The year is still new and Domenic Tagliola, a Tax and Estate Planner with TD Wealth, reminds us that now is a great time to evaluate what state your savings, your retirement plans and your Will is in.
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[MUSIC PLAYING]
- Well, it's a new year and a new decade and a great time to start off on a new foot with your finances. And Domenic Tagliola is here. He's a Tax Estate Planner with TD Wealth to tell us all the things we should be thinking about to get things started off right. Nice to see you.
- You as well, Kim.
- Let's start off with-- you talk about needing a clean slate. And part of I think establishing that is getting those goals clear in terms of what you actually really want.
- Right, and its motivation as well. You can only be motivated-- or only achieve your goals if you're motivated--
KIM PARLEE: Very good point.
- --to achieve them. We're human, and we all act in the same way. Motivation is the key to achieving your goals. And when we're talking about financial goals, it doesn't matter what they are. They could be planning for early retirement, buying a new home or a cottage, making major renovations, or in my personal situation, planning to pay for our children's post-secondary education. Motivation comes from understanding those goals and how to achieve those goals.
Setting those goals is one thing. But making sure that you have the means to achieve them is another. So what we started doing when my daughter graduated from high school two and a half years ago, we decided to start tracking our expenses to make sure that we have an idea as to where the money is going and whether or not we're still on track to meeting those goals.
And so when we started tracking all those expenses, we're now in a more comfortable position to say what exactly those liabilities and those goals are. Not surprisingly for us, we found that the mortgage expenses, the carrying costs in the home, and with two teenage children the food that we consume, are the three biggest expenses. But then we started realizing that we have the ability to achieve those goals.
And so, when you turn over a new leaf, you're looking to do that as well. And I encourage other people to do the same thing.
- You know, it's such a great example, because I think often if you say, oh, I'm just going to try and save money, if you don't have the for what or the why and really something you care about, it doesn't work.
- It doesn't work.
- So you have to have that goal. And it's totally bang on. OK, second thing that you think about for a new year is we've just finished buying things for the ones we've loved, sometimes we buy a little too much, and the bills are coming in.
- Right. And so what we try to do is make sure that we're ahead of the curve and not behind so we're not trying to catch our own tails. There is good debt. And there's bad debt. And what we're trying to do is to try to get good debt. Bad debt is credit card debt--
- Yeah.
- --huge interest rates, payment immediately. Whereas if you can consolidate that and get a line of credit, for example, you have more control over that, you're proactive on what needs to be done, and you're able to work that out in a way that allows you to meet those financial goals. And so, try to stay away from the bad debt. Get to the good debt.
- And good debt-- I guess, the best kind of good debt would be like money for an asset that's going to earn you-- like you know, money for education that you're going to actually do something with. This is better debt, better managed debt.
- You pay it forward, right?
- Yeah, yeah, yeah.
- So you pay it forward. And so that's absolutely the case.
- Third thing you say to keep in mind for the new year, taxes.
- Right. Never, ever forget about taxes. When you're looking at your net worth, or your worth-- there's a net worth. And the reason why it's net worth is because you have to take into account and factor in the taxes. So typically Canadians will have RSPs or RIFs. And some people are surprised to realize that there's an erosion of that value to take into account the taxes. And the taxes could be substantial on those assets.
When I look at this in the context of sort of planning, I always put a dollar sign up on the table and I say, OK, this is my estate. This is my net worth. Where do I want it to go? I get the choice over here, to a certain extent, to whether or not it will go to my family, whether or not or go to a Canada Revenue Agency, or whether or not it will go to charities, for example.
And so what we're looking to do is to say, well, in what we can control, we should be proactive on doing that and making sure that it's going in the right box. So it may be as simple as making sure that we cover off all of the credits that we're entitled to on a yearly basis and maybe thinking philanthropic if it's a way to try to take those assets away from CRA's hands and put them into another person's or another company or another charity's hands. So yeah, absolutely, taxes is going to be an extremely important part of it.
- Yeah, you want to pay your fair tax, but not more than that.
- Not more than.
- This is an interesting one. You have-- we were talking earlier, and you mentioned-- you have recently reevaluated your will. And you think this is something that everyone should take a look at doing.
- Yeah, it's just from my personal experience. Again, we had old wills, old in the sense that the children were young at the time that the wills were done. Now we have a different reality. We have a 19-year-old and a 17-year-old. And so there's a different change, both in terms of the assets that we have and also in terms of the children's needs and obligations. And we're looking to say, well, we're going to not necessarily need a guardian for these children, but we're going to probably need trusts for them. So that way we can have control over these assets for a period of time should we pass away so that they're going to have that protected for them.
And so the rule of thumb for out there is three to five years you should at least be evaluating the need for a will, or at least looking at the documents that you currently have. A lot of the clients that I'm in front of don't even know where their wills are, don't know when the last time they did their wills. And so we want to avoid that.
And of course, apart from a review every three to five years, I think it's also a good opportunity to look at your review of your will if something major happens in your life. And that would be the death of a loved one, a marriage, a divorce, the birth of a grandchild. And so those are sort of the things that should be prompting you to look at least reviewing your will and updating it.
- I know you mentioned as well that when you take a look at the will, part of it-- you mentioned big life events, divorces, and marriages and births, but sometimes it's worth having the money talk with your family. And I'm going to bet that a lot people probably don't want to have the money talk with their family.
- No, they don't. This is not something that you speak about over Christmas dinner--
- No.
- --or anytime. Communicate, communicate, communicate is key. When you communicate your wishes to your family, you have control, to a certain extent, about what the reaction is going to be, how you're going to be able to plan for that. And there's not going to be any surprise that will happen later on.
Typical example that I see over here is a couple is looking to figure out what's to be done with a certain asset. And they communicate with their children to say, what would you like to see happen with these assets? And rather than racking your brain and trying to figure out who is going to get what and who's not going to be happy--
- They may not even want it.
DOMENIC TAGLIOLA: They may not even want it. And so you don't know unless you ask. And so, communication is going to be vitally important over here. Have the talk, right? Absolutely.
- Any tips though on how to have the talk?
- Yeah, it depends on whether we're talking about over here with a professional trying to engage the clients and get that information out of them. I always find that if you're prepared to give some information about your own personal circumstances, there's a lot of things that resonate very well with people that are universal. And so they will have an immediate attachment to what you're saying.
But internally with the family members, the inevitability of death and perhaps loss of capacity means that matters are going to need to be dealt with anyway. To the extent that we can get ahead of that and make that planning I think is important. Don't always look for the home run, though. A communication is not a one-off thing potentially. It could be a series of communications where I'm prepared to give some information today, and I'll share some more information tomorrow. As long as the dialogue is continuous and that it's an open channel between the parents and the children, that I think is important.
- I think one of your last tip here is one the most important-- it will help with that-- is to talk to professionals, because they've been there and done that. They've seen so many situations. They've seen so many scenarios. They'll have some ideas about how to manage this stuff.
- And they'll look at it objectively.
- Yeah.
- You don't get the benefit of objective look at your finances or your estate planning, because you're in it. It is yours. It is, by nature, subjective.
So having professionals help you to try to navigate that is going to make a big difference, because yes, they may discover things that you're not aware of. Yes, they may be able to have planning in place that you can take advantage of. And also, you'll get that peace of mind in knowing that there is someone who's trained to do this type of thing that's going to add value for me. So yes, absolutely speak with your professionals.
KIM PARLEE: Domenic, thanks so much.
- Thank you.
[MUSIC PLAYING]
- Well, it's a new year and a new decade and a great time to start off on a new foot with your finances. And Domenic Tagliola is here. He's a Tax Estate Planner with TD Wealth to tell us all the things we should be thinking about to get things started off right. Nice to see you.
- You as well, Kim.
- Let's start off with-- you talk about needing a clean slate. And part of I think establishing that is getting those goals clear in terms of what you actually really want.
- Right, and its motivation as well. You can only be motivated-- or only achieve your goals if you're motivated--
KIM PARLEE: Very good point.
- --to achieve them. We're human, and we all act in the same way. Motivation is the key to achieving your goals. And when we're talking about financial goals, it doesn't matter what they are. They could be planning for early retirement, buying a new home or a cottage, making major renovations, or in my personal situation, planning to pay for our children's post-secondary education. Motivation comes from understanding those goals and how to achieve those goals.
Setting those goals is one thing. But making sure that you have the means to achieve them is another. So what we started doing when my daughter graduated from high school two and a half years ago, we decided to start tracking our expenses to make sure that we have an idea as to where the money is going and whether or not we're still on track to meeting those goals.
And so when we started tracking all those expenses, we're now in a more comfortable position to say what exactly those liabilities and those goals are. Not surprisingly for us, we found that the mortgage expenses, the carrying costs in the home, and with two teenage children the food that we consume, are the three biggest expenses. But then we started realizing that we have the ability to achieve those goals.
And so, when you turn over a new leaf, you're looking to do that as well. And I encourage other people to do the same thing.
- You know, it's such a great example, because I think often if you say, oh, I'm just going to try and save money, if you don't have the for what or the why and really something you care about, it doesn't work.
- It doesn't work.
- So you have to have that goal. And it's totally bang on. OK, second thing that you think about for a new year is we've just finished buying things for the ones we've loved, sometimes we buy a little too much, and the bills are coming in.
- Right. And so what we try to do is make sure that we're ahead of the curve and not behind so we're not trying to catch our own tails. There is good debt. And there's bad debt. And what we're trying to do is to try to get good debt. Bad debt is credit card debt--
- Yeah.
- --huge interest rates, payment immediately. Whereas if you can consolidate that and get a line of credit, for example, you have more control over that, you're proactive on what needs to be done, and you're able to work that out in a way that allows you to meet those financial goals. And so, try to stay away from the bad debt. Get to the good debt.
- And good debt-- I guess, the best kind of good debt would be like money for an asset that's going to earn you-- like you know, money for education that you're going to actually do something with. This is better debt, better managed debt.
- You pay it forward, right?
- Yeah, yeah, yeah.
- So you pay it forward. And so that's absolutely the case.
- Third thing you say to keep in mind for the new year, taxes.
- Right. Never, ever forget about taxes. When you're looking at your net worth, or your worth-- there's a net worth. And the reason why it's net worth is because you have to take into account and factor in the taxes. So typically Canadians will have RSPs or RIFs. And some people are surprised to realize that there's an erosion of that value to take into account the taxes. And the taxes could be substantial on those assets.
When I look at this in the context of sort of planning, I always put a dollar sign up on the table and I say, OK, this is my estate. This is my net worth. Where do I want it to go? I get the choice over here, to a certain extent, to whether or not it will go to my family, whether or not or go to a Canada Revenue Agency, or whether or not it will go to charities, for example.
And so what we're looking to do is to say, well, in what we can control, we should be proactive on doing that and making sure that it's going in the right box. So it may be as simple as making sure that we cover off all of the credits that we're entitled to on a yearly basis and maybe thinking philanthropic if it's a way to try to take those assets away from CRA's hands and put them into another person's or another company or another charity's hands. So yeah, absolutely, taxes is going to be an extremely important part of it.
- Yeah, you want to pay your fair tax, but not more than that.
- Not more than.
- This is an interesting one. You have-- we were talking earlier, and you mentioned-- you have recently reevaluated your will. And you think this is something that everyone should take a look at doing.
- Yeah, it's just from my personal experience. Again, we had old wills, old in the sense that the children were young at the time that the wills were done. Now we have a different reality. We have a 19-year-old and a 17-year-old. And so there's a different change, both in terms of the assets that we have and also in terms of the children's needs and obligations. And we're looking to say, well, we're going to not necessarily need a guardian for these children, but we're going to probably need trusts for them. So that way we can have control over these assets for a period of time should we pass away so that they're going to have that protected for them.
And so the rule of thumb for out there is three to five years you should at least be evaluating the need for a will, or at least looking at the documents that you currently have. A lot of the clients that I'm in front of don't even know where their wills are, don't know when the last time they did their wills. And so we want to avoid that.
And of course, apart from a review every three to five years, I think it's also a good opportunity to look at your review of your will if something major happens in your life. And that would be the death of a loved one, a marriage, a divorce, the birth of a grandchild. And so those are sort of the things that should be prompting you to look at least reviewing your will and updating it.
- I know you mentioned as well that when you take a look at the will, part of it-- you mentioned big life events, divorces, and marriages and births, but sometimes it's worth having the money talk with your family. And I'm going to bet that a lot people probably don't want to have the money talk with their family.
- No, they don't. This is not something that you speak about over Christmas dinner--
- No.
- --or anytime. Communicate, communicate, communicate is key. When you communicate your wishes to your family, you have control, to a certain extent, about what the reaction is going to be, how you're going to be able to plan for that. And there's not going to be any surprise that will happen later on.
Typical example that I see over here is a couple is looking to figure out what's to be done with a certain asset. And they communicate with their children to say, what would you like to see happen with these assets? And rather than racking your brain and trying to figure out who is going to get what and who's not going to be happy--
- They may not even want it.
DOMENIC TAGLIOLA: They may not even want it. And so you don't know unless you ask. And so, communication is going to be vitally important over here. Have the talk, right? Absolutely.
- Any tips though on how to have the talk?
- Yeah, it depends on whether we're talking about over here with a professional trying to engage the clients and get that information out of them. I always find that if you're prepared to give some information about your own personal circumstances, there's a lot of things that resonate very well with people that are universal. And so they will have an immediate attachment to what you're saying.
But internally with the family members, the inevitability of death and perhaps loss of capacity means that matters are going to need to be dealt with anyway. To the extent that we can get ahead of that and make that planning I think is important. Don't always look for the home run, though. A communication is not a one-off thing potentially. It could be a series of communications where I'm prepared to give some information today, and I'll share some more information tomorrow. As long as the dialogue is continuous and that it's an open channel between the parents and the children, that I think is important.
- I think one of your last tip here is one the most important-- it will help with that-- is to talk to professionals, because they've been there and done that. They've seen so many situations. They've seen so many scenarios. They'll have some ideas about how to manage this stuff.
- And they'll look at it objectively.
- Yeah.
- You don't get the benefit of objective look at your finances or your estate planning, because you're in it. It is yours. It is, by nature, subjective.
So having professionals help you to try to navigate that is going to make a big difference, because yes, they may discover things that you're not aware of. Yes, they may be able to have planning in place that you can take advantage of. And also, you'll get that peace of mind in knowing that there is someone who's trained to do this type of thing that's going to add value for me. So yes, absolutely speak with your professionals.
KIM PARLEE: Domenic, thanks so much.
- Thank you.
[MUSIC PLAYING]