Legislation was proposed on March 4, 2009 that would give Ontario the legal standing to sue cigarette companies in order to recover the money spent on tobacco related illnesses in Ontario. Approximately $1.6 billion dollars is spent every year by Ontario tax-payers in relation to smoking related illnesses. The new legislation introduced by Attorney General Chris Bentley would allow the Ontario government to seek billions of dollars in damages from the 3 biggest Canadian cigarette manufacturers: Imperial Tobacco, Rothmans, Benson and Hedges, and JTI-Macdonald. British Columbia, New Brunswick, Newfoundland and Labrador, Nova Scotia, Saskatchewan and Manitoba have all passed similar legislation. JTI-Macdonald is currently under bankruptcy protection which means Ontario has to act now or they lose their opportunity to sue this company. British Columbia has to get permission from the court to pursue this company in their claim.

The proposed legislation would allow Ontario to sue the tobacco companies for alleged wrong-doings by the companies and holding them accountable. British Columbia already has a bill that suggests the tobacco companies marketed light cigarettes as safer than the regular ones, as well as targeting their advertising towards children. It is also alleged that the companies conspired to hold back research regarding the harmful effects of smoking tobacco and undermining the health warnings that had been issued. These allegations have not been proven yet in court. Premier McGuinty has stated that Ontario is ready to sue the tobacco companies due to British Columbia's successes.

The proposed bill would give the Ontario government the right to sue the companies directly for any alleged wrong-doing as well as to allocate liability by market share and measure the health-care cost to taxpayers regarding tobacco-related illnesses. A successful lawsuit could potentially bring in a settlement as much as $60 billion dollars. The lawsuit could also bring about protective changes, i.e. no longer being able to use cartoon characters in their advertising that are targeted towards young Canadians, as well as other restrictions. A successful lawsuit would hold the companies accountable for health-care costs, which currently are estimated at $1.6 billion per year. Deaths due to tobacco related illnesses in Ontario are estimated at 13,000 per year or almost 36 deaths per day and almost 500,000 hospital days annually. The amount of money spent by the government in providing health-care for smoking related illnesses could provide funding for 8 large community hospitals or a year's funding for 2,000 MRI units.

4 U.S. states pursued the first lawsuit against tobacco companies in the mid-1990s, which ultimately led to a 50-state Master Settlement Agreement in 1999 with the tobacco industry. In this settlement, the tobacco industry agreed to pay $246 billion over a 25 year period for health-care costs incurred from use of their products. It also led to restrictions regarding advertising that was directed towards minors.

This proposed legislation follows other government initiatives to prevent Canadians from being exposed to second hand smoke. Currently in Ontario smoking is banned in all workplaces, as well as public areas such as bars and restaurants. A very recent ban made it a finable offence to smoke in a vehicle when minor passengers are present. As well, higher taxes for tobacco products are a deterrent for those who are unwilling to pay as much as $8 for one pack of cigarettes. Smokers also pay higher premiums for their health and life insurance policies, due to the increased health risk. Smokers who have quit for a year are entitled to have these premiums reassessed due to being eligible for a better health status. If you have recently quit smoking, consult with your broker to see when you can apply for a decrease in your premiums. For those who want to quit, consult websites such as the Canadian Cancer Society for help as well as support.

As the economy is still dramatically fluctuating, people are now looking at ways to save money. It has been confirmed that the last three months of 2008 Canada did indeed experience a recession, and continues to do so. However, it is important for Canadians to ensure that short-term savings do not impact long-term financial goals and protection.

Some people may find it tempting to cancel their life insurance coverage in order to save on paying the premiums. This 'solution' however can lead to financial consequences later on. Should your health status change, you may find that in the future premiums will be more expensive, and can potentially cost more than what was initially saved; especially for those who purchased their coverage when they had excellent health status.

Financial protection, especially in regards to the wage-earners in the family are even more essential now. Should an unexpected death occur, it is important to have coverage in order to cover not only the funeral expenses, but to make sure that the family has enough money for living expenses, paying off debt, etc. For families with children, the remaining parent may want to take an extended leave from their employment, as well as have the financial resources to pay for additional expenses such as childcare, nanny, etc.

Health insurance is also a wise financial move at the current time. Sudden expenses, i.e. prescription medications, can quickly add up. This total amount per month can easily exceed your premiums, especially with the high prescription costs in some provinces. This coverage is also contingent on health status as well; should a health problem occur you may not be entitled to the same premiums as you once were should you cancel your existing coverage.

For Canadians who insure their mortgage through the lender, consider using term life insurance instead. Choose a term life policy that is compatible with the amount of time that is owed on your mortgage. Not only is this generally a less costly expense, but it offers added benefits. Most mortgage insurance policies only cover the existing balance that is owed; a term life policy retains its full value throughout the duration. Term life also gives the financial control to the policy owner; mortgage insurance is only used to pay off the mortgage should the mortgagee die. Term life offers the beneficiary full control of the money; this can be used to pay off the mortgage, pay off other debts, etc. Especially at a time of need, this flexibility can be essential. There is term life policies that can be converted into whole life insurance once the term has expired, thereby giving the policy holder continuing protection. Many of these policies do not require a new medical questionnaire to be filled out; therefore the rates will be consistent with the health status provided originally. This can be a great way to not only save money at the present time, but also in the future when the rates will possibly be higher.

Go through your monthly budget carefully when decided when and/or where to economize. Any items that are essential to your financial security and well-being should not be cut from your budget if at all possible; try and find other ways to save money. This can include not spending as much on items such as entertainment, clothing, vacations, etc. which, while possible causing inconvenience, will not impact your long-term goals.

Canadian charities are facing a reduction in charitable donations due to the global financial crisis. An open letter was sent to the Prime Minister as well as the Finance Minister that was published in Canadian newspapers. The letter asked for tax breaks for corporate as well individual donations in order to increase charitable giving for Canadian charities.

Under the current laws, individuals and/or corporations can donate shares of publicly traded companies and do not have to pay the capital gains tax. The open letter asked for this same exemption for donations of private company shares as well as real estate. This would put Canada in the same playing field as the United States, and is expected to dramatically increase charitable donations. Currently a tax receipt is issued for donations of real estate and private shares, but a capital gains tax still must be paid on these types of donations.

Donating to charity is not only a great way to help the community, but also for financial planning due to the tax credits. In order to benefit from the tax credits, donors are required to donate to a registered charity. Currently qualified donees include:

• Registered Canadian charities;
• Registered Canadian amateur athletic associations;
• Prescribed universities outside of Canada;
• Charitable organizations outside of Canada that the Government of Canada has made a donation to in the current or previous tax year;
• The Government of Canada, a province, and/or a territory;
• Tax-exempt Canadian housing corporations that provide only low-cost housing for seniors;
• Municipal and/or public bodies that perform a function of government in Canada;
• The United Nations and its agencies.

Donations made to a registered charity do not have to be claimed in the current year, but can be used on any tax return for any of the next five years. Donations can only be claimed once. Tax credits that are carried forward from a previous year must be used before tax credits for gifts in the current year can be applied. When claiming a donation from a previous year, a note should be attached to the return indicating the year in which the receipt was submitted, as well as the portion of the eligible amount you are claiming for the current year and the amount that will be carried forward. Receipts can also be combined with those of a person's spouse/common-law partner and be claimed together on one tax return that will allow for the highest tax credit rate.

Currently, the first $200 that is donated is eligible for a federal tax credit of 15% of the amount donated. For amounts after the initial $200, the federal tax credit is increased to 29% of the remainder. All or a part of this amount is eligible generally up to 75% of the net income. Provincial tax credits are also available; these will vary among the provinces.

For those Canadians who wish to donate to charity and claim the tax credits, only donations made to a registered charity will be allowed. A list of registered charities can be found at the Canada Revenue Agency website. This also provides information regarding any charity that has had their status revoked, as well as new charities that have been registered within the past year. Life insurance policies can also be used to donate to charity, as well as property/cash gifts. When using a policy to donate the donor can either gift the ownership of an existing policy or allow the charity to take out a policy on the donor's life. In either circumstance the charity becomes the legal owner of the policy. When gifting an existing policy, the cash surrender value minus any outstanding policy loans plus any accumulated dividends and/or interest will be considered the fair market value. This amount will then be eligible for a tax receipt. If the donor pays the premiums for a policy in which the charity is the beneficiary, these payments are considered a charitable donation and can be issued a tax receipt yearly for the premiums paid. For more information regarding this charitable donation option, visit Life-Quotes.ca

 

Life-Quotes.ca published a blog in November regarding the new Tax-Free Savings Accounts that are now available to Canadians. The initial blog gave general information regarding this subject; this blog is intended to provide more detailed information.

The Tax-Free Savings Account (TFSA) gives Canadians more choice in how they wish to accumulate savings, retirement assets, etc. It allows all Canadians over the age of 18 to contribute initially $5000.00 per year into this account; this amount will increase in increments of $500.00 per year as inflation grows. The income derived from this account is exempt from taxation, including withdrawals; however there is no tax deduction available for deposits made to the account. Any withdrawals can later be replenished to the account without affecting that particular year's allowance.

This new type of account offers several advantages. As there is no taxable liability, 'income' taken from this plan does not increase your marginal tax rate. It also allows for long term financial planning; and as the added cash flow doesn't affect taxable income it can increase the after tax income you receive from other taxable plans, i.e. RRIFs. The TFSA can be a very effective estate planning tool as well as there is no taxable liability. While the language of the plan is somewhat unclear, it does suggest that there will be no tax on any income/gains accrued up until death.

The TFSA is almost as successful as an RRSP when used as a wealth accumulation tool. When the taxation is factored in, money saved in the TFSA is comparable to the RRSP due to the tax rates that are involved when withdrawing funds from the RRSP. As well, RRSPs can create other 'costs', i.e. loss of tax credits. As well, taxes can be higher on RRSP income due to the triggering of OAS when the minimum withdrawals are mandated. The total amount accumulated will be dependent on the tax rates that are applicable to withdrawing the funds from the RRSP; the TFSA does not incur any taxation costs upon withdrawal.

For Canadians who are trying to save money while earning a lower income, the TFSA can actually be more advantageous than an RRSP. The advantage of the RRSP deduction is reduced by the lower tax rates that this income bracket would pay. For people who will more than likely be earning more in their future, the TFSA can be a better financial planning tool and the RRSP room can be carried forward for future deductions at higher tax rates. For Canadians who are saving for their retirement, the TFSA has the advantage of allowing the individual to avoid the withdrawal penalties. Most people end up having to take more income from their RRIF due to the legislated minimums; the TFSA can be used as a way to continue to save these excess proceeds from future tax penalties, and does not affect any income-tested tax benefits.

The TFSA can be a great financial tool when it comes to financial planning for their child(ren). The parents can fund more of the education for the child with the agreement that the child save an equivalent amount in their TFSA. This allows the parents to benefit from the tax deductions and credits for funding their child’s education and benefits the child as they will begin to accumulate savings. As the majority of students are lower-income their contribution towards the TFSA comes with a very low after-tax cost and enables them to begin saving towards purchasing a home, starting a business, etc.

The TFSA gives all Canadians another tool when in regards to their financial planning needs. Alone, or combined with other saving strategies, this type of account can help Canadians save more money, especially when it comes to the amount of taxable income. It also allows for a more comprehensive saving strategy for those who are not only planning for retirement, but for other major financial transactions. When it comes to retirement planning, it's always a wise idea to ensure that your life insurance coverage is suitable for your estate planning needs.

The government of Ontario has launched a $1.1 billion over four year plan that is designed to help seniors reside in their own homes. The initiative was started at the end of August, 2007 and will help match the needs of seniors and their caregivers access the local support services they require to maintain their independence. The Aging at Home Strategy hopes to develop new ways to provide supports and/or services that ensure seniors can spend their final years living where and how they wish to.

The stated goals of the Aging at Home Strategy are:

• To ensure that seniors home support them;
• To ensure that seniors have supportive social environments;
• To ensure easy accessibility to senior-centered care;
• To identify innovative solutions to ensure that seniors are and stay healthy.

The Aging at Home Strategy will increase traditional services that enable seniors to be healthy and live independently in their homes such as:

• Community support services;
• Home care;
• Assistive devices;
• Assisted living services, supportive housing;
• Long-term care beds;
• End-of-life care.

This new approach will combine traditional services that are currently offered with new services that will be provided by Local Health Integration Networks (LHINs) on a community-based level. Each LHIN will be required to allocate a minimum of 20% of the funding throughout the first three years in order to deliver innovative care for seniors. Innovation proposals must be either evidence-based and/or build in an evaluation component if previously untested. Ultimately the goal is for LHINs to assume more responsibility for the planning, managing and funding of senior healthcare services at a local level. Support at the local level is intended to help seniors, especially those with chronic health issues, remain living at home, avoid unnecessary hospital emergency room visits and as well as avoid/delay admission to a Long Term Care facility.

This program is targeted for seniors who are living with age-related health conditions and/or age-related disabilities. Consideration will also be given to services, programs and/or supports that allow the family, friends as well as neighbors to help care for seniors in their community. The strategy will be based on the senior population of the community in Ontario; therefore services will vary depending on where the senior resides. Funding for each LHIN will be allocated on estimates of the basis of age, gender, socio-economic status and rural geography and health status in order to estimate the demand for services. The funding will also depend on the estimated population growth as well as the type of seniors who live in a specific LHIN territory and the current service level that is already in place.

For more information regarding this initiative please visit the Ministry of Health and Long-Term Care.