Budget 2012: A client letter

Show clients you’re proactive by sending them this customizable letter about the Federal Budget.

Dear [Client/Prospect name],

As you know, Finance Minister Jim Flaherty delivered his federal budget on March 29 in Ottawa.

This budget has several items that could affect your financial plan or present additional opportunities. In case you haven’t had a chance to review the media coverage, I thought you would appreciate a quick overview of the federal budget.

Old Age Security: Starting in 2013, anyone turning 65 years of age will have the option of deferring their OAS payments until they turn 70. This deferral will result in a higher OAS payment, similar to deferring CPP payments.

A more significant change will begin in 2023, when the minimum age for collecting OAS will start to gradually rise. By 2029, the minimum age to qualify for OAS payments will be 67.

This change won’t affect people who are 54 or older, as of March 31, 2012.

Those born on or after February 1, 1962 will have an eligibility age of 67.

Those born between April 1, 1958 and January 31, 1962 will be part of the phase-in period, and will have an eligibility age between 65 and 67.

Registered Disability Savings Plan: The budget introduces new flexibility to the RDSP program.

A parent, spouse, or sibling can now be a plan-holder for a disabled adult who lacks the mental capacity to act as the plan-holder. This temporary provision will be in effect until 2016; allowing the provincial and federal governments to harmonize their RDSP regulations over the next four years.

Parents of disabled children who have been using a Registered Education Savings Plan (RESP) can now roll the growth in that account over into an RDSP on a tax-free basis.

Under certain circumstances, a plan-holder can now withdraw up to 10% of the plan’s fair market value at one time, and there’s now a minimum required withdrawal for certain types of RDSP.

Small business owners: Some budget measures will specifically affect small business owners.

Employee Profit Sharing Plans: The government will be tightening the rules applicable to Employees Profit Sharing Plans to discourage what it calls “excessive contributions” for employees who are members of the employer’s family.

Retirement Compensation Arrangements: The budget also announced tighter rules governing RCAs, to prevent certain arrangements that the government deems to be “designed to inappropriately reduce tax liabilities.”

Dividends: The rules governing the designation of dividends entitled to the enhanced dividend tax credit are being eased. A proportion of a dividend may now be designated as eligible, and late designations will be allowed within 3 years following the date the designation was first required to be made.

I hope you find these highlights useful. If you’d like to discuss these and other federal budget initiatives and how they affect your financial plan, please don’t hesitate to contact me.

Sincerely,

[Your signature]

[Your name]

(03/30/12)