasing power (inflation), not long-term market loss. Older investors also tend to fear capital loss and have little understanding of the benefit of asset allocation and diversification and the more competitive long-term returns available from non-guaranteed investments. The fact that many older investors have a strong relationship with a bank has also tended to keep them in safe guaranteed investments. Until quite recently, banks had little incentive or inclination to recommend securities or funds to their customers - since securities were unavailable from the bank. Recommending securities involved sending money to the bank's competitors. This was also true in the insurance industry. Representatives met client needs primarily through the sale of life, annuity, disability, and other types of insurance products. Historically equity investments were not a part of the mix. Times have, however, changed. Both banks and insurance companies are now major distributors of more aggressive financial products and services (either directly or through subsidiaries).
2 - 8.9 Types of Return Total Return: This is the annual return that includes gains, losses, dividends, and interest. Example: In one year, a stock’s price increases from $20.00 to $22.00. It also pays a 50¢ per share annual dividend. Total Return = ($2.00 + 50¢)/$20.00 = 12.50% Positive Net Return: This is a return that is positive - even when taxation and inflation are considered. Here is an example of positive net return. Table 2 – 7 Positive Net Return – Example An investor holds 100 shares of a $20.00 stock that grows by 12.50%. Assume a tax rate of 50% and inflation rate of 2.5%. Annual Total Return Calculations 12.50% growth on 100 $20.00 shares $250.00 Taxes of 50% -$125.00 Net Return $125.00 Less 2.5% x 2,000 Inflation -$50.00 Positive Net Return $75.00 Negative Net Return: This is a return that is negative when both taxation and inflation are factored into the equation. 2 - 8.10 The Importance of Diversification and Asset Allocation The secret to successful investing is to start early, invest regularly, buy quality, maintain a modest lifestyle, have an emergency fund, have patience, and use common sense. Clients understand personal asset allocation. They use it in their everyday lives by disbursing assets in order of their priorities. Asset allocation, as it relates to securities and investments, is the disbursement of assets among three primary areas: stocks, bonds and cash. This assures that a portion of an investor's assets will be "in the right place at the right time." Diversification deals with the allocation of assets among various security classifications. The true test of asset allocation is meeting investor needs for returns that are more consistent and predictable. There is a relationship between risk and reward. For every unit of risk taken by an investor, a proportionate unit of reward should be received. Risk, the exposure to the chance of
Table 4.1 Provincial and Territorial Laws of Intestate - 2014 Province/ Territory Spousal Share* Spouse and one child** Spouse and children** Can common law spouses inherit? British Columbia $65,000 ½ each 1/3 spouse 2/3 children Yes (min. 2 year cohabitation) Alberta All All to spouse All to spouse Yes Saskatchewan $100,000 ½ each 1/3 spouse 2/3 children Yes (min. 2 year cohabitation) Manitoba Greater of $50,000/50 % of estate All to spouse (if spouse is parent of child) All to spouse (if spouse is parent of kids) Yes (min. 3 year cohabitation, or 1 year together with child) Ontario $200,000 ½ each 1/3 spouse 2/3 children No Quebec Nil 1/3 spouse 2/3 child 1/3 spouse 2/3 children No New Brunswick Marital Property ½ each 1/3 spouse 2/3 children No Nova Scotia $50,000 ½ each 1/3 spouse 2/3 children No Prince Edward Island Nil ½ each 1/3 spouse 2/3 children No Newfoundland Nil ½ each 1/3 spouse 2/3 children No Yukon $75,000 ½ each 1/3 spouse 2/3 children Yes (min. 1 year cohabitation) Northwest $50,000 ½ each 1/3 spouse 2/3 children No Nunavut $50,000 ½ each 1/3 spouse 2/3 children Yes (min. 2 year cohabitation or other permanence)
Nunavut Same as Alberta Nova Scotia First $10,000 - $70 $10,000 to $24,999 - $176 $25,000 to $49,999 - $293 $50,000 to $100,000 – Progressive to $820 Over $100,000 - $820 + $13.85 per $1000 over $100,000 Ontario First $50,000 - $5 per $1000 Over $50,000 - $15 per $1000 Prince Edward Island First $10,000 - $50 $10,001 to $100,000 - $400 Over $100,000 - $400 + $4 per $1000 + 0.2% Closing Fee Quebec $65 for non-notarial wills $0 for notarial wills (notarial wills do not need to be probated) Saskatchewan All Estates - $7 per $1000 Yukon First $25,000 – No fee Over $25,000 - $140 Table 4 3 Sample Probate Calculation of $625,000 Estate Ontario British Columbia PEI First $50,000 $250 $50,000 $358 $100,000 $400 Remaining $575,000 $8,625 $575,000 $8,050 $525,000 $2,100 TOTAL $8,875 $8,408 $2,500* * Plus a 0.2% Closing Fee 4 – 7.2 Onerous New Rules Acting as an estate trustee can be an onerous task. Recent amendments to Ontario's Estate Administration Tax Act will change the process for paying probate fees, and will both clarify and add to the obligations of estate trustees.
6 – 6 Tax credits are provided by both the federal and provincial governments in determining tax payable. Under the federal-provincial tax collection agreement, the provinces can top up the federal amounts or add their own credits if they wish, but at a minimum they must offer the same basic credits as those available federally. A deduction reduces taxable income on which tax is calculated. A credit is a direct reduction of tax. Tax credits are classified as refundable tax credits and non-refundable tax credits. Refundable credits are treated the same as withholdings and instalments and are refunded if the amounts exceed the tax payable. Non-refundable credits reduce the tax payable in a year but are not refunded if the credits exceed the tax payable. 6 – 6.1 Personal Tax Credits Basic personal amount Age amount available to those over 65. The amount of this credit is dependent on the elder’s income level Spouse/ common law partner amount if a spouse or partner has income under a specified amount Eligible dependant credit Taxpayers may claim the equivalent-to-spouse credit if, at any time during the year, they were single, divorced or separated and supported a qualified relative who lived with and was dependent on them. The equivalent-to-spouse credit is calculated in the same manner as the spousal credit and is based on the following factors: The dependent, other than a child, must be a Canadian resident A dependent child must be either under 18 at any time in the year, or any age if dependent because of mental or physical infirmity The claim may only be made in respect of one other person Where two or more individuals are otherwise entitled to a credit in respect of the same person, only one is able to claim the credit The credit cannot be claimed for an individual on behalf of whom the taxpayer is required to pay a support amount To qualify, the dependent does not need to have lived with or be supported by the taxpayer throughout the entire year Infirm dependant credit is available for those individuals over the age of majority who are dependent on the taxpayer. The credit is adjusted for the net income of the infirm dependant.
Childcare expenses. The child must be under age 15, or if over age 15, must be physically or mentally infirm. Must have been incurred to enable the taxpayer to earn taxable income. Required receipts Net Income can be further reduced by deductions from: Loss carryovers from previous year as prescribed Capital gain from previous years as prescribed by carrying back allowable capital losses 6 – 14 Service for Seniors allows seniors to file their tax returns for free using a touch-tone telephone. It only requires clients to identify themselves and answer a few "yes" or "no" questions. Unlike the normal TELEFILE service, clients are not required to enter their income, deductions, or non-refundable tax credit amounts (spousal income may be required). Clients residing in Ontario may have to enter amounts in order to claim refundable provincial/territorial tax credits. During the assessment process, the client's income will be included automatically using Agency information. As well, the client will be allowed the basic personal amount, age amount and, if applicable, the disability amount. Clients do not have to prepare their return prior to using Service for Seniors. The Notice of Assessment issued to the client will confirm the amount of OAS, CPP/QPP and/or net federal supplements included during assessment. The client must be over age 65 and their only income must be from the OAS, CPP/QPP, or Net Federal Supplements; and taxable income must be below a specified threshold. If a person is eligible to use TELEFILE he/she will receive a promotional sheet and an access code with their personal income tax package. To use Service for Seniors, the client calls the existing TELEFILE service at Once the client enters their social insurance number and access code, the TELEFILE service will know that the client is eligible to use the service.