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Wealth Update – Seg Funds and Non-resident Beneficiaries plus a Federal Budget Summary



Before we get into this week’s subject, here is a summary of the proposed Federal budget presented this week.


For those with clients with RESPs, the budget proposal contains a recommendation to increase the maximum EAP in the first 13 weeks of full-time school from $5,000 to $8,000.


Back to this week’s topic:


Here is a great opportunity to use seg funds with your clients who have beneficiaries living outside of Canada.


Consider a client whose child has chosen to live in the US. When this client passes, the executor of their estate will have to be very careful with the distribution of assets to the beneficiaries.


What happens:

  • Withholding tax of 25% of value of assets being given to a non-resident beneficiary

  • Personal liability for the Executor

  • Possible unequal distribution of assets between resident and non-resident beneficiaries

  • Jumping through hoops with CRA


When segregated funds are used with named beneficiaries, here’s what happens:


  • At the time of death, any taxes owing from the deemed disposition of the assets will be managed and paid from the estate of the owner

  • The benefit itself will be delivered directly to the non-resident beneficiary without any withholding tax

  • The non-resident beneficiary can work with their local financial planner to determine if any local taxes are owing

  • And, in particular, for non-registered money, the proceeds at death will pass directly to the beneficiary without having to go through the time-consuming estate settlement process – only insurance-based investments can do this!


Why not reach out to your clients that have children living outside Canada and explain how you can simplify the estate process and guarantee their principal investment at death?


We’ve attached a marketing piece from Manulife for your reference.


As always, we look forward to your thoughts.



Scott Edgington, CEA

Director, Advanced Planning, Wealth

Qualified Financial Services


&


Jim Lyons

Regional Vice President, Business Development - Wealth

Qualified Financial Services





This communication reflects the views of Qualified Financial Services Inc. as of the date published. The information in this publication is for general information purposes only and is not to be construed as providing individual legal, tax, financial or other professional advice. Qualified Financial Services Inc. assumes no responsibility for any errors or omissions in the information contained herein nor for any reliance placed on such information. Please seek independent professional advice before making any decisions.


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