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Email this2:19 pm
June 10, 2020
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Hey, just wondering if anyone has any input.
My parents sold their house recently, and seem to have lost all interest in managing their money. I want to make sure they have enough to get them through the rest of their lives. They need to pay rent on a seniors residence, and any health expenses, which are minimal right now.
They are seniors, so I'm not taking chances with their money, and they aren't going to do anything with an online-only bank, or even do anything online. I have no desire to do anything that they aren't comfortable with. So we're sticking with the Big 6 bank they bank with.
How important is CDIC protection? Do you think I should be splitting things up into various joint accounts (there is only me and the parents and my brother, no spouses or children) to make sure each account is protected? Any ideas besides GICs? Like I said, nothing risky.
Anything (else) I should know or take into consideration?
Thanks!
2:31 pm
October 27, 2013
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There is no real risk with any of the big 5 or 6 banks so I would not go out of my way to keep accounts within CDIC insurance protection. Many folks, including small businesses, have millions in accounts. If they have 3 accounts, his, hers and theirs (JTWROS), that is likely enough.
With the new rules on Bare Trusts that may/can/will catch JTWROS accounts of convenience, I would be highly wary of including any adult child (you or your bro) on any such accounts. They may be deemed to be 'in trust' accounts subject to the filing of T3 Trust returns. I flagged this as a potential issue in a new thread https://www.highinterestsavings.ca/forum/income-tax-filing/new-tax-rules-regarding-bare-trusts-joint-property-issues/ but it has gotten no attention.
I have no skin in this game since we do not 'do' joint accounts but those that do need to be aware the world may have changed commencing the 2023 tax year.
3:06 pm
June 10, 2020
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Thanks, Alta. We were considering doing JTWROS accounts, but I wasn't aware of those changes coming. Thanks for pointing me to that.
3:07 pm
August 14, 2023
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AltaRed said
There is no real risk with any of the big 5 or 6 banks so I would not go out of my way to keep accounts within CDIC insurance protection. Many folks, including small businesses, have millions in accounts. If they have 3 accounts, his, hers and theirs (JTWROS), that is likely enough.With the new rules on Bare Trusts that may/can/will catch JTWROS accounts of convenience, I would be highly wary of including any adult child (you or your bro) on any such accounts. They may be deemed to be 'in trust' accounts subject to the filing of T3 Trust returns. I flagged this as a potential issue in a new thread https://www.highinterestsavings.ca/forum/income-tax-filing/new-tax-rules-regarding-bare-trusts-joint-property-issues/ but it has gotten no attention.
I have no skin in this game since we do not 'do' joint accounts but those that do need to be aware the world may have changed commencing the 2023 tax year.
Now that you put it that way , AltaRed, I will review that thread with those links. I did see that post but it went right over my head. I don't think I will be caught up in this Bare (trap) Trust , but I will review and bring it up to the accountant just in case.
Thanks AltaRed.
Trader first, Saver second
3:24 pm
October 27, 2013
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That thread has a link in it to a FWF forum discussion thread on the subject where it has been discussed in some detail, but where the conclusion is that much is still unknown depending on how CRA actually plays this out. It is at least worth a read even if it is currently clear as mud. A number of accounting firms wrote some articles on it in late 2022 and early 2023 but it seems they are also waiting for clarity from CRA.
It may turn out to be much ado about little, especially for JTWROS property (real property and capital accounts) between spouses, but potentially a major issue with anyone else on a JTWROS title.
8:59 pm
October 21, 2013
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I know I should read up on this but it is beyond my capacity at this time.
Can anyone tell me what exactly is the risk with these T3s? Are they somehow going to cost us money if the joint account is with a parent rather than spouse? I assume the money belongs to the parent and income from it would have been taxed to the parent all along; and that the "convenience" is for the purpose of avoiding probate tax when the parent dies. What difference will the T3 make?
9:10 pm
October 27, 2013
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I think the risk is paperwork, i.e.the trustee (legal owner(s)?) obtaining a Trust Account number https://www.canada.ca/en/revenue-agency/services/tax/trust-administrators/t3-return/application-trust-account-number-how-apply.html for each account that is a Bare Trust, the filing of (I think) a T3 trust return for each Bare Trust and the issue of T3 tax slips to the beneficiaries of attributable shares of income from each Bare Trust. What seems to be unknown currently is which jointly held properties (accounts) will be Bare Trusts?
Added: I don't know anything more and only brought this subject up because I don't think many folk are aware of it.
9:55 pm
October 21, 2013
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I appreciate your bringing it up and your replies.
It sounds like they want to keep track of who owns what in more detail. The question is why.
My guess is that this could be a prelude to making the amount that the "survivor" acquires from the deceased taxable, as in probate tax. In other words, you have to get them all lined up and identified before you can tax them. This would create disincentive for joint accounts other than with spouse.
It would make sense to exempt joint accounts with spouse as the remainder would still be taxable when second spouse dies and they already have various measures to allow some sources of spouse income to be shared.
I shudder to think of the paper work though. Lots of accountant fees if you use one. And a PITA if you use multiple accounts with close attention to CDIC limits.
This kind of tax would not be a popular move with supporters of any Party that introduced it, but they are all desperate for more funds to deal with our debts. On the other hand, it is clearly unfair that those with more cooperative and trusting parents should be able to avoid taxes that other offspring must put up with.
6:43 am
September 30, 2017
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POA - Power of attorney? ... The term hasn't come up in this thread yet
We went to TD, so the attorney power is only granted locally to the TD accounts. Their setup process is fairly straight forward.
7:21 am
November 8, 2018
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I have different opinion on the topic of CDIC insurance. I don't want to be the son who one day has to tell his parents that due to once in a lifetime event the bank where they kept all their money went belly up and they lost everything but CDIC insured minimum.
Money that my parents have is distributed between FIs in joint (with me) accounts, each not exceeding CDIC limits. Managing this is a bit of a chore, but it is me who is doing it and I can handle it. They trust me with it.
------------------------------
I want to talk about something else. My parents are of advanced age, but they are active. They have online presence with their online groups, they do shopping paying at stores by debit card (and VISA debit), they need access to online banking because it is really hard to perform some of financial activities offline these days. They have desktop computer and tablet for which I provide sort of IT support, but it is their computer/tablet.
My concern is that they might become a victim of a scam, which are plenty these days. Despite me giving them an overview of safe computing and shopping practices. I am afraid they could become a victim through debit card skimming, access to their PC and through it to their online banking, 'grandparent scam' or what else. These types of scams are plenty.
So, I asked myself, how could I limit financial losses in case someone gets access to their debit card with PIN, to their PC and to all their banking credentials needed to access their finances online. Worst case scenario.
My solution: they have account at one of major banks with branch nearby, ABM, checkbook, debit card, online access. This account is an island: from it one can't transfer money to/from their other joint accounts in other FIs. That account has about $20,000 combined in checking and savings.
I keep an eye on that account balance and when it drops below minimum I defined (such as $15,000) I transfer money to it from one of their joint accounts. Using my PC/smartphone.
This gives my parents necessary financial independence and flexibility. I don't babysit their expenses. I don't check their financial activity on daily basis. They don't feel like someone micromanages them and their spending habits.
They call me their banker and that's it.
The worst that could happen they'll lose $20,000. This is substantial amount of money, but for them it is not a catastrophic loss. They won't need to change their lifestyle because of that loss.
This is, of course, not full proof. Someone could get access to their money in joint accounts through my PC by hacking or scamming me. Still, I believe what I set up for my parents is better than finding one day that your parents lost all their money due to the scam they failed to recognize.
7:49 am
October 27, 2013
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hwyc said
POA - Power of attorney? ... The term hasn't come up in this thread yetWe went to TD, so the attorney power is only granted locally to the TD accounts. Their setup process is fairly straight forward.
Maybe because this has been discussed to death a number of times. I agree with you though. That is exactly what a POA is for, legal rights to manage the operation of a property.
The original post was really a 2 pronged question: 1) managing parent's money due to lack of interest on their part (as compared to ability perhaps), and 2) CDIC protection... with what appears to be emphasis on the latter. A POA is most appropriately used for the former rather than JTWROS accounts and I responded that there are new risks associated with JTWROS accounts for 'matters of operational convenience'. A POA would negate this new apparent risk of many/certain joint accounts becoming Bare Trusts with a mountain of tax preparation and filing paperwork.
8:13 am
September 30, 2017
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On the contrary, if the scheme is overly complicated. What if things happened to the custodian first. One must also consider a capable runner up.
... Murphy's law, the usual.
... sorry if I missed the mark & say something useless. Bye.
9:52 am
October 30, 2023
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I used to assist my mother in laws’ investments. My wife was her power of attorney. Power of attorney was used a few times and not for banking. My mother in law was present at all financial meetings.
She was married 3 times and was lucky to acquire maximum CPP, husbands pension, husbands disability along with her pensions. She worked later in life after bringing up her family. So each pension was not a lot but the acquired ones added up, nicely.
She used our financial guy, and a credit union for TFSA. Eventually we moved all investing to our financial guy. Then she sold her condo and put all that money with the financial guy. Most was invested in GICs and we put $30,000 in a money fund for emergency funds. The latter was never used. She had approx a million dollars all in GICs in the amounts no greater than $100,000 and all GICs were insured under CDIC. From there all GICs were set up to pay interest monthly and she did well. I also cut her costs where ever possible, like negotiating her TV, internet, and phone bill. She lived very comfortably in an assisted living building. She continued to travel right up to end of life.
My wife and I stopped using the financial guy only because I can do better, rate wise. And I only deal in GICs....they are a sure thing vs the markets. I went by his philosophy to use CDIC insured investments and don’t exceed $100,000, principal plus interest. I also use some credit union insured products as well.
Personally the rule of not exceeding $100,000 is deeply engrained.
The only thing about using a financial guy is that their GIC rates will never be as good as what we get. But using him was an acceptable comfort level.
So if you go all GICs. Things to consider.
Reduce RRIF as quickly as possible without going into next tax bracket. That’s more of an estate plan.
Max out on TFSA if possible.
Do 5 year ladders on non registered and TFSA.
Manage RRIF in or out of a 5 year ladder.
Make sure RRIF and TFSA.
If both using same FI don’t exceed $50,000 principal plus interest**
If both using different FI don’t exceed $100,000 principal plus interest
** If one passes then the acquired amount that gets combined won’t exceed the $100,000 for CDIC coverage.
Make sure all accounts are joint or have successors or beneficiaries.
People’s has 2 banks so that’s $100,000 x 2 for each account type***
Oaken has 2 banks so that’s $100,000 x 2 for each account type****
***People’s Trust has all except RRIF accounts. People’s Bank only has non registered accounts.
****Oaken has it all EXCEPT savings accounts associated with registered accounts
BOTTOM LINE: I say stick to NOT exceed CDIC coverage and plan ahead, that a spouse may pass on to the remaining successor spouse. Make sure Wills are in place along with Power of Attorneys ... and make sure you know where they are. Make sure you have access to all statements.
Please write your comments in the forum.