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Life Insurance (Canada)
Old 01-10-2007, 08:12 AM   #1
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Life Insurance (Canada)

Every time we meet with our FA, he always pushed L.I. The end result was always the same.....no ........no and no. I asked him never to bring up the topic again and he response was that he was obligated blaw blaw blaw.......I replied, fine but never bring is up again because I don't think I need it.
At our last and final meeting low and behold he brought up the topic of L.I. 6 more times. Every time he tried to find a good reason I felt I had to shoot it down, for e.g.

1. If you should ever loose your job............I'm retired, I have no job.
2. The rest of the family won't be able to survive financially.........we have no debt and we presently survive on or portfolio.......dah.
3. The survivors should maintain there standard of living...........the income won't change since I don't have to be alive for the portfolio to continue.
4. Life insurance will also help you with a will, executor etc. ............I already have that in place.
5. L.I. will greatly help out in the tax issue, presently you won't have enough left over after the tax man gets a hold of the estate............I didn't have an answer to that one.

Now I know that he probably gets commission on L.I but is he really trying to look out for our best interest?

Please no FA bashing.

Questions:

1. Is there something I should know about in regards to estate planning? How can we protect ourselves against having to pay fees, taxes etc.
2. Do I truly need life insurance?


Keep in mind that I'm in Canada.


Thanks
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Re: Life Insurance (Canada)
Old 01-10-2007, 08:58 AM   #2
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Re: Life Insurance (Canada)

As you surmised, unless there is an estate tax issue you do not need life insurance. I am not familiar with Canadian estate taxes, so you may wish to consult an attorney.
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Re: Life Insurance (Canada)
Old 01-10-2007, 09:37 AM   #3
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Re: Life Insurance (Canada)

I have to assume the general tenet is the same. Life insurance is really only for two reasons:

1)To cover the risk of lost income if the breadwinner dies.

2)As a wealth transfer vehicle if you have a large estate.

Since number one is covered, and number two you aren't concerned about, I would question the reason to buy LI, other than your FI is compensated to sell it.

I would make sure that your will or whatever Canada calls it is up to date. Ask the estate attorney to structure it to take advantage of any unified credit laws or ways to transfer your estate to a surviving spouse or family with little hassle and tax burden. Good luck...............
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Re: Life Insurance (Canada)
Old 01-10-2007, 11:33 AM   #4
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Re: Life Insurance (Canada)

You don't need life insurance.

When you've got lots of future earning potential and little money, you need life insurance. But when you have no future earning potential and enough money you do not need it.
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Re: Life Insurance (Canada)
Old 01-10-2007, 12:04 PM   #5
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Re: Life Insurance (Canada)

Quote:
Originally Posted by My Dream
Now I know that he probably gets commission on L.I but is he really trying to look out for our best interest?
No.

Quote:
Originally Posted by My Dream
Please no FA bashing.
Well, that's going to cut down on the number of people interested in answering your questions!

I think your biggest issue right now is that you haven't cut off contact with your financial advisor. When you're ready to move to a new fund company, whichever one you choose, they'll be happy to do the paperwork of obtaining the "transfer in kind" of your funds from your manager to their custody. You never have to speak to your FA again.

Quote:
Originally Posted by My Dream
1. Is there something I should know about in regards to estate planning?
If it's just you & spouse then you probably don't care. However if you have a large estate then your (or your spouse's) death may cause a large inheritance tax to be charged to the estate when your survivors inherit. I don't know anything about Canadian inheritance taxes but one of the resident posters will no doubt give you the short version.

Quote:
Originally Posted by My Dream
How can we protect ourselves against having to pay fees, taxes etc.
The best way is to have too small an estate to trigger any taxes, but if you give too much of it away then you can risk running out of money before you run out of lifespan.

Other tax-avoidance methods involve various types of trusts that are set up with the help of a lawyer. Life insurance is typically used in estate planning as a way of paying any inheritance taxes or of balancing out the bequests to your heirs to make sure that everyone gets a fair share.

Quote:
Originally Posted by My Dream
2. Do I truly need life insurance?
Probably not. We canceled ours whe I ER'd and spouse left her higher-paying job. We don't need it for estate planning, either, since our kid will inherit some and the rest will probably go to charity.

Your FA may be trying to pound your round peg into a "one size fits all" square hole that pays him a healthy commission. But I'm not trying to bash FAs in general, just this one in particular...
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Re: Life Insurance (Canada)
Old 01-10-2007, 01:26 PM   #6
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Re: Life Insurance (Canada)

Quote:
Originally Posted by My Dream

Now I know that he probably gets commission on L.I but is he really trying to look out for our best interest?

There are two basic forms of Life Insurance:

Investment type like "Whole Life" sold by your FA for his benefit.

and

"Term Life" sold by Insurance Companies that benefit you.
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Re: Life Insurance (Canada)
Old 01-10-2007, 04:20 PM   #7
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Re: Life Insurance (Canada)

There are no inheritance, estate or gift taxes in Canada. The only tax hit is on your RRSP. You can name your spouse as beneficiary and it transfers tax-free. When spouse dies, 100% of the gains in value are immediately taxable before any heirs get it. But why pay the expense of insurance to pay future taxes. Invest the money and you heirs will get it.

The only other case is if there is a family cottage and multiple heirs, you might want insurance to pay the capital gain to keep it in the family. This assumes that the heirs could not agree to pay them equally out of their inheritance or there is insufficent inheritance to pay.

You do not seem to have an FA. He should know these facts. What other facts does he not know?
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Re: Life Insurance (Canada)
Old 01-10-2007, 11:46 PM   #8
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Re: Life Insurance (Canada)

MD, with all due respect, your FA is an idiot. Ditch him/her immediately.
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Re: Life Insurance (Canada)
Old 01-11-2007, 07:39 AM   #9
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Re: Life Insurance (Canada)

Quote:
Originally Posted by Nords
Quote from: My Dream on January 10, 2007, 09:12:47 AM
Please no FA bashing.

Well, that's going to cut down on the number of people interested in answering your questions!
I was hoping that wasn't the case.

Quote:
Originally Posted by Nords

I think your biggest issue right now is that you haven't cut off contact with your financial advisor. When you're ready to move to a new fund company, whichever one you choose, they'll be happy to do the paperwork of obtaining the "transfer in kind" of your funds from your manager to their custody. You never have to speak to your FA again.
If it's just you & spouse then you probably don't care. However if you have a large estate then your (or your spouse's) death may cause a large inheritance tax to be charged to the estate when your survivors inherit. I don't know anything about Canadian inheritance taxes but one of the resident posters will no doubt give you the short version.
The best way is to have too small an estate to trigger any taxes, but if you give too much of it away then you can risk running out of money before you run out of lifespan.

Other tax-avoidance methods involve various types of trusts that are set up with the help of a lawyer. Life insurance is typically used in estate planning as a way of paying any inheritance taxes or of balancing out the bequests to your heirs to make sure that everyone gets a fair share.
Probably not. We canceled ours whe I ER'd and spouse left her higher-paying job. We don't need it for estate planning, either, since our kid will inherit some and the rest will probably go to charity.

Your FA may be trying to pound your round peg into a "one size fits all" square hole that pays him a healthy commission. But I'm not trying to bash FAs in general, just this one in particular...
Bottom line is I don't think I need life insurance as I stated to my FA, I even told him that my DW is 46, worst case cenario, she has the capacity to get a good paying job.

No worries M8T.

Thanks Nords and everyone else that answer this thread.
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