Jeff and Sylvia Chan are now both 71 years of age and they have been retired for seven years They have managed to remain debt free since their retirement seven years ago and their cash flow is now positive Sylvia received a $1,000,000 inheritance shortly after their planned retirement and the funds were used exclusively to fund their retirement over the last six years There is still $500,000 left from this amount and it is currently sitting in her bank account earning very little interest Sylvia would like some recommendations on how to invest these funds Her objective is to generate a 6 return on investments that are moderate risk and can provide a tax credit She understands that 4 of this income will relate to dividend yield and 2 to deferred capital gains Their RRSPs continued to grow since Jeff and Sylvia were age 65 and they have not taken any withdrawals The plans were worth $600,000 and $700,000 respectively Since they are 71 years of age and must start withdrawing their RRSP funds as per the maturity rules they will be taking the minimum amount from their RRIF staring at age 72 In addition to this income they will have maximum CPP and maximum OAS, the amounts of which increased since they have deferred withdrawal They also want to leave a significant estate for their two children The current market value of the principal residence is $1,200,000 Jeff also has an investment property that transferred over to him at a fair market value of $400,000 when his dad died five years ago The property is current valued at $500,000 and he expects that both the investment property and the principal residence will increase in value at 7 per year The investment property generates $12,000 of additional rental income per year before deductions for property taxes which are $3,000, and property insurance of $1,200 per year There is no mortgage on either property Their primary residence is held in joint tenancy and they have designated each other as beneficiary on their RRIF accounts The inheritance account will be held solely in Sylvia's name and the investment property solely in Jeff's name REQUIRED 50 marks Assuming 5 annual compound growth, what will the value of Jeff and Sylvia's RRSPs be at age 72 Show these amounts separately for both Jeff and Sylvia (4 Marks) P Y 1 C Y 1 N 7, PMT 0 PV AMOUNTS ABOVE AT AGE 65 CPT FV If they want to continue with a 5 targeted annual return on their RRSP RRIF plans what asset mix will you recommend to achieve this objective Please be specific with the type of bonds and or equities you are recommending and why (3 Marks) NO NEED FOR SPECIFIC SECURITY RECOMMENDATIONS JUST TYPE OF BOND OR EQUITY E G HIGH YIELD BONDS, GROWTH EQUITIES, DIVIDEND STOCKS If they don't convert their RRSPs to a RRIF at age 71, what other options do they have (1) If they convert the RRSP to a RRIF by December 31 in the year they turn 71, when will payments begin and what is the minimum withdrawal rate (2 Marks) MUST USE THE RRIF TABLE AS THE FORUMULA 90 1 AGE ONLY WORKS TO AGE 70 How would you recommend Sylvia invest her remaining $500,000 inheritance given her objective for income with moderate risk and tax credits (2) Recommend at least two different mutual funds and provide details on the mutual fund's investment objective, performance, management fees and volatility (8 Marks) THERE IS A TYPE OF INVESTMENT INCOME IN THE UNIT 7 AND 8 NOTES THAT IS SUITABLE HERE Calculate the total amount of tax that Sylvia and Jeff will each have to pay on their annual investment income at age 72 using the returns provided above This relates to Sylvia's inheritance funds and Jeff's investment property only Please use the gross up of 38 and federal and provincial dividend tax credits of 15 and 12 respectively for Sylvia's dividend income You can assume they are each have a 40 marginal tax rate Assume one full year of investment income (8 Marks) JEFF JUST FIGURE OUT THE NET RENTAL INCOME FOR SYLVIA DETERMINE THE TAX ON HER DIVIDEND INCOME OF $20,000 WHICH IS BASED ON 4 OF $500,000 SHE HAS TO PAY TAX ON THE DIVIDEND INCOME EACH YEAR AND SHE KEEPS THIS INCOME SO THE FUND ONLY GROWS AT 2 PER YEAR AND CREATES A DEFERRED CAPITAL GAIN USE THE NOTES FROM UNIT 7 TO CALCULATE THE TAX ON HER DIVIDEND INCOME They would like to get life insurance to pay the taxes and probate fees on their estate to maximize the value for their heirs Assuming they both die of natural causes at age 83 and their assets have the following values the RRIFs are worth $400,000 for Jeff and $500,000 for Sylvia the non registered investments and investment property continue to grow by the amounts indicated above but Sylvia does not reinvest the dividend income What amount of insurance do they need to cover the potential taxes Assume a effective tax rate of 45 on the estate along with BC probate fees ( 8 Marks) DETERMINE THE TAX ON SYLVIA'S FUND WITH 2 GROWTH AND THEN TAX ON 50 OF THE CAPITAL GAIN JEFF TAX ON INVESTMENT PROPERTY IS SAME BUT HIS PROPERTY GROWS AT 7 OVER 12 YEARS TAX ON PRINCIPAL RESIDENCE RRIFS ARE FULLY TAXABLE ON DEATH AND I GIVE YOU THE AMOUNTS ON THEIR DEATH FOR THE PROBATE FEES CALCULATE THE FAIR MARKET VALUE OF ALL THE ASSETS AT DEATH WITH NO ADJUSTMENT FOR CAPITAL GAINS INCLUSION SO FV OF SYLVIA'S INHERITANCE FV OF JEFF'S PROPERTY FV OF PRINCIPAL RESIDENCE VALUE OF RRIFS AT DEATH AND THEN ADD ALL THESE UP AND SUBJECT TO 1 4 TO GET PROBATE FEES What would be the best type of insurance to pay the estate taxes and probate fees above (2 Marks) NOT TERM INSURANCE If Sylvia invested her inheritance in term deposits earning 3 and she did not reinvest the interest income which is fully taxable, would there be any additional taxes owing on her death with Jeff being her survivor (1) What about probate fees (1) AS PER UNIT 7 AND 8 NOTES INTEREST ON NON REGISTERED INVESTMENTS TAXED EACH YEAR SO TAX IN YEAR OF DEATH FROM JAN 1 TO DATE OF DEATH IF ASSETS TRANSFERS TO A BENEFICARY OR JOINT SURVIVOR THEN NOT AN ESTATE ASSET AS WILL NOT GO TO SYLVIA'S ESTATE What happens if Jeff and Sylvia die without a Will How can they ensure that their wills are accessible to the executors, do they need trusts for their children (6 Marks) LOOK UP IN TEXT OR RESEARCH If Jeff and Sylvia decide that they want a guaranteed life income on their RRIFs and they are not concerned about leaving any of these funds to their children, what options are available to them (2) Are there any disadvantages with these types of products (2 Marks) INCOME MUST BE GUARANTEED

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Jeff and Sylvia Chan are now both 71 years of age and they have been retired for seven years. They have managed to remain debt

Jeff and Sylvia Chan are now both 71 years of age and they have been retired for seven years. They have managed to remain debt free since their retirement seven years ago and their cash flow is now positive. Sylvia received a $1,000,000 inheritance shortly after their planned retirement and the funds were used exclusively to fund their retirement over the last six years. There is still $500,000 left from this amount and it is currently sitting in her bank account earning very little interest. Sylvia would like some recommendations on how to invest these funds. Her objective is to generate a 6% return on investments that are moderate risk and can provide a tax credit. She understands that 4% of this income will relate to dividend yield and 2% to deferred capital gains. Their RRSPs continued to grow since Jeff and Sylvia were age 65 and they have not taken any withdrawals. The plans were worth $600,000 and $700,000 respectively.

Since they are 71 years of age and must start withdrawing their RRSP funds as per the maturity rules they will be taking the minimum amount from their RRIF staring at age 72. In addition to this income they will have maximum CPP and maximum OAS, the amounts of which increased since they have deferred withdrawal. They also want to leave a significant estate for their two children. The current market value of the principal residence is $1,200,000. Jeff also has an investment property that transferred over to him at a fair market value of $400,000 when his dad died five years ago. The property is current valued at $500,000 and he expects that both the investment property and the principal residence will increase in value at 7% per year. The investment property generates $12,000 of additional rental income per year before deductions for property taxes which are $3,000, and property insurance of $1,200 per year. There is no mortgage on either property.

Their primary residence is held in joint tenancy and they have designated each other as beneficiary on their RRIF accounts. The inheritance account will be held solely in Sylvia's name and the investment property solely in Jeff's name.

REQUIRED - 50 marks

Assuming 5% annual compound growth, what will the value of Jeff and Sylvia's RRSPs be at age 72?Show these amounts separately for both Jeff and Sylvia. (4 Marks)P/Y = 1; C/Y = 1; N = 7, PMT = 0; PV = AMOUNTS ABOVE AT AGE 65; CPT FV.

If they want to continue with a 5% targeted annual return on their RRSP/RRIF plans what asset mix will you recommend to achieve this objective. Please be specific with the type of bonds and/or equities you are recommending and why. (3 Marks)NO NEED FOR SPECIFIC SECURITY RECOMMENDATIONS JUST "TYPE" OF BOND OR EQUITY. E.G HIGH YIELD BONDS, GROWTH EQUITIES, DIVIDEND STOCKS.

If they don't convert their RRSPs to a RRIF at age 71, what other options do they have? (1) If they convert the RRSP to a RRIF by December 31 in the year they turn 71, when will payments begin and what is the minimum withdrawal rate? (2 Marks)MUST USE THE RRIF TABLE AS THE FORUMULA 90/1-AGE ONLY WORKS TO AGE 70.

How would you recommend Sylvia invest her remaining $500,000 inheritance given her objective for income with moderate risk and tax credits? (2) Recommend at least two different mutual funds and provide details on the mutual fund's investment objective, performance, management fees and volatility. (8 Marks)THERE IS A TYPE OF INVESTMENT INCOME IN THE UNIT 7 AND 8 NOTES THAT IS SUITABLE HERE.

Calculate the total amount of tax that Sylvia and Jeff will each have to pay on their annual "investment" income at age 72 using the returns provided above. This relates to Sylvia's inheritance funds and Jeff's investment property only. Please use the gross up of 38% and federal and provincial dividend tax credits of 15% and 12% respectively for Sylvia's dividend income. You can assume they are each have a 40% marginal tax rate. Assume one full year of investment income (8 Marks)JEFF JUST FIGURE OUT THE NET RENTAL INCOME. FOR SYLVIA DETERMINE THE TAX ON HER DIVIDEND INCOME OF $20,000 WHICH IS BASED ON 4% OF $500,000. SHE HAS TO PAY TAX ON THE DIVIDEND INCOME EACH YEAR AND SHE KEEPS THIS INCOME SO THE FUND ONLY GROWS AT 2% PER YEAR AND CREATES A DEFERRED CAPITAL GAIN. USE THE NOTES FROM UNIT 7 TO CALCULATE THE TAX ON HER DIVIDEND INCOME.

They would like to get life insurance to pay the taxes and probate fees on their estate to maximize the value for their heirs. Assuming they both die of natural causes at age 83 and their assets have the following values: the RRIFs are worth $400,000 for Jeff and $500,000 for Sylvia; the non-registered investments and investment property continue to grow by the amounts indicated above but Sylvia does not reinvest the dividend income. What amount of insurance do they need to cover the potential taxes? Assume a effective tax rate of 45% on the estate along with BC probate fees. ( 8 Marks)DETERMINE THE TAX ON SYLVIA'S FUND WITH 2% GROWTH AND THEN TAX ON 50% OF THE CAPITAL GAIN. JEFF TAX ON INVESTMENT PROPERTY IS SAME BUT HIS PROPERTY GROWS AT 7% OVER 12 YEARS. TAX ON PRINCIPAL RESIDENCE? RRIFS ARE FULLY TAXABLE ON DEATH AND I GIVE YOU THE AMOUNTS ON THEIR DEATH.

FOR THE PROBATE FEES CALCULATE THE FAIR MARKET VALUE OF ALL THE ASSETS AT DEATH WITH NO ADJUSTMENT FOR CAPITAL GAINS INCLUSION. SO FV OF SYLVIA'S INHERITANCE; FV OF JEFF'S PROPERTY; FV OF PRINCIPAL RESIDENCE; VALUE OF RRIFS AT DEATH AND THEN ADD ALL THESE UP AND SUBJECT TO 1.4% TO GET PROBATE FEES.

What would be the best type of insurance to pay the estate taxes and probate fees above? (2 Marks)NOT TERM INSURANCE

If Sylvia invested her inheritance in term deposits earning 3% and she did not reinvest the interest income which is fully taxable, would there be any additional taxes owing on her death with Jeff being her survivor? (1) What about probate fees? (1)AS PER UNIT 7 AND 8 NOTES INTEREST ON NON-REGISTERED INVESTMENTS TAXED EACH YEAR SO TAX IN YEAR OF DEATH FROM JAN 1 TO DATE OF DEATH. IF ASSETS TRANSFERS TO A BENEFICARY OR JOINT SURVIVOR THEN NOT AN ESTATE ASSET AS WILL NOT GO TO SYLVIA'S ESTATE.

What happens if Jeff and Sylvia die without a Will? How can they ensure that their wills are accessible to the executors, do they need trusts for their children? (6 Marks)LOOK UP IN TEXT OR RESEARCH

If Jeff and Sylvia decide that they want a guaranteed life income on their RRIFs and they are not concerned about leaving any of these funds to their children, what options are available to them? (2) Are there any disadvantages with these types of products? (2 Marks)INCOME MUST BE GUARANTEED.