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FAQ for Personal Financial Planning

Q. I have heard of income-splitting techniques to reduce Income Taxes. What is income-splitting?

Here are some income-splitting techniques:

· Reasonable and justifiable salaries to family members
· Interest-bearing loan at prescribed rate to spouse for investment
· Gift to minor children of assets that will generate a capital gain
· Have the spouse with the higher income pay the household expenses (check marriage contract)
· Income on income
· Spousal RRSP
· Child tax benefits
· Gifts of money to adult children
· Pension income splitting
· Pay attention to legal issues

Q. Can you provide me with some tax deferral strategies?

A few examples of tax deferral techniques :

· Deferred income plans
· Incorporation
· Capital cost allowance
· Deferred income or capital gains reserve
· Retiring allowance
· Declaration of bonus and payment after December 31 (within 180 days)
· Rollover to spouse after death

Q. I have heard of a trust. Why might I uses a trust in financial planning?

· to protect assets
· to split income
· to ensure the devolution of property

Q. What happens in terms of taxation when someone dies?

There is a deemed year end and a disposition of all property at fair market value.

Q. What are some financial planning points that arise in the event of the death of a share holder?

· Rollover of shares to spouse
· Capital gains deduction ($750,000)
· Capital dividend account
· Redemption or purchase of shares
· Death benefit
· Production of an income tax declaration for rights and things
· RRSP rollover to a minor dependent child and purchase of a life annuity

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