First Steps
The 6-Month Rule
| Advice |
|
| Don’t rush |
Grief impairs decisions |
| Park money safely |
High-interest savings account |
| Wait |
3-6 months before major decisions |
| Plan |
Create a deliberate strategy |
| Step |
Action |
| 1 |
Confirm amount received |
| 2 |
Understand any conditions |
| 3 |
Move to HISA temporarily |
| 4 |
Get professional advice |
| 5 |
Create a plan |
Understanding What You Received
| Type |
Considerations |
| Cash |
Ready to use/invest |
| Registered accounts |
RRSP/RRIF—may be taxable |
| Real estate |
Sell, keep, or rent? |
| Investments (non-registered) |
Inherited at FMV |
| Life insurance |
Tax-free |
| Business interests |
Complex—get advice |
Tax Implications
| Asset |
Tax Treatment |
| Cash |
Tax-free to you |
| RRSP/RRIF (non-spouse) |
Taxed in estate already |
| RRSP/RRIF (spouse) |
Rolled over tax-deferred |
| Non-registered investments |
Your ACB = FMV at death |
| Real estate |
Your ACB = FMV at death |
| Life insurance |
Tax-free |
Creating Your Plan
The Framework
| Priority |
Focus |
| 1 |
Emergency fund |
| 2 |
High-interest debt |
| 3 |
Tax-advantaged accounts |
| 4 |
Other goals |
Questions to Ask
| Question |
|
| What are my goals? |
Short, medium, long-term |
| What debt do I have? |
Interest rates |
| What’s my income? |
Affects strategy |
| What’s my age? |
Time horizon |
| What would they want? |
Honour their memory |
Priority 1: Emergency Fund
If You Don’t Have One
| Action |
|
| Set aside |
3-6 months expenses |
| Where |
High-interest savings account |
| Why first |
Foundation of financial security |
Example
| Monthly expenses |
$4,000 |
| Emergency fund |
$12,000-$24,000 |
| Put in |
HISA earning 4%+ |
Priority 2: Pay Off High-Interest Debt
Debt Payoff Priority
| Debt Type |
Interest Rate |
Priority |
| Payday loans |
300%+ |
Immediate |
| Credit cards |
19-29% |
High |
| Personal loans |
8-15% |
High |
| Car loans |
5-10% |
Medium |
| Student loans |
5-8% |
Medium |
| Mortgage |
4-7% |
Consider |
| HELOC |
6-8% |
Consider |
The Math
| Scenario |
|
| Credit card debt |
$15,000 at 20% |
| Annual interest |
$3,000 |
| Paying off = |
Guaranteed 20% return |
| vs Investing |
Uncertain 7-8% return |
Mortgage Decision
| Factor |
Consideration |
| Mortgage rate |
5% or less? |
| Risk tolerance |
Prefer guaranteed? |
| Investment return |
Expected 6-8%? |
| Peace of mind |
Value being debt-free? |
Priority 3: Tax-Advantaged Accounts
Maximize These First
| Account |
2024 Limit |
Priority |
| TFSA |
$7,000 + unused |
High |
| RRSP |
18% of income |
If higher bracket |
| FHSA |
$8,000 |
If buying home |
| RESP |
$2,500/year |
If have children |
TFSA First (Usually)
| Why |
|
| Flexibility |
Withdraw anytime |
| Tax-free growth |
All gains |
| No income requirement |
|
| Room accumulates |
May have lots |
RRSP Considerations
| Best if |
|
| High income |
Marginal rate 40%+ |
| Will be lower |
In retirement |
| Lots of room |
Catch up |
Example Allocation
| Inheritance |
$200,000 |
| Emergency fund top-up |
$15,000 |
| Credit card debt |
$10,000 |
| TFSA (max) |
$60,000 |
| RRSP (max room) |
$50,000 |
| FHSA (max) |
$16,000 |
| Remaining |
$49,000 |
Investing the Remainder
Investment Options
| Option |
Best For |
| Index funds/ETFs |
Long-term, simple |
| GICs |
Short-term, safe |
| Balanced funds |
Moderate approach |
| Robo-advisors |
Hands-off investors |
| Financial advisor |
Large amounts, complexity |
Asset Allocation by Age
| Age |
Stocks |
Bonds/Fixed |
| 20s-30s |
80-90% |
10-20% |
| 40s |
70-80% |
20-30% |
| 50s |
60-70% |
30-40% |
| 60s+ |
50-60% |
40-50% |
Where to Invest
| Platform |
Best For |
| Wealthsimple |
Beginner, small amounts |
| Questrade |
DIY, low fees |
| Robo-advisors |
Hands-off |
| Big bank advisor |
Full service (higher fees) |
| Fee-only planner |
One-time advice |
Special Situations
Inherited RRSP/RRIF (Non-Spouse)
| What Happens |
|
| Estate paid tax |
Full amount taxed |
| You receive |
After-tax amount |
| Your treatment |
Like receiving cash |
| Invest |
In your own accounts |
Inherited RRSP (Spouse)
| What Happens |
|
| Rollover option |
To your RRSP/RRIF |
| No immediate tax |
Deferred until you withdraw |
| Good option |
Keeps tax-deferred growth |
Inherited Property
| Options |
|
| Sell |
Get cash, invest elsewhere |
| Keep + rent |
Rental income stream |
| Live in |
Personal residence |
| Consider |
Maintenance, location, market |
Your ACB on Inherited Property
| Starting Point |
FMV at death |
| Future gain |
From FMV, not original cost |
| Capital gains |
Only on increase from FMV |
How Much to Spend
The 4% Rule (for Large Amounts)
| Guideline |
|
| Withdraw |
4% per year |
| Likely lasts |
30+ years |
| Inflation |
Adjust annually |
Example
| Inheritance |
$500,000 |
| 4% withdrawal |
$20,000/year |
| Monthly |
$1,667 |
| Principal |
Likely preserved |
Gifting to Family
| Consideration |
|
| Gift tax |
None in Canada |
| Attribution rules |
May apply if minor children |
| Estate planning |
Include in your plan |
Honour Their Memory
Meaningful Uses
| Idea |
|
| Invest in yourself |
Education, career |
| Help family |
Shared goal |
| Charitable giving |
Cause they cared about |
| Memorial |
Scholarship, donation |
| Future security |
What they’d want |
Common Mistakes
What to Avoid
| Mistake |
Why Bad |
| Spending it all quickly |
Lifestyle inflation |
| Risky investments |
Can lose everything |
| Lending to family |
Often not repaid |
| Major purchases immediately |
May regret |
| Ignoring advice |
Missing opportunities |
| Feeling guilty |
It’s okay to benefit |
Getting Professional Help
When to Get Advice
| Amount |
Recommendation |
| Under $50K |
Self-direct, simple plan |
| $50K-$250K |
Fee-only planner (one-time) |
| $250K+ |
Comprehensive advice |
Fee-Only Planner
| Benefit |
|
| No conflict |
Paid hourly, not commission |
| One-time |
Create plan, then DIY |
| Cost |
$1,500-$3,500 typically |