Case Study 1 – Helga - waypointfamilyoffice.ca

Case Study 1 - Helga

Solutions covered:

tax planning
multi-pronged income generation
insurance solutions
preservation of benefits
estate planning

Helping Helga achieve her vision for the present and future

It can be difficult to recognize when the financial advice you’re receiving isn’t leading to the best possible outcome. Take our client, Helga*, for instance. She was referred to us by a client and close friend of our team.

This friend was an employee of Helga’s late husband. He’d come to know the family so well that, when her husband passed away, he dove in as a surrogate son. This meant taking over the business, and making sure Helga was taken care of.

As time went on, his concerns grew about Helga’s finances. He wanted her to get comprehensive, big-picture advice from professionals they could trust.

*Name has been changed to protect confidentiality.

Helga’s background and initial challenges

Helga was nearly 80 years old when we began working together. Prior to us, she had worked with a bank-owned financial firm who did very little planning for her.

Helga should have been receiving Old Age Security (OAS) benefits from age 65 onwards. However, the government rescinded her benefits because her reported income was above their threshold. She would’ve received a good income boost through OAS but, because her income wasn’t optimized, she was losing all of it to clawbacks.

Additionally, Helga’s husband had left behind a company with approximately $1 million in it. To her, the money was of no value unless she could use it, so she was rampantly withdrawing from the corporation. But the more she withdrew, the more her tax burden increased.

Helga didn’t know she had other options, so she kept doing what she thought she had to do to protect her lifestyle. The result? Lost OAS benefits, unnecessarily high taxes, and instability in her golden years.

First solution: tax-driven prescribed annuity

After meaningful conversations with Helga, we designed a multi-pronged solution that would guarantee a stable income while reducing her taxes.

We opted for a tax-driven prescribed annuity, which involves purchasing a contract from a life insurance company that will provide a guaranteed monthly income for the rest of a person’s life.

In Helga’s case, one of her greatest concerns was having stable income as she got older. We helped her set up a $500,000 annuity that would pay her a monthly benefit that more than covered her cash flow needs and would continue to do so for all her remaining years—even if she outlived her life expectancy!

By suggesting a prescribed annuity using Helga’s personal, non-registered funds, only a tiny percentage of her annuity income would show up on her tax return, meaning much lower income tax.

And, because we optimized Helga’s income, the government reinstated her OAS benefits, leading to an even more handsome income and an incredible positive impact on her lifestyle.

Protecting Helga and her husband’s corporate assets

Next, we turned our attention to the assets in the family company.

If the worst were to happen and Helga passed shortly after putting the prescribed annuity in place, the money she paid for it wouldn’t be returned to her beneficiaries. Thus, we arranged for an insurance policy to be taken out on Helga through the company, which would pay the premiums.

This way, no matter how long Helga lives, her original capital (and then some) is preserved for the benefit of her family. The death benefit from the life insurance would be paid out to the company, tax-free. Plus, with the way this insurance works, the policy gradually creates a balance that can come straight out of the corporation tax-free upon her passing.

Helga’s reaction to her newfound options

Helga isn’t one to become outwardly emotional. However, we know that our planning has had a massive positive impact through a few telling clues.

Our team continues to visit her at home to answer the questions she has. Each time she brings out her bank book and asks: “There’s this much in here. Is it mine to spend?”

Having frictionless access to cash is a massive shift for Helga after years of high taxes, clawbacks, and financial worries. Today, she feels empowered, in control, secure, and at peace.

This has led her to ask a new set of questions when we visit:

“Can I gift this to my family?”
“Can I spend this on the house?”

These “pinch me” moments opened new possibilities for Helga and her wealth, which led us to the second phase of our work together…

Second solution: estate planning and trusts for her children

Once Helga’s new financial reality began to sink in, we were able to have even deeper conversations about her vision for the future. She expressed her wish to do more to support her two adult children after her passing.

In collaboration with one of our recommended estate lawyers, we implemented her wishes, putting a trust in place for each child to look after their individual needs.

Protecting her adult son with a Qualified Disability Trust

At an early age, Helga’s son, Tom*, faced a diagnosis that meant he would have ongoing challenges throughout his life. This has led to difficulty finding and maintaining work.

Receiving a large inheritance would typically disqualify him from government benefits. This is why we put a special trust in place for him, enabling Tom to qualify for ongoing government benefits, preserve his low taxation, and produce enough income from the significant money left to him to provide financial security for the rest of his life.

Neither Helga nor Tom knew these options were available to them. This money is now protected through Helga’s lineage, giving her significant peace of mind. In turn, Tom feels a deep sense of security and renewed hope for the future.

Putting plans in place for her daughter and grandsons

Recall that Helga wanted to put trusts in place for both adult children. Her daughter Sabine currently lives overseas and frequently visits to care for Helga.

Sabine’s two sons have a special relationship with their Oma. In the last decade, not one year has gone by without one of the boys visiting to spend time with Helga, often for months at a time.

These relationships mean so much to Helga that she left instructions in her will to provide a significant financial gift to each grandson upon her passing. Her intention is that these funds will help them purchase homes and generally set them up for their future. We also put in place a clause that in the event of Tom’s passing, his trust would revert to his sister, Sabine.

Heart and soul advisors

Seeing the impact we created for Helga and her family, including the peace of mind for years and generations to come, we realized that our work isn’t only about financial planning.

Instead, it’s about the softer issues of life—the heart and soul conversations, and the cherished vision that each person has for their life and the lives of their loved ones.

That’s why we take the time to truly uncover the goals and wishes of each family we work with to create a plan that reflects how they want their life to unfold. At Waypoint Family Office, we feel honoured to be a part of their journey, helping clients to navigate the path to their personal success story.

If you’d like to learn more about how our team might help your family achieve its goals for generations to come, feel free to get in touch.

Start a conversation