Smart Advice with Carissa Lucreziano

In this episode of Smart Advice, we delve into the intricate world of estate planning for blended families—a crucial yet often overlooked topic for many Canadians. Estate planning becomes significantly more complex when it involves couples with children from previous relationships, second marriages, or common-law partnerships, which are increasingly common across the country.

Our guest, Richard Voss, Director of Wealth Strategies at CIBC Private Wealth, shares expert insights to help protect your family’s legacy. Tune in for practical tips on managing wills, powers of attorney, and trust planning to help avoid potential conflicts and ensure everyone’s interests are protected.

Three reasons you should listen to this episode:

1. Learn how to navigate the complexities of estate planning for blended families.
2. Discover the legal differences between common-law partnerships and marriage and how they affect your estate plan.
3. Understand the importance of open communication within families when discussing estate planning.

Resources

• CIBC Article: 5 Tips On Talking About Money With Your Partner
• CIBC Private Wealth Insights Hub
• CIBC Smart Advice hub

Episode Highlights

[00:21] Estate planning for blended families

• Estate planning is an important part of ensuring your wealth is transferred smoothly.
• However, every family has its own unique dynamics, which creates unique challenges and considerations.
• Blended families in particular have specific nuances to their financial situation.
• 23% of couples in Canada are living as common law partners — the highest among G7 countries.

[03:07] Understanding your financial landscape

• It’s a financially smart decision to fully understand your financial assets and liabilities before entering a new relationship.
• There is a difference between hard assets (real estate, cars, collections) and soft assets (family knowledge, heirlooms with emotional attachments).
• Review your current wills, powers of attorney, and beneficiary designations to ensure they are up to date.

[5:44] Richard: “If you are remarried or in some provinces common law, and intend to leave your entire or the majority of your estate to your children and you die without a will, recognize that a portion of your estate will go to your new spouse. This can vary depending upon the province you reside in, unless you have what's known as a domestic agreement or a marriage contract in place.”

• Ideally, blended families should have a will and power of attorney to help with financial planning of both the children and the parents.

[09:24] Building financial stability in blended families

• Both partners should understand each other’s spending habits and set boundaries on how to utilize their finances.

[10:15] Richard: “When two families are coming together to be one new family, it's important for the new heads of the household to be in tune with what type of a spender they are and what type of a spender their new partner is.”

• There are different approaches to financial planning, from fully integrated finances to separate accounts.
• Richard advises regular cash flow monitoring and open conversations about financial goals and obligations.

[15:18] Communication and financial literacy in blended families

• Carissa and Richard discuss the importance of communication in blended families, especially with minor and adult children.
• Richard advises demonstrating an abundance mentality and ensuring minor children feel secure.
• Adult children, on the other hand, need to understand the estate plan and potential changes in financial security.
• Plus, it is a good idea to discuss care decisions and responsibilities for aging parents early on.

[19:10] Legal differences between married and common law couples

• There are two legal partnerships in Canada that can differ significantly in the eyes of the court: married and common law relationships.
• Defining common law couples in Canada depends on different perspectives and the lens through which it’s viewed.
• The property rights for common law couples varies depending on the province they’re in, jurisdictional rules, and cohabitation agreements.
• Legal advice from qualified practitioners for different aspects of estate planning helps smoothen estate planning.

[26:19] Complexity of Estate Planning and the Role of Profe...

Get ready for an in-depth conversation with savvy real estate investor Scott McGillivray, as he shares the ins and outs of his journey from a university student facing housing challenges to a real estate investment guru. Discover Scott's strategic approaches to investment, key financial insights, and personal anecdotes that highlight the resilience required to thrive in the competitive world of real estate.

Whether you’re an aspiring entrepreneur or a Canadian looking to dip your toes into real estate investing in Canada, this episode is for you!

Here are three reasons why you should listen to this episode:

1. Learn the value of leverage when it comes to your capital — whether that’s actual cash or equity.
2. Find out why it’s critical to tap into expertise, building a team of professionals to support you along your homeownership journey.
3. Discover the reality of real estate investing in Canada — and why you should start right now.

Resources

• Visit CIBC for more smart advice
• Watch episodes of Income Propertyfor lessons on how to leverage your home as a real estate investment.
• Watch episodes of Buying In for more real estate advice.

Episode Highlights

[01:23] Scott’s origin story and first real estate investment:

• Scott started his real estate journey while in university after facing the challenge of finding affordable housing.
• It wasn’t necessarily about wealth at the time — back then, it was just about finding a reliable place to live.
• His first shot at real estate investing in Canada was prompted by a suggestion from a realtor to buy instead of rent.
• Although his family and friends cautioned him against buying real estate, he elected to listen to his real estate agent, financial advisor, and mortgage advisor instead.

“Why take financial advice from broke people when I have — I hate to say it — I have these people who have a track record of success with money, giving me different advice?”

[09:23] Strategies for building a real estate portfolio

• Scott explains his aggressive strategy of using equity from one property to buy more, scaling up rapidly.
• He discusses transitioning from basic cash flow focus to long-term equity building and strategic financial planning.

[09:24] “You have to be ruthless about achieving your goals. And you have to make smart goals. So set up your goals to make sure that they're realistic, they're time bound, that there's a certain metric attached to them.”

• The evolution of his business model included learning to manage and leverage financial tools and market changes effectively.

[19:15] Advice for new investors

• Scott advises new investors to make decisions based on logic and calculations rather than emotions.
• Another critical piece of advice to new investors is to dislike failure, rather than fear it.

[20:36] “You can hate losing, that's great, but you can't be afraid of it. You just have to learn how to understand this part of the process. It's worth losing ten times, it's all worth it when you win that one time. But if you're afraid, you never get the win.”

• He stresses the importance of being proactive in creating positive cash-flowing properties as they rarely come ready-made.
• Scott encourages new investors to educate themselves and use professional advice to navigate the real estate market.

[22:55] “When the work needs to be done, the best thing you can do is lead by example.”

[29:33] Scott’s reflections on his personal experiences

• Scott reflects on the importance of persistence and adapting to market conditions throughout his career.
• He shares personal anecdotes of overcoming challenges and leveraging opportunities that seemed daunting at first.
• Scott discusses the value of learning from both successes and failures, emphasising continuous improvement.

[35:39] The future outlook on real estate investing in Canada

• Scott talks about adapting strategies to cope with economic changes, such as interest rate fluctuations and market dynamics.
• He expresses optimism about the future of real estate and the potential for continued growth and adaptation.
• Scott emphasises the importance of long-term planning and strategic investment to navigate through varying economic climates.

[43:55] “One of the biggest secrets to succeeding as an entrepreneur, I believe, is making sure that other people get to their goals.”

• He concludes by sharing his commitment to both personal growth and helping others achieve th...

Whether you're looking for a new mortgage, contemplating your investment strategy, or simply trying to make sense of the economy, join us for a conversation with Avery Shenfeld, Managing Director and Chief Economist at CIBC Capital Markets, to shed light on the recent interest rate cut, its expected impact on the Canadian economy, and what this means for consumers.

Here are three reasons why you should listen to this episode:

1. Find out what the recent interest rate cuts may mean for inflation and the Canadian economy.
2. Learn how inflation and interest rates may impact Canadian consumers.
3. Gain valuable insight into what economic changes Canadians can expect for the year ahead and into 2025.

Resources

• Visit CIBC for more smart advice
• Visit CIBC Capital Markets Insights Hub to access timely economic insights

Episode Highlights

[02:50] Tackling Changing Interest Rates

• After continuous interest rate hikes, interest rates were reduced from 5% to 4.75%. However, this rate cut won’t have any significant impact on the economy immediately.
• The future decisions of the Bank of Canada will be key in achieving economic relief. Further rate cuts are necessary to reach an interest rate of around 3%.

[03:24] Avery: "It's not the first move that will matter, but it's really the follow-up from the Bank of Canada. We've got to get that short-term interest rate down to something like three percent or two and three-quarters."

Historically, Canada and the US differ in economic performance and interest rates. These reflect the differing needs of the two economies and the varying interest rates.

• While Canada’s initial rate cuts may weaken the Canadian dollar, there is no significant impact on the trade and consumer price index.

[06:30] The Current Consumer Price Index and Impact of Inflation

• The majority of inflation from the past year was a result of global production issues from the COVID-19 pandemic. As goods became more available, prices started to increase.
• Shelter is the critical component of the Consumer Price Index (CPI). Rent inflation which has greatly increased may ease by 2025 due to revisions in government policies.
• Another aspect of the shelter component is mortgage interest costs. Cutting interest rates can lead to the reduction of the inflation of mortgage interest costs. By the end of 2025, Avery shares that “variable or short term mortgages will see substantial savings that will show up in that part of the inflation basket.”

[09:47] The Future of the Canadian and Global Economy

• Avery states that the growth of the Canadian economy and the overall global economy is still sluggish.

[10:34] Avery: "The overall temperature of the global economy is not likely to be that vigorous in the balance of this year, where our hopes lie is really for 2025, after a sequence of interest rate cuts, not just in Canada, but in Europe, and eventually in the US as well."

Global growth and domestic demand improvement due to interest rate cuts can lead to a better year for the Canadian economy by 2025.

• In response to the higher interest rates, Canadians focus on saving an increasing position of their after-tax income and being more cautious about saving.
• The Bank of Canada’s goal was to encourage saving to slow consumer spending growth. This will contribute to the hopeful growth of the economy in 2025.
• With lower interest rates, people have more to spend. The biggest economic changes will impact the real estate market with increasing housing turnover and more spending.

[15:00] Investment Outlook for the Second Half of 2024

• The equity market has been doing well in the past years. However, equities are fully valued for the coming interest rate cuts and Avery advises caution for these assets.
• On the other hand, there is room for bond yields to decrease and result in better returns on fixed-income investments.
• Avery states that we’re now in a period of the usual backstop. The bond market can provide a good return and shelter for the slowing of the equity market.
• A traditional balanced portfolio offers shelter from the volatile market as interest rate cuts continue.
• The expected economic recovery in 2025 should mean well for the stock market.

[17:16] What Canadians Need to Know About the Economy

• Looking at the big picture, the overnight interest rate is expected to go down to around 3%. Avery predicts that it will go lower than it is today, especially by the end of 2025.
• Inflation is a...

Tax expert Jamie Golombek, Managing Director of Tax & Estate Planning at CIBC Private Wealth, joins us for an in-depth conversation on the new higher capital gains inclusion rate, and what this change could mean for Canadians and their future financial decisions—including individuals, investors, and businesses or corporations. If you might be affected by the change, you’ll want to listen to this episode!

Here are three reasons why you should listen to this episode:

1. Learn about the changes to the capital gains tax inclusion rate that took effect on June 25th, 2024.
2. Find out how the changes affect people with vacation homes/cottages and rental properties, investors, and corporations and businesses.
3. Discover the impact of tax planning with long-term strategies and advice.

Resources

• Visit CIBC for more smart advice
• Read Jamie Golombek’s column “Tax Expert” in the National Post

Episode highlights

[02:40] Current rules vs. proposed changes

• Jamie says it’s a big change, but only affects a small number of people each year. The change affects people who realize capital gains outside of a registered plan that total more than $250,000 in a calendar year.
• Jamie says the change will also affect individuals who sell a vacation property, income or rental property. Or, if the property isn’t transferred to a spouse or partner via spousal rollover, the estate may be liable for taxes.

[04:40] “If we really want to break it down, what does this really mean for those who are affected? For individuals, it’s only gains over $250,000, and effectively your tax rate is going up by nine percentage points.”

[05:51] Who the changes will affect

[06:30] Individuals with a second home/cottage/vacation property

• Jamie notes that if you will have higher capital gains from selling your vacation property, you can use the principal residence exemption.
• If a vacation property is jointly owned by two spouses or partners, capital gains can also be split 50-50. Each individual can take advantage of lower 50% inclusion rate on first $250,000 in capital gains. This also applies to jointly owned rental properties.
• Jamie suggests tracking capital expenditures, like a major renovation, that add to the property’s value. These can be added to your adjusted cost base for tax purposes. When you sell, the capital gain will be lower because cost will be higher.

[09:10] Cottage owners

• Jamie notes one interesting opportunity for some clients is permanent life insurance if there’s no cash in the family to pay capital gains taxes if you die and someone inherits your cottage. The amount of insurance you need only needs to cover the taxes. This can be done affordably if you’re in relatively good health and relatively young.

[12:11] Investors

• Jamie predicts for 2024, the new term will be “capital gains selling.”
• Jamie advises to look at your broader portfolio allocation and holdings, and speak to your advisor to see if there are opportunities to crystallize a gain and rebalance portfolio. By end of the year, as long as the capital gains are less than $250,000, you will pay a preferred rate on the capital gains tax.

[14:56] Corporations or businesses

• Jamie says that many professionals use corporations because of the substantial tax deferral. But with the recent change, there’s have a problem: if you earn capital gains, you don’t get the $250,000 break of the lower threshold in the corporation. This means you would be better off if you earned the gains personally vs. in a corporation.
• For new business owners, the real concern is if you’re building up an investment portfolio internally, you’re really disadvantaged.

[17:37] “I think that you really need to look at the value of deferral. If you’re not leaving at least $100,000 or more a year in the corporation, and you’re deferring tax on that, you have to question, is it worth paying that extra tax ultimately on the capital gain rather than having that investment done personally?”

[17:56] Will the capital gains inclusion rate ever go back down?

• Jamie says it will depend on what future governments do. A new government could get elected and reduce the inclusion rate.

[19:18] “Ultimately it really is a political issue, and I think it will depend on who comes in, and the budget, and ultimately spending and how they can manage the deficit and also the long-term debt.”

[19:46] Tax planning tips

• Jamie advises sitting down with a financial advisor, tax advisor, or an accountant to make sure you’re taking a...