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“Tomorrow belongs to those who can hear it coming.”
– David Bowie

One of the most important items I encourage you to note is how the financial press will continue to demonstrate their misunderstanding of the changes that impact our economy. They will breathlessly report on financial facts and data that are increasingly irrelevant. Let me explain with some examples:

• World’s largest taxi company owns no taxis (Uber)
• Largest accommodation provider owns no real estate (Airbnb)
• Largest phone companies own no telecommunications infrastructure (Skype)
• World’s most valuable retailer has no inventory (Alibaba)
• Most popular media owner creates no content (Facebook)
• Fastest growing banks have no actual money (SocietyOne)
• World’s largest movie house owns no cinemas (Netflix)
• Largest software vendors don’t write apps (Apple & Google)

Technology has created a “digital disruption” that is completely changing how we gauge the rate of change in our business markets. What do we learn from shipping data, purchasing manager indexes and inventory levels when the world’s fastest growing and most successful companies have no inventory, no manufacturing and require no shipping? When you hear the news reports, ask yourself if they are reporting on the “old economy” or the new one.

Note from Coleman Wealth: Often, we don’t take the time to rethink how we shape some of the basic components of our financial picture. Thinking about using debt in a strategic fashion in today’s low interest rate environment can often be overlooked. Helena Corallo, a banking specialist with Manulife Bank, has helped us and our clients by removing the anxiety around debt and cash flow management by introducing a new solution, the Manulife One all-in-one account. To find out more information or to be put into contact with Helena, please email us at coleman.wealth@raymondjames.ca.

Do you have a plan for debt elimination?

When most people think about retirement planning, they think of building a retirement nest-egg through RRSPs and pension plans. While these are key pieces of the puzzle, it’s important not to forget about another important element of retirement planning – debt elimination. After all, the less you spend on interest payments, the more you can allocate to your retirement savings.

A debt-elimination plan doesn’t have to be complicated. But you should have one or you’ll likely be in debt longer than you have to. There are a few simple strategies for getting out of debt sooner, such as:

Building extra debt payments into your budget.
Consolidating all of your debts at the lowest rate possible.
Using your income and savings to automatically reduce your debt (without giving up access to that money).
When you’re planning for retirement, don’t forget about the impact that your debt has on those plans. With a strategy for becoming debt-free sooner, you may even be able to retire earlier than expected.

A painless way to cut back on expenses

With the current economic uncertainty, many people are looking for ways to reduce expenses. A relatively painless way to reduce your monthly expenses is to have a second look at the way you’re managing your debt.

Over time, most of us take out a variety of loans for different purposes. These can include things like credit card debt, car loans, home renovation loans and, of course, the mortgage. And if you have more than one loan, you’re most likely paying a different interest rate on each loan. One of the easiest ways to reduce your monthly interest costs is to consolidate your debt at the lowest rate. Typically, your lowest-rate debt will be a loan that is secured by an asset, such as your home.

If you have sufficient equity built up in your home, consider switching to a product that allows you to access your equity, such as a home equity line-of-credit. Then, use this line of credit to repay your higher-interest loans. In this way, you’ll be bringing all of your debts together into a single account, at a single rate. Some line-of-credit products even allow you to track debts separately within the account so you can continue to keep track of interest costs and repayment separately. Not only will debt-consolidation save you interest but it will make it easier for you to keep track of what you owe and how you’re progressing in paying it down.

Reducing your monthly expenses is one way to deal with economic uncertainty – and it doesn’t have to be painful. By borrowing smarter you can reduce your interest costs and increase your cash flow each month.

Help out the kids without hurting your retirement

As parents, we want nothing more than for our kids to succeed. Often, we wish to give our children a “leg up” in their transition to adulthood by helping them out with larger expenses, such as tuition for post-secondary education, a down payment on a home or even a reliable vehicle. If you find yourself in this situation, be sure to carefully consider where you take that money from so that helping your kids doesn’t hurt your retirement.

For people who don’t already have savings set aside for their kids, such as an RESP or a savings account, there are generally two options:

Retirement savings. Tapping into your retirement savings may be the quickest way to access cash but it could have some undesirable consequences. For example, you’ll be charged taxes on a withdrawal from your RRSP and you’ll lose that contribution room forever. You’ll also forego any future growth on the amount you’ve withdrawn, which will most likely mean you’ll have less money available at retirement.

Home equity. Some people are reluctant to take on more debt in the years leading up to retirement. However, using a home equity line of credit to help out your kids may be the wiser choice in some instances. Here’s why: you won’t be charged any tax when you access your home equity and your existing retirement savings can remain intact and continue to grow. Some accounts will even allow you to track different portions of your debt separately. This can be particularly useful if you’re providing money to more than one child and/or if you wish to track the interest charged for different portions of the debt.

We all want to help our kids succeed. By carefully considering how you help, you can help to ensure you don’t compromise your own future financial security.

Note from Coleman Wealth: We work with a network of Canada’s best cross border experts, and are fortunate to have connected with Michael Kennedy, an American estate lawyer at Ingenuity Counsel. Michael has worked with a number of our clients who have cross border legal issues and understands the complexity of cross border investing. To contact Michael, please email us at coleman.wealth@raymondjames.ca.

As the calendar turns from summer to autumn, Canadian snowbirds begin to plan for their annual pilgrimage south escaping the inevitable Canadian winter. Whether you own property in Florida or are thinking of purchasing your own piece of southern paradise now is a good time to evaluate your estate plan to ensure it protects your interests in the United States.

One important issue to consider is whether you have the appropriate Power of Attorney documents in place. Many Canadian snowbirds already have an Ontario Power of Attorney for Property and/or a Personal Care Power. However, do you also have the Florida equivalents of these important documents?

Powers of Attorney are used to make important decisions that affect your assets and medical treatment. In many cases, these decisions are incredibly time sensitive. For example, if you were admitted to a Florida hospital, your spouse would not be able to make decisions related to your care under an Ontario Personal Care Power. Under Florida law, your Ontario Personal Care Power will not be valid and therefore not effective with the medical provider. In that case, a guardianship proceeding would have to be commenced in the Florida courts. Clearly, this could take time, significant money and ultimately delay your spouse’s ability to make timely decisions related to your care.

In addition, to the health care problem above, let’s assume you had a stroke and are unable to make decisions regarding your affairs. Your spouse wants to sell your Florida home but since you own the property as joint tenants with right of survivorship, you must consent to the transaction. Your spouse presents the buyer with your Ontario Power of Attorney for Property naming her as your agent but because it was executed under the laws outside the United States, the buyer and the title company will not accept it and therefore it will not be effective.

Another critical cross border estate document for the snowbird is the last will & testament covering property in the USA. Many problems arise for your estate if you dispose of property in the United States using your Ontario last will & testament. By using a state specific last will & testament for your property in the USA, your executor can save time, confusion, stress & money.

The good news is that you are permitted to have estate-planning documents under both Canadian and United States law. You can have Ontario estate documents to address matters in Ontario (and throughout Canada) and Florida estate documents to protect your interests in the USA. Therefore, you should consider adding United States documents to your estate plan to provide you with an extra layer of protection while in the USA.

With or without an up to date United States estate plan, there will be estate administration that must be done with respect to your property situated in the United States. Whether it’s probating the estate in the USA, clearing title to the property (even if jointly owned), transferring property to the rightful heirs or filing an estate tax return with the Internal Revenue Service and the state department of revenue, there is work to be done with respect to your property situated in the USA. Knowing that this will be the case is half the battle.

If you want to avoid many of these problems, a trust can be the answer, but it takes advance planning and working with the proper attorney to ensure compliance with all relevant United States laws & regulations. The Florida Land Trust is one particular trust that must be used with careful cross border planning – it is not the silver bullet you may think.

In the end, you should strongly consider discussing your activities in the United States with an experienced cross border tax & American estate lawyer.

To find out more about cross border estate planning, please contact Michael Kennedy at mk@ingenuitycounsel.com, 519-252-3888 or www.ingenuitycounsel.com. Michael Kennedy provides representation and counseling related to all facets of estate planning and business enterprise throughout the United States.