Professional Documents
Culture Documents
Premiums
Basic life:
Adjustments
Basic life:
Benefits
Four steps:
1: assets final expenses = cash needs
2: continuing income continuing expenses = income
needs
3: income needs interest rate = capitalized value
4: capitalized value +/- cash needs* = insurance need
* add cash needs if a negative sum; subtract
cash needs if a positive sum
INVESTMENTS
Segregated Funds (IVICs)
Disability:
Residual disability:
annual income
pre-disability income =
Group:
Deductibles
Single deductible:
Co-insurance:
Deductible + coinsurance:
Family deductible:
claim ($) (family deductible [$] single deductible
Three steps:
1. withdrawal value of units = no. of units to be
surrendered
2. original no. of units no. of surrendered units =
new unit balance
3. (new unit balance original no. of units) x original
value of fund = contract value on which guarantee is
based
e.g. if withdrawal = $5,000; value of units = $10; original no.
of units = 1,000; original value of fund = $2,000 ; then:
step 1: $5,000
$10 = 500 units; step 2: 1,000 500 =
500 units; step 3:(500 1,000) x $2,000 = $1,000 contract
value
TAXATION
Tax Deferral
RRSP Contributions:
Basic: earned income x 18% = contribution limit to a
maximum dollar limit for the year (2014 = $24,740;
2013 = $23,820)
With Pension Adjustment (PA): basic contribution
pension adjustment for previous year
Taxation of Investments
Interest:
interest income x investors marginal tax rate (MTR) =
tax on interest income
Capital gains/loss:
market value of capital property cost of capital property
= capital gain or capital loss on capital property
e.g. if $6,500 selling price - $500(cost) = $6,000 capital gain;
if $6,500 selling price - $8,000 (cost) = ($1,500) capital loss
Stock Dividends:
The dividend tax credit and the dividend gross-up
amount are changing each year as of 2010. For
this reason, the calculation of taxation on stock
dividends is no longer being tested.
Segregated Funds (tax consequence of withdrawal):
Three steps:
1. amount of withdrawal fair market value of contract =
percentage of disposition
2. fair market value of contract adjusted cost basis =
basis for taxation
3. basis for taxation x percentage of disposition =
capital gain
e.g. if withdrawal = $1,000; fair market value of contract =
$5,000; adjusted cost basis = $2,500; then: step 1: $1,000
$5,000 = 20% of contract being disposed; step 2: $5,000
$2,500 = $2,500 basis for taxation; step 3: $2,500 x 20% =
$500 capital gain
Future Value
future value (FV) = present value (PV) x (1 +
interest rate [i])n
e.g., if present value is $50,000; interest rate is 3.1%;
and n (number of compounding periods [typically the
number of years]) is 3; then:
FV = 50,000 x (1 + .031)3; FV = 50,000 x (1.031)3;
FV = 50,000 x (1.031 x 1.031 x 1.031)*;
FV = 50,000 x 1.096; FV = $54,800
*(remember to solve the calculation in the brackets first)