BCC Case Prep Flashcards
What is regular occupation?
Most used definition. Provides benefit as long as insured can’t do a job that doesn’t fit their range of skills
What is own occupation?
Most generous. As long as you can’t do your job, you’ll get the benefit. Ex. Surgeon
What is any occupation?
Most restrictive. No benefits if you can do any job you are qualified for. Normally used in lower occupations.
What are some benefits of the RDSP
-Free bonds
-tax splitting from parents to child
-beneficiary might not be able to save on their own
-will not interfere with provincial
Benefits
How are gains on stock options a treated?
Same as capital gains, but Proceeds-ACB(which is purchase price plus benefit) then had 50% stock deduction
What are the benefits of divesting stock options?
Diversification, locking in a gain
What happens when you transfer a corporate policy to personal ownership?
Policy is taxable as passive income to corporation (CSV-ACB)
What is the taxable gain for the individual when transferring a policy from corporation to individual?
Taxed as shareholders benefit on FMV. Unless he put any amount towards it then that would reduce the benefit.
What assets are hard to categorize?
- CSV
- balanced mutual funds/ETFs
- preferred shares
How do you calculate the real rate of return?
Return-inflation/
1+inflation
What does Assuris cover for disability benefits?
85% when benefit is higher than 2000/m.
-Covers the higher amount
How do tax credits on charitable donations work?
15% on first $200
29% on amount above
-can be carried forward up to 5 years
How do you determine the medical expense deduction?
The lesser of the max or 3% of your income
What are the key considerations of a spousal Loan?
- need a loan agreement (in case of marital breakdown)
- must charge CRA prescribed interest rate
- person getting funds can deduct interest
- person receiving interest would include it as income
How to calculate taxes/credit on dividend?
-dividend is paid Dividend is grossed up Tax paid on dividend (MTR) Dividend tax credit applied on grosses up amount After tax return (tax-credit)
What does LTD’s benefit calculation include?
Salary only, not dividends
What does LTD all-sources maximum mean?
If the plan is not taxable: take after tax monthly income and x 85% =can’t go Over this amount
How does someone who has a corp obtain more disability insurance?
- Replace dividends with salary.
- replace group plan with individual coverage
- change to an insurer that would cover dividends
What event would require a buyout?
- death
- disability or illness
- failure to perform
- morals
- loss of capacity
- marital breakdown
- personal bankruptcy
Why is purchase price valuation important in a buy sell agreement?
To get proper valuation of the business. Hire CBV to value.
Why is timing of purchase important in a buy sell agreement
Makes it clean and sets a common timing for certain events
Why is source of funds important in a buy sell agreement
To determine where the funds will come from. Insurance, loan agreement, third party borrowing
Why is tax handling important in a buy sell agreement
The amount paid to the departing shareholder can be from capital dividend, eligible, non Eligible, return of capital
What happens when you transfer property into a trust?
Think of it as if there’s no trust:
-if it’s staying in the control of the same person: no tax
-if there’s an opportunity for a spousal rollover: no tax
Needs to be over 65
