Braun Family Financial Planning

• Tanya and Larry Braun have enlisted a financial planning company for guidance on significant financial changes.

Family Details

• Married for 15 years
• Have a 2-year-old daughter named Samantha
• Larry was born June 30th and is 39 years old
• Tanya was born May 15th and is 37 years old
• Samantha was born April 1st and is 2 years old

Employment Information

• Both Tanya and Larry are career-oriented.
• Greta, Tanya's mother, cares for Samantha.
• Tanya owns Grand Illusions, a specialty garden accessories shop, as a sole proprietor, located in a renovated downtown house, owned for 10 years.
• Tanya employs one part-time employee and manages the shop with assistance from Larry and Greta.
• The business's net income was about $55,000 last year, with a 10% annual growth.
• Tanya rents the second floor to a custom framing business, generating $6,000 in net rental income annually.
• Larry's current salary is $62,000 and has been increasing by 2% per year for the last 4 years at ComBuild Inc, where he has worked for 18 years since college.
• Larry wants to start a construction company and relocate to southern Ontario, where friends live.
• Larry wants to take a one-year, full-time business course starting in January and finishing in December.
• Larry expects to return to work in two years and may earn $15,000 per year part-time through a friend in Ontario.
• Another friend in Ontario can care for Samantha for $6,000 per year.

Personal Use Assets

• Tanya and Larry bought their house 14 years ago for $80,000 with a $20,000 downpayment and it is registered in joint tenancy
• The house is valued at $140,000.
• Larry is restoring a 1957 Chevrolet valued at $14,000.
• Tanya's artwork collection is valued at $50,000.

Tax-Paid Capital

• Tanya bought her store 12 years prior for $150,000, with $50,000 allocated to the land and $100,000 to the building, with a $30,000 down payment.
• Tanya's mother guaranteed the loan.
• The store mortgage has a 7.25% effective annual rate and is up for renewal in December.
• The property was appraised at $220,000 ($70,000 for land, $150,000 for the building)
• The UCC of the building is $78,000.
• Other business assets were valued at $45,000 last year.
• Larry has a $36,000 investment portfolio with an ACB of $23,600
• He adds about $1,000 a year to his GICs and money market funds.

Retirement Assets

• Larry has been a vested member of his employer's defined contribution pension plan for 16 years.
• Larry and his employer each contribute 5% of Larry's salary.
• Larry's RPP account has $148,000
• Larry has $112,000 in his RRSP.
• Larry contributed $5,000 annually to Tanya's spousal RRSP for five years, accumulating $27,000.
• Larry has no unused RRSP contribution room
• Tanya has $18,000 in her RRSP.
• Tanya has an unused RRSP contribution room of $33,780.

Estate Planning

• Larry and Tanya drafted new wills after Samantha's birth, leaving assets (excluding RRSPs) to each other, then to Samantha in trust upon simultaneous death.
• Samantha is the beneficiary of their RRSPs and insurance policies
• Tanya is the beneficiary of Larry's RPP.
• Neither has drafted a power of attorney.

Insurance Coverage

• Larry has life, disability, and group health insurance through his employer, with the life insurance policy paying twice Larry's salary (doubled for accidental death).
• The disability plan provides long-term coverage with a 120-day waiting period, with premiums deducted from Larry's paycheck.
• Group health covers 80% of standard dental and prescription costs, with limited coverage for glasses and chiropractic care.
• Tanya has a $150,000 term insurance policy with a $20,000 child life rider for Samantha.
• Tanya does not have disability insurance.

Net Worth Statement Highlights as of December 31st

• Joint checking account: $3,000
• Larry's money market fund: $6,000
• Larry's GICs: $6,250
• Tanya's store: $220,000
• Tanya's store furnishings and inventory: $45,000
• Larry's equity portfolio: $36,000
• Larry's RPP: $148,000
• Larry's RRSP: $112,000
• Tanya's spousal RRSP: $27,000
• Tanya's RRSP: $18,000
• House: $1,400,000
• 1957 Chevrolet: $14,000
• Sculptures and paintings: $50,000
• Personal vehicles: $11,900
• Furnishings personal belongings: $39,000
• Credit cards: $1,800
• Mortgage on storefront: $80,454
• Personal loans: $150,000
• Mortgage on house: $627,450
• Estimated deferred taxes: $154,821
• Larry's net worth: $551,185
• Tanya's Net Worth : $570,440
• Total Net Worth: $11,21,625

Questions for Financial Planner

• Prepare a cash flow statement if Larry quits his job and moves his family to southern Ontario but Tanya's business stays intact.
• Review and address all aspects of their financial plan.
• Determine the capital gains impact if Tanya sells her storefront building.
• Provide retirement projections if they maintain their current standard of living.
• Determine strategies if they fall short of their goal.
• Greta has already contributed $2,000 to an RESP on Samantha's behalf in late December of last year with $2,000 planned for the end of this year and all future years until the year before Samantha begins her post-secondary education.
• Develop options to fund Samantha's education if Larry quits his job and returns to school.
• Need help looking at estate liabilities

Assumptions

• Tanya’s marginal tax rate last year: 41.9%
• Larry’s marginal tax rate last year: 41.9%
• Greta’s marginal tax rate last year: 30.8%
• CPP YMPE for last year: $58,700
• CPP YMPE for this year: $61,600
• Current mortgage rates: 2 year 4.09%, 3 year 4.39%, 4 year 4.49%, 5 year 4.59%
• Inflation: 3%