Claiming Medical Expenses: Free Healthcare?

Free Health Care? Did you know that Canadians spend on average more than $1,000 on medical expenses each year? It’s estimated that government programs, via our taxes, cover about 72% of medical expenses, which means that we pay for the rest. Your clients may be over-paying on their taxes because they don’t know about medical expense deductions. 

Recent economic data tell the same story: Canada has hit what TD Bank Group economists call a "soft patch.î Indications are Canada's economic performance will remain "sub-parî for the rest of 2012. Certainly Statistics Canada's job vacancy numbers are nothing to crow about. From June 2011 to June 2012, the number of job vacancies increased by 20,000 to 263,000 vacancies. "There were 5.3 unemployed people for every job vacancy,î reports StatsCan, "down from 5.8 in June 2011.î There is growth, but it is sub-par. StatsCan also measures the national job vacancy rate among Canadian businesses. In June, it was 1.8%, up slightly from 1.7% a year ago. "Higher job vacancy rates are often associated with periods of economic growth,î writes StatsCan "while lower rates may be associated with periods of slower growth or economic contraction.î Declining house sales are also putting a damper on growth. According to the Canadian Real Estate Association (CREA), house sales were down 5.8% in August from July, the fifth straight monthly decline. Actual (not seasonally adjusted) activity stood 8.9% below levels in August 2011. Prices, too, have cooled. CREA tells us the national average home price was up a mere 0.3% on a year-over-year basis in August. As Bank of Montreal economist Robert Kavcic points out, "Canada's market has quietly built up an above-normal 6.5 months' worth [of inventory] ó far from saturated, but certainly keeping the bidding wars at bay.î That puts a chill on Canada's economic recovery. According to TD's quarterly economic forecast, "Canadian Outlook: Caught in the middle,î Canadian households have begun the long process of reining in their borrowing. "Even with this moderation,î says the forecast, "combined growth in mortgage and consumer debt has continued to outstrip that of incomeÖ. Some cooling off in formerly-red-hot housing markets is expected to weigh on consumers' appetite for more credit and spending over the forecast period.î The result: a sub-par pace of consumer spending. On the plus side, the consumer price index (CPI) rose 1.2% in the 12 months to August, following a 1.3% gain in July. According to StatsCan, higher prices for the purchase of passenger vehicles, gasoline, meat and food purchased from restaurants were major factors in the year-over-year increase. Still, that keeps inflation well within the Bank of Canada's desired 2% target range, probably keeping the spectre of higher interest rates at bay. "With no engine firing on all cylinders,î says the TD's forecast, "economic growth is being held to a meek sub-2% rate and the jobless rate is stuck above 7%. By early 2013, we suspect that global headwinds will have dissipated enough to spur stronger Canadian exports and entice cash-flush businesses to loosen their purse strings ó pulling real GDP growth back above 2% and pushing the jobless rate down modestly.î Additional Educational Resources: Elements of Real Wealth Management course and Financial Recovery in a Fragile World book.      

Disability, physical and mental, all too often comes with age. And as the baby boomers get older ó in 2016, 16% of Canadians will be over the age of 65 ó the economic and social costs of disability will climb, for families and communities. According to Statistics Canada's Participation and Activity Limitation Survey,  43.5% of people aged 65 to 74 have a mental or physical disability while 56.3% of people 75 and over are disabled. Dementia is of particular concern. Currently, about one in 11 Canadians over the age of 65 lives with dementia. Within a generation, says the Canadian Study of Health and Aging (CSHA), that number will double to two in 11. CSHA and the Alzheimer Society of Canada  have calculated the economic costs of this changing demographic. Over the next 25 years, the cumulative economic cost of dementia, which includes Alzheimer's Disease, the most common form of dementia,  is expected to exceed $872 billion. The number of family care-giving hours will triple to 756 million hours in 2038 from 259 million hours in 2010. Dementia hits women particularly hard: 72% of all Alzheimer's cases and 62% of all dementia cases are female. According to Statistics Canada 2008 Elder Care: What we know today, women have traditionally been the caregivers. That means the burden of care will need to shift to others in the family or the community. This is a devastating and significant issue and the federal government has started to recognize the costs to families of dealing with vulnerable family members. In the 2011 federal budget it introduced the Family Caregiver Amount. If you care for a disabled dependant, when you prepare your 2012 taxes the following non-refundable tax credits will increase by $2,000: Spousal amount; Amount for eligible child (claimed by a single parent for one child); Amount for dependants under 18; Amount for infirm dependants 18 and over; Caregiver amount. Granted, the value of the additional amount is $300, a small reward given the sacrifices made when caring for a vulnerable person. Nonetheless, that $300 will help pay for some much-needed respite. Also, if you qualify for the credit and pay your income taxes on a quarterly basis, you may wish to change your withholding tax rate for the final quarter of the year or reduce your quarterly instalment payments accordingly. It's Your Money. Your Life. Caring for the vulnerable is a community issue. We need to prepare for that with our precious resources of time and money, because it's an honor and a privilege to give back with compassion and empathy to those who have done so much for us. Evelyn Jacks is president of Knowledge Bureau, which offers bookkeeping and income tax preparation courses within its curriculum. You can also offer financial education books to your clients or other family members. For more information, click here.   Additional Educational Resources: Introduction to Personal Tax Preparation Services and EverGreen Explanatory Notes.  

Quebec is taking a page from France's book. To battle deficits and increase revenues, recently elected leaders in France and Quebec have announced intentions to deliver tax hikes to higher-income residents. Earlier this month, France's new Socialist president, FranÁois Hollande, proposed a 75% income tax on the portion of an individual's income that exceeds €1 million (C$1.2 million) a year. More recently, Quebec's Parti Québécois premier, Pauline Marois, made good on an election promise to introduce provincial tax brackets for incomes over $130,000 and over $250,000, with provincial tax rates expected to be 28% and 31% respectively. That is on top of federal income taxes. Add in the maximum federal tax and Quebecers in the $130,000 to $250,000 tax bracket would see their marginal tax rate rise to 52%; for those earning more than $250,000 it would be 55%. The majority of taxpayers seem content with these new plans. According to the New York Times,  half the nation's households earn less than €19,000 a year; only about 10% of households earn more than €60,000 annually. In Quebec, according to The Globe and Mail, Ministry of Finance figures show that in 2010, slightly more than 102,000 people earned between $130,000 and $250,000 a year; another 38,000 earned more than $250,000 a year. The wealthy, however, are clearly unimpressed. The United Arab Emirates' English-language The National.ae has reported that Bernard Arnault, the owner of the LVMH luxury goods group and the wealthiest person in France, has since applied for citizenship of neighbouring Belgium, where the fiscal regime is more agreeable. Many more are concerned that France's aggressive tax plan will scare away investment and jobs, hurting the already-fragile economy. Another top earner in France described the 75% tax to the The National as "morally and politically legitimate but economically stupid.î Those concerns are mirrored in Quebec. "Anything above 50% means that you're really working for the government more than yourself," Jamie Golombek, managing director of tax and estate planning at CIBC Private Wealth Management, told Montreal's The Gazette. "It's a huge barrier." Hollande estimates he must create €30 billion in new taxes and spending cuts to meet his target of reducing the public deficit to 3% of GDP by the end of next year. For Marois, the challenge is replacing the $850 million lost when the government eliminates Quebec's health tax. As these controversial proposal comes closer to reality, the world will be watching to see how both France and Quebec are affected and what the wealthy choose to do. Such policies may help win an election, but only time will tell if taxing "les richesî will steer an economy out of the sewer. Additional Educational Resource: Distinguished Advisor Conference    

Respected author and investment guru Gordon Pape  is no "gold bugî but, he says, now is the time to buy gold. That's because Pape, a keynote speaker at the upcoming Distinguished Advisor Conference, believes the U.S. Federal Reserve's third "quantitative easingî (QE) is bad news for investors. "It suggests the economy is in worse shape than we thought,î says Pape, the author of more than 20 books as well as the editor and publisher of the Internet Wealth Builder. "The Fed says QE3 is about job creation but it is more involved than that. The economic numbers are telling them something ó and the numbers are worse than they thought.î In mid-September, in the midst of a hard-fought U.S. presidential election campaign, the Fed announced its plan to purchase agency mortgage-backed securities at the rate of US$40 billion a month for an indefinite period of time. As well, the Fed decided to keep the target range for the federal funds rate at 0% to 0.25%, at least through mid-2015, an extension of its earlier deadline of mid-2013. "The fact the Fed decided it had to act now,î says Pape, "suggests the situation is deteriorating at a rate that would make further delay a dangerous gamble.î There are other reasons QE3 causes Pape concern. First off, it is inflationary. Commodities are priced in U.S dollars which means it will take more US$ to buy a barrel of oil, an ounce of gold, a pound of copper or a bushel of wheat. He admits that good news for Canada's resources sector ó but bad news for consumers. "Gold is the prime beneficiary,î Pape says. "If you don't own gold, you should. It's a good insurance policy.î The Feds open-ended commitment to print money will also devalue the US$ and put upward pressure on the Canadian dollar, making it difficult for Canadian exporters, who are already feeling the impact of sluggish trading partners. Finally, the Fed move ties the hands of Bank of Canada Governor Mark Carney, who has repeatedly indicated that he thinks the time to raise interest rates is drawing near. But if Canadian rates move too much out of step with U.S. rates, it will be one more factor pushing the C$ higher. "Carney is hamstrung,î says Pape. That makes the theme of this year's Distinguished Advisor Conference ó "Navigation: Charting a New Courseî ó particularly apropos. Pape will address the annual conference, held this year in Naples, Fla., from Nov. 11 to 14, on Monday, Nov. 12; he'll talk about how advisors can develop profitable investment strategies for their clients in what is essentially a stagnant economy. "I'm not a pessimist by nature,î says Pape, "but I am cautious. We have to face reality ó and continue to adopt a defensive strategy.î Early registration deadline for the conference is Sept. 30.  

Fall is in the air and you know what that means: yearend tax-planning and tax-filing time is just around the corner. It's time to get a handle on recent changes to tax laws and their impact on your income. That means it's also time find a tax professional who meets your needs and becomes part of the team of professionals who advise you. But finding the right tax professional ó someone to whom you can turn when an important life event triggers crucial financial decisions ó can seem like a difficult task. Often, you simply don't know what questions to ask, or if you are receiving the right answers for your situations. You can start by asking yourself three questions: What are your top three concerns about your taxes? What are your top three concerns about your investments? What are your top three concerns about your family financial affairs? Once you have identified these concerns, discuss them with the tax professional you are interviewing. Then, use this checklist as your interview guide: 1. Has the professional answered your concerns in plain English? 2. Would you consider this person a "financial educatorî? 3. How does this professional price his or her services? 4. Are these services available to you year round? 5. Does the professional have a "successionî team, juniors he or she is mentoring so you can get service when your professional is on vacation or is ill? 6. Are services guaranteed? What happens if there is an error or omission that costs you interest, penalties or causes you to lose money? 7. Can the professional provide you with three references from professionals who have worked with him or her? 8. Can the professional provide you with three references from clients who have worked with him or her? 9. When is the last time this person took a refresher course? Look for certificates from reputable educational programs. There are thousands of professionals who have Knowledge Bureau certification and designations ó the Master Financial Advisor (MFA) or the Distinguished Financial Advisor (DFA) - Tax Services Specialist ó who are trained to work with you and become part of your inter-disciplinary team. You may wish to seek out local MFAs and/or DFAs and interview them. They are people who you know will be up to date. Every fall, Knowledge Bureau faculty travel across Canada bringing new educational programming to these savvy professionals, so they can update their knowledge for yearend tax-planning opportunities. We also delve into issues involving specialized expertise; this November, we'll discuss cross-border taxation with our special guest, Angela Preteau, CA, CPA. You may wish to join us. It's Your Money. Your Life. At Knowledge Bureau, we strongly recommend that you work with a team of advisors who come from various disciplines, who can assist with a strategic solution when you have important decisions to make. Make sure you deal with competent professionals who can be your financial educator, advocate and steward of your hard-earned money. Evelyn Jacks is president of Knowledge Bureau, which offers bookkeeping and income tax preparation courses within its curriculum. You can also offer financial education books to your clients or other family members. For more information, click here.   Additional educational resources: Cross Border Taxation Course and Distinguished Advisor Workshop.  

In this second of a two-part series, Ottawa Personal Financial Organizer Patricia Cocker tells you how to put your life in order so you'll be ready for the end of life. (For Part 1, click here.)   Losing a loved one is tough. You think all you have to do is get through the funeral, then you will have the time you need to come to terms with your loss. But if you are the executor, nothing could be further from the truth. It is only the beginning. Unfortunately, the executor is often the spouse or another family member. Although this person may respect the deceased's wishes, he or she generally has little experience with government rules and regulations, never mind the paperwork that needs to be completed. The funeral home may provide some information ó a package detailing the necessary letters of notification, application forms for Canada Pension Plan (CPP) benefits, proof of death ó but there is a great deal more to be done! ï Cash flow. Your first responsibility as executor will be to ensure that there is sufficient cash flow to support those who are financially dependent upon the deceased. Here, it is wise to consult a professional. ï Paperwork. With any luck, the deceased will have prepared an itemized list of assets and liabilities for you. If not, review the previous year's income tax return to determine sources of income, eg. salary, pension, investments, etc. You will need to notify the following, where applicable, of the deceased's death: Employer, pension offices. Ask if there are any benefits available to survivors or the estate; CPP. Apply for death benefit, survivor/orphan benefits; Service Canada, which administers the Old-Age Security program; Veterans Affairs Canada, which administers veterans' pensions and benefits; Financial services companies including banks, credit unions, mutual fund companies and brokerage firms. Ask if there are any insurance benefits available for survivor/estate from any of these accounts; Credit card companies and other financial institutions with which there exists a liability. You must return credit cards or cut them in pieces and pay any outstanding balances. Likewise, ask if there is a death benefit attached. Also, it is important to return the deceased's government-issued cards, including social insurance card, provincial health card, passport, motor vehicle licence and driver's licence. Finally, to prevent identity theft, notify the Canada Revenue Agency (CRA, as well as the Office of Vital Statistics in deceased's place of birth if it is in not in the province of his or her death. It is also wise to inform credit tracking agencies such as Equifax and TransUnion Canada. ï Insurance. Next, if the deceased had life insurance, complete the applications for benefits. If you are not sure, contact the Canadian Life and Health Insurance Ombudservice. ï Legal. Meet with the deceased's legal representative to determine whether probate is required. Note that probate validates the will and formally appoints the executor. Financial institutions may require probate before releasing any funds. ï Sell or transfer assets. If the deceased had real estate, stocks, bonds and or mutual funds, as the executor you will need to sell or transfer ownership of these assets. That requires working with the appropriate individuals or institutions as well as consulting the appropriate professional. As well, you will need to: close the deceased's safety deposit box, close bank accounts, pay debts, settle creditor claims. ï Income taxes. People often think that with death, the responsibility to file income tax returns and pay outstanding taxes ends. Not true! All prior years' returns, as well as a return for the year of death, must be filed and any taxes owing must be paid. Depending on the estate, you may need to file a return for the estate as well. Once you have received assessments for all returns, you can complete the application for "Clearance Certificate,î confirming with the CRA that it has no further interest in the deceased's affairs. Failure to do so may result in the CRA coming back at a later date for more money ó with the executor being liable. The final duty is to distribute the assets to beneficiaries. The executor may collect executor fees and be reimbursed for legitimate reasonable out-of-pocket expenses incurred during the process. Thought for the day: Have you ever heard anyone who has acted as executor say, "Gee that was fun. I want to do it again!î? Patricia Cocker, B.A., CFP, is a Certified Professional Consultant on Aging and a qualified Credit Counsellor who helps clients organize their financial paperwork in four areas: money management, income tax preparation, financial records management and after-funeral care.   Additional Educational Resource: MFA - Succession and Estate Planning Specialist Designation.