In this week's newsletter, we are sharing some valuable insight into both the new First Home Savings Account and the factors to consider when choosing an executor for your estate.
With help from our team's wealth planning expert Elvis Henrique, we are unpacking the First Home Savings Account, a registered savings account with significant tax advantages for potential first-time homebuyers. We share the details of the plan, and how this could be an important piece of your family's wealth management strategy.
We are also sharing an information (and entertaining) video from 'the Wealthy Barber', as we learn about how to choose your executor - and why a professional might be a good idea.
We will be sharing our economic update with you in our next newsletter communication.
First Home Savings Account - what you need to know
Our own wealth planning expert Elvis Henrique walks us through the First Home Savings Account, what it is, and what that can mean for you.
First Home Savings Account (FHSA) – what is it and how does it work?
The new First Home Savings Account (FHSA) is a registered account that combines the best features of an RRSP and TFSA to help individuals save for a downpayment for their first home, while enjoying important tax advantages. These benefits can be highly applicable to younger family members who are looking to enter the housing market for the first time.
Who can open a FHSA?
As the name would suggest, prospective first-time home buyers who are Canadian residents over the age of majority (but younger than 71 years old) can open a FHSA. First-time home buyers are defined as not owning a home lived in as a principal residence at any time during the part of the calendar year before opening the account or the preceding four calendar years. If that individual has a spouse (including common-law partner), they must also be a first-time home buyer.
Why should you open a FHSA?
There are many benefits to opening a FHSA, many of which are aimed towards assisting individuals in making their first purchase:
- - Contributions to the FHSA are tax deductible against your income and you can carry forward undeducted contributions indefinitely.
- - Contribution room accumulates at $8,000 per year once the account is opened, up to a lifetime maximum contribution of $40,000.
- - You can carry forward up to $8,000 unused contribution room to future years.
- - You can earn tax-free investment income on your contributions.
- - When the time comes to purchase a first home in Canada that you intend to occupy, you can make tax-free qualifying withdrawal to do so.
- - Alternatively, you can transfer FHSA funds tax free to your RRSP (or RRIF) without reducing your available RRSP contribution room (effectively gaining more RRSP contribution room).
Opening an FHSA
The carry forward contribution room only starts accumulating after you open a FHSA – so if a family member is considering a first-time home purchase within the next several years, it can make a lot of sense to open a FHSA account this year, even if contributions aren’t made right away.
You can gift funds to your family members, like your children and grandchildren, to open their own FHSAs and remember that qualified first-time home buyers can still use the popular Home Buyers Plan (HBP) for the same qualifying purchase which can allow them to potentially access up to $75,000 in capital plus growth.
Please contact us for more information about opening tax-free FHSAs for you and your family and what planning opportunities that exist.
Does your executor need to have financial skills?
As challenging as discussions around your estate plans may be, having a well-designed and thoughtful plan can help provide you the peace of mind that your wealth objectives, assets and beneficiaries are taken care of.
However, estates are becoming increasingly complicated: structures, tax implications, and family situations can make acting as a loved one’s executor stressful, time-consuming and can potentially harm family relationships.
Watch this short video from The Wealthy Barber David Chilton as he tackles the importance of choosing the right executor for your estate.
As always, we are available to connect with you personally. Please don’t hesitate to contact us at 519-822-2024 or elineskyschuett@rbc.com.
