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Faculty/Presenter Disclosure Faculty: [Bridget Paton] Program: 51 st Annual Scientific Assembly Relationships with commercial interests: Not applicable.

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Presentation on theme: "Faculty/Presenter Disclosure Faculty: [Bridget Paton] Program: 51 st Annual Scientific Assembly Relationships with commercial interests: Not applicable."— Presentation transcript:

1 Faculty/Presenter Disclosure Faculty: [Bridget Paton] Program: 51 st Annual Scientific Assembly Relationships with commercial interests: Not applicable

2 Disclosure of Commercial Support This program has received financial support – not applicable This program has received in-kind support from – not applicable Potential for conflict(s) of interest: –Bridget Paton has received income from MD Physician Services Inc. –MD Physician Services Inc. distributes financial services and products that will be discussed in this program: Retirement Planning for Incorporated Physicians

3 Mitigating Potential Bias We will be discussing mainly financial services and concepts that we can assist with using our service & product offering at MD Physician Services Inc.

4 Faculty/Presenter Disclosure Faculty: [Adrian Leandro] Program: 51 st Annual Scientific Assembly Relationships with commercial interests: –Adrian Leandro has received income from MD Physician Services Inc. –MD Physician Services Inc. distributes financial services and products that will be discussed in this program: Retirement Planning for Incorporated Physicians

5 Disclosure of Commercial Support This program has received financial support [ MD Physician Services] from in the form of [An educational grant]. This program has received in-kind support from [MD Physician Services] in the form of [Logistical support]. Potential for conflict(s) of interest: –[Adrian Leandro] has received [payment/funding, etc.] from [MD Physician Services]. –[MD Physician Services] [developed/licenses/distributes/benefits from the sale of, etc.] a product that will be discussed in this program: [MD Management].

6 Mitigating Potential Bias We will be discussing mainly financial services and concepts that we can assist with using our service & product offering at MD Physician Services Inc.

7 Faculty/Presenter Disclosure Faculty: [Greg Leja] Program: 51 st Annual Scientific Assembly Relationships with commercial interests: Not applicable

8 Disclosure of Commercial Support This program has received financial support – not applicable This program has received in-kind support from – not applicable Potential for conflict(s) of interest: –Greg Leja has received income from MD Physician Services Inc. –MD Physician Services Inc. distributes financial services and products that will be discussed in this program: Retirement Planning for Incorporated Physicians

9 Mitigating Potential Bias We will be discussing mainly financial services and concepts that we can assist with using our service & product offering at MD Physician Services Inc.

10 Faculty/Presenter Disclosure Faculty: [Greg Leja] Program: 51 st Annual Scientific Assembly Relationships with commercial interests: Not applicable

11 Disclosure of Commercial Support This program has received financial support – not applicable This program has received in-kind support from – not applicable Potential for conflict(s) of interest: –Greg Leja has received income from MD Physician Services Inc. –MD Physician Services Inc. distributes financial services and products that will be discussed in this program: Retirement Planning for Incorporated Physicians

12 Mitigating Potential Bias We will be discussing mainly financial services and concepts that we can assist with using our service & product offering at MD Physician Services Inc.

13 Presented by: Bridget Paton, CFP, FMA Greg Leja, CFP, FMA Adrian Leandro, CFP Retirement Planning For The Incorporated Physician

14 Agenda  Canadian physicians at retirement  Retirement planning  Corporate considerations  Take action

15 Profile Of Canadian Physicians At Retirement As in all successful ventures, the foundation of a good retirement is planning. - Earl Nightingale

16 What Age Do Most Canadian Physicians Plan To Retire? A.60–64 B.65–69 C.70–74 D.75+ 0–64 B.65– CMA Baseline Research June 2010

17 A. 18% B. 25% C. 33% D. 38% What Percentage Of Canadian Physicians Choose To Semi-Retire Before Going Into Full Retirement? Years in semi-retirement? Mean = 7.68 years % of retired 1 to 2 years31% 3 to 5 years34% 6 to 9 years13% 10 years or more23% CMA Baseline Research June 2010 D.38%

18 What Percentage Of Retired Canadian Physicians Have An Average Income Of $50,000+? A. 66% B. 76% C. 86% D. 96% C. 86% CMA Baseline Research June 2010

19 Top Retirement Goals CMA Baseline Research June 2010

20 Retirement Planning With Corporate Considerations Over 8,000 physicians trust MD to manage more than $4 billion for their professional medical corporations

21 Retirement Planning: Some Key Questions How will I spend my time? ► What do I need vs. What do I want? ► What are my priorities now vs. my long-term objectives? ► How can my goals become SMART? Am I financially secure? ► Where will my retirement Income come from and will it be tax efficient? ► How will my net worth evolve over time and what are the estate implications? ► Will my portfolio provide what I need and stand up to market surprises?

22 MD’s Five Step Retirement Preparation Process

23 Step 1: Identify And Prioritize Your Goals  When you think of your retirement, what vision comes to mind?  What would an average week in retirement look like?  What is it about practising medicine that you’ll miss most?  What could you see yourself doing in retirement in order to fill that gap? Don't simply retire from something; have something to retire to. – Harry Emerson Fosdick

24 Goal-setting Exercise The purpose of this exercise is to help you identify what you really want from retirement. Things to consider when identifying retirement goals: ► Needs satisfied by work ► Needs satisfied by current leisure ► Needs satisfied by past leisure activities ► Work skills and leisure skills

25 Goal-setting Exercise

26 – buy a new car – renovate the kitchen – wind down practice – update will – financial peace of mind – time with grandchildren – find a hobby – save and invest more – buy a vacation property – golf & travel more – charitable giving – write a book – help children or grandchildren financially Goal-setting Exercise

27 Identify And Prioritize Your Goals: Incorporation Exercise  Minimize current taxes  Grow net worth  Protect income  Estate preservation

28 Specific Measurable Attainable Relevant Timed This is key to meeting your goals. SMART Goals

29 SMART Goal Examples  Buy a new Lincoln MKZ Hybrid by December 2013, paid for with cash from my primary savings account …  Complete kitchen renovations by summer of 2014 – focus on doing most of this on my own to limit budget to $25,000  Wind down practice so that I will be fully retired by January, 2015 and ready to assist in caring for grandchildren two days a week.

30 Step 2: Determine Your Income  Clarify goals and assign a cost where applicable.  Determine sources of income and risks associated with generating that income.

31 Sources of Income In Retirement?  Canada Pension Plan (CPP)/Old Age Security (OAS)  Registered Retirement Income Fund (RRIF)  Sell Property  Tax Free Savings Account (TFSA)  Inheritance  Bank Account  Joint Investment Account (JtIA)  HOOP, Sick Kids pensions  Corporation – Dividends & Return of Capital

32 Provided Income Ratio (PIR) Income from fixed sources such as CPP/QPP, OAS, and defined pensions _ _ Desired retirement income = Provided Income Ratio Income you can count on _ Income you would like during retirement

33 Income Risk (Age 72) Provided Income Ratio (PIR)Income Risk 0 – 10% Excessive 11 – 25% High 26 – 40% Medium 41 – 65% Low 66% + Minimal

34 Step 3: Create Your Roadmap  Winding down practice  What to do with corporation  Where will my income come from  How will my net worth evolve  Will my portfolio stand up to market surprises  Have I considered contingencies

35 Winding Down Your Practice Things to consider: ► What to do with patient records ► Dealing with staff. i.e.: termination benefits, etc. ► Making arrangements for office closure and fixtures ► Arrangements with hospitals and clinics ► Advising CPSO, OMA, etc.

36 Two scenarios: 1.Primary purpose of corporation has been income splitting. If so, it is unlikely that there will be any future income splitting (fully retired), and the corporation has minimal assets. 2.Purpose of corporation has been to build capital for retirement. If so, there could be: a) Opportunity for income splitting in retirement b) Non-liquid corporate assets c) Corporation may have a role to play in your estate planning. What To Do With My Corporation?

37 You will need to: ► Liquidate all corporate holdings ► Pay out all final expenses, taxes and equity ► File final tax return and notify CRA ► Close all bank and investment accounts Corporation Wind-up

38 Continuing Corporation ► Lawyer must conduct a name change. “Medicine professional” can no longer be in the name. ► You may wish to amend share structure. Talk to your MD Advisor, accountant and lawyer about this first to ensure you understand the impact of changes. ► No longer need to renew your Certificate of Authorization.

39 Where Should I Get Money In Retirement? Perspective Minimize current tax Net worth growth Risk management Estate preservation Withdrawal Order (first to last) TFSA, JtIA, Corp, CPP, RRIF CPP, JtIA, RRIF, Corp, TFSA Corp, JtIA, TFSA, RRIF, CPP RRIF, CPP, Corp, JtIA, TFSA

40 Perspective Ramifications – Option 1 Minimize Current Tax vs. Preserve Estate  Personal tax (10yrs): current tax focus better by $138,000  Personal tax (20yrs): preserve estate better by $209,000  Net worth (10yrs): current tax focus better by $280,000  Net worth (20yrs): current tax focus better by $230,000  Estate value (10yrs): preserve estate better by $120,000  Estate value (20yrs): preserve estate better by $167,000

41 Perspective Ramifications – Option 1 Minimize Current Tax vs. Preserve Estate  Personal tax (10yrs): current tax focus  Personal tax (20yrs): current tax focus  Net worth (10yrs): current tax focus  Net worth (20yrs): current tax focus  Estate value (10yrs): current tax focus  Estate value (20yrs): current tax focus

42 How Will My Net Worth Evolve

43 ► Annuities ► Increase fixed income portfolio ► Dividend income considerations ► Discretionary investment management Will My Portfolio Stand Up To Market Surprises

44 Managing Investment Income  MD Management &/or MD Private Investment Counsel – Purpose & Time Horizon – Capacity for Risk – Protection from Market Volatility – Tax Considerations

45 Sample $1M Portfolio RRSP $450,000 Medicine Professional Corporation $550,000 Int’l Equity 6% Cash 3% Cdn Bond 64% Cdn Long- Term Bond 0% Cdn Equity 20% US Equity 7% Cash 3% Cdn Bond 3% Int’l Equity 24% Cdn Long- Term Bond 11% Cdn Equity 34% US Equity 25% Int’l Equity 16% Cash 3% Cdn Long- Term Bond 6% Cdn Equity 28% US Equity 17% Cdn Bond 30% Total portfolio Total Portfolio Asset Allocation Total Cash & Fixed Income 39.5% Total Equities60.5% A more tax efficient asset location

46 Priorities: Income vs. Estate

47 Corporate Intermediary – all tax brackets 50% Understanding Tax on Investment Income For illustrative purposes only

48 Understanding Tax on Investment Income For illustrative purposes only

49 Understanding Tax on Investment Income For illustrative purposes only

50 Contingencies Risk assessment ► Income ► Markets ► Health

51 Step 4: Leave A Legacy, Protect Your Assets And Close Your Practice Questions to consider…  When are you closing your practice?  How do you feel about charitable giving?  What are your plans for your corporation?  How would you like to be remembered by your beneficiaries?  What strategies have you explored to ensure the transfer of your estate is done tax effectively?

52 ► Multiple wills ► Trusts ► Bump ► Pipeline Advanced Estate Planning Strategies

53 Trusts Two types of trusts: inter vivos and testamentary. Both can play an important role in your estate plan. ► Inter vivos. Created during lifetime -Spousal Trust -Joint Partner Trust -Alter Ego Trust ► Testamentary. Created upon your death and are outlined in your will.

54 Trusts: Alter-Ego, Joint Spousal/Partner  Alter Ego Trust  Age 65 or older  You are the only person entitled to receive income or capital from the trust during your lifetime.  Joint Spousal/Partner Trust  Age 65 or older  You and your spouse/partner are only persons entitled to receive income or capital from the trust during your lifetimes. On your death, or when both you and your spouse have died, the trust assets pass to the beneficiaries named in the trust deed.

55 Alter Ego, Joint Spousal/Partner Estate planning considerations: ► Reduce estate settlement costs/executor fees ► Avoid probate process, delay and probate fees ► Privacy - no public scrutiny ► Maintain control in event of incapacity ► Ease of access to capital as required ► Can include investment management

56 Testamentary Trust Created upon death via a will.  Testator: the deceased person  Trustee: typically the executor of the will, but could also be a separately named trustee in the will  Trustee holds legal title to the property in the trust and has discretion to manage the assets as per the terms of the will for the benefit of the beneficiaries.  Beneficiaries: family members, or other individuals/charities, as directed by the testator  Interests of beneficiaries can be fixed or at discretion of trustee to allocate income and/or capital in accordance with the terms of the will.

57 Taxation Of Testamentary Trusts  Treated as separate taxpayer under the Income Tax Act. Requires annual return for its income and capital gains and allocation to beneficiaries.  Testamentary trusts pay tax at the graduated tax rates applied to individuals on income retained in the trust.  The trustee can make an election to have income taxed in the trust even if these amounts have been paid or are payable to a beneficiary (“income splitting” –with lower overall income tax).

58 Spousal Testamentary Trusts  Assets are left for the sole benefit of the testator’s spouse, usually for their lifetime.  Assets can be rolled into the trust at the testator’s adjusted cost base.  All trust income must be payable to the spouse during his/her lifetime. May also include access to capital at trustee’s discretion (as outlined in will). No one but the spouse beneficiary can have access to capital while the spouse beneficiary is alive.  On spouse’s death, a deemed disposition of the trust’s assets at fair market value is reported, following which the assets pass to other specified beneficiaries either outright or in a continued trust.  Provides access to two sets of graduated income tax rates: ”income splitting” - one for the spouse and one for the spouse trust, resulting in lower overall income tax.

59 When Should You Consider A Testamentary Trust?  If beneficiaries need investment management for their inheritance.  For spouse, children or grandchildren who have their own income and who can benefit from the tax efficiencies of having a trust as a separate taxpayer.  To protect assets from widow/widower’s new suitor and/or children’s spouses on marital breakdown.  To protect a spendthrift or disabled child.  Where estate plan includes charity as ultimate beneficiary and where the income is required to continue support for a spouse or children.

60 ► Terminate or convert term life contracts? ► Terminate disability contracts? ► Consider long term care insurance ► Consider permanent insurance to maximize your tax-effectiveness. What About Insurance?

61

62 Arriving at one goal is the starting point of another. Step 5: Review Your Plan

63 MD’s Five Step Retirement Preparation Process

64 Taking Action ► Our presentation began by sharing some context regarding retiring physicians. ► We then moved through five steps to formulating a retirement plan – with a healthy dose of the incorporation perspective. ► In our final segment of the agenda we want to leave you with two things: 1. We encourage you to act – regardless of where you are please identify your next step and take it; and 2. At MD, we want to help!

65

66 Total Wealth Management Exclusively For Physicians

67 ► Book an appointment with your MD Advisor ► Complete the goal setting exercise with your MD Advisor. Ask for a copy of our Forward Thinking retirement planning kit. ► Follow the five steps of preparing for retirement. Next Steps

68 Thank you! MD Physician Services provides financial products and services, the MD Family of Mutual Funds, investment counselling services and practice management products and services through the MD group of companies. For a detailed list of these companies, visit md.cma.ca. Estate and trust services are offered through the MD Private Trust Company, a CMA company. Insurance products are distributed through MD Insurance Agency Limited, a subsidiary of the Canadian Medical Association. All life licensed MD Management Advisors and MD Insurance Consultants have life licenses with MD Insurance Agency Limited. © MD Physician Services Inc. All rights reserved.

69 Retirement Planning For The Incorporated Physician Questions?


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