NOTE: The case studies illustrate Black Spruce Financial’s Three-step Process of Life Planning.  Although the individuals portrayed are fictitious, the scenarios are based on common cases we encounter.  In these cases, all individuals are assumed to be Canadian tax paying residents (Canadian Citizens, Permanent Residents or Landed Immigrants).

Explore – Retirement Goals

Darcy, the Chief Financial Officer at a prominent Engineering company, is looking to retire in ten years. He wants to supplement his executive retirement income in a tax advantaged way. He has a pension plan with his company in place and owns investments, both registered and non-registered, which are held personally. He has invested these funds in self-directed accounts at his local bank, but admits that he simply does not have the time or patience to monitor the investment holdings any longer, especially in light of recent years’ market volatility which has left him insecure about making individual investment decisions without the help of an experienced advisor.

Darcy is married to Donna. They have two dependent children who they hope will be going to university in about ten years, and they own a cottage and some other investment properties. Donna, a physiotherapist, would like to retire at about the same time as Darcy so that they can spend their retirement together, traveling, enjoying the cottage, and spending time volunteering with the children’s charity that has come to mean so much to them. Although they both have life insurance, they have not updated it since they were married. Also, they both have group benefits through their employers that covers medication, dental, disability and critical illness.

The concern for Darcy and Donna is that they would like to have sufficient resources to fund their retirement objectives and to have a proper estate plan in place for their children.

Sculpting a Retirement Plan

After completing a discovery questionnaire, Darcy and Donna meet with us several times, and their data is entered into the Black Spruce Life Planning software. Although Darcy’s initial concern was having enough money to fund their retirement, more issues are brought to light once the data is entered into the program. For instance, their investment properties will trigger an estate tax liability at death. This is something they will need to plan for ahead of time to ensure that their family is not burdened unnecessarily after they pass away.

A few different scenarios are created to allow for the most practical and feasible options to be considered, leading to the ideal plan option. Once Darcy and Donna confirm that nothing has changed since starting the planning process, they implement the new plan.

The Life Plan details include:

• Darcy’s investments are transferred to a wealth investment dealership that Black Spruce Financial recommends for stewardship. Using the Life Planning software and the ‘Know Your Client’ questionnaire, the new account is set up in accordance with Darcy and Donna’s risk profiles.
• The software shows that they have an estate gap – they do not have sufficient assets or insurance in place to offset the taxes due at death. To supplement their current life insurance policy, a whole life policy is put in place, one with a cash value component. The policy will cover the expected taxes, but the cash value fund, which is tax sheltered, can be used not only to cover any additional expenses, but will also help to fund Darcy’s retirement in a tax advantaged manner.
• Their wills had been created when Darcy and Donna were married, nearly fifteen years ago.  They need to update their wills to include their children, and to reflect all of the changes in their assets. They plan to update their wills regularly from now on, whenever there is a significant change in their lives, or when their wishes changes.

The Outcome – a Planned Retirement

Fast forward ten years into the future. Both Darcy and Donna are retired and both children are off to post-secondary education. The Life Plan, which is reviewed regularly to help make necessary adjustments over the years, has helped to keep them on track with their vision and objectives. They have more than sufficient resources needed to have a comfortable retirement, funded by their individual registered accounts and the cash value from their insurance policy. Also, the estate planning issues that they had been concerned about a decade ago are now taken care of through the life insurance policy and updated wills.

The Life Planning process helps to create a road map for people to follow, a plan that keeps you on track through the twists and changes of life. For more information, please contact us.