On the path toward equality
It has taken couples in the LGBTQ community many years to achieve the rights and opportunities they now have in Canada. Ontario became the first Canadian province to recognize same-sex marriages in 2003. Many other provinces soon followed suit. The passing of the Canadian government’s Bill C-38 (the Civil Marriage Act) in 2005 gave married same-sex partners many of the same legal rights as other married couples. Before these important milestones were reached, many legal battles were fought across the country, paving the way for LGBTQ couples to earn the same rights and opportunities that heterosexual couples have long enjoyed. In addition to the right to marry, equality under Canada’s taxation rules was granted in 2001 when the definition of common-law partner was updated to include a same-sex partner.
This significant change gave LGBTQ couples the same tax benefits as heterosexual couples, and these benefits can be used to reduce tax costs and to make tax-efficient retirement and estate plans. Even today, full equality has not yet been realized in Canada. Some legislation still puts unmarried same-sex couples at a disadvantage when it comes to certain estate planning issues.
Population on the rise
The most recent census, conducted in 2011, showed a large increase in the number of same-sex couples in Canada. In 2011, nearly 65,000 same-sex couples (0.8% of the couples population) were reported. This is almost double the number of same-sex couples reported in the census 10 years earlier. Same-sex couples tend to live in the largest cities, with almost half (45.6%) living in Toronto, Montreal and Vancouver. In contrast, only one-third (33.4%) of opposite-sex couples live in these three metropolitan areas. Since the right to marry was granted in 2005, the number of married same-sex couples has grown to more than 21,000. This represents about one-third of the same-sex couples reported in the 2011 census.
The struggle for equality is not limited to the courtroom. Many members of the LGBTQ community find that the treatment received within their own families is less than equitable. Parents sometimes feel a loss when they learn their child is coming out. This sense of loss is often rooted in how parents see their own identity and future goals relating to those of their son or daughter. The conversation in the right sidebar illustrates a typical scenario that may play out in the family of an LGBTQ child.
Every child expects a supportive atmosphere within their own family. Unfortunately, parents or other family members may be judgemental and unsupportive, at least initially. This is one reason why many in the LGBTQ community choose to keep their status private. One US study asked members of the LGBTQ community how “out” they were. Only 64% of the respondents indicated that they were fully out, and 28% stated that they were mostly out. The remaining 8% indicated that they were not out at all.
Opening a line of communication early with family members is important. It may be difficult to start that conversation when some other situation arises, such as a need for financial assistance. Often this can be made possible by enlisting the help of a more open person of the parents’ generation.
Affluence in the community
Compared to the population at large, the LGBTQ community has a higher income. Statistics from the United States show that household incomes are more than 20% higher than the average American family ($61,500 vs. $50,000). This difference is perhaps not so surprising as LGBTQ couples tend to live in the largest cities, where incomes are above average.
This higher level of income, combined with the fact that same-sex couples are far less likely to have children than opposite-sex couples (9.4% vs. 47.2%), can make more discretionary income available to spend today and to save for future goals. It is wrong to assume that the goals of same-sex couples are different than those of opposite sex couples. They are very similar, and LGBTQ couples face the same challenges achieving them. In other words, the “what” that same-sex couples want to achieve for their future is no different, but at times the “how” requires some extra customization.
Changes in Old Age Security and the Canada Pension Plan
Old Age Security (OAS) has been in existence since 1927 and the Canada Pension Plan (CPP) since 1966, yet it was only in 2000 that both the benefits and obligations of these two income support programs were extended to same-sex, common-law couples. Included in these changes was the availability of survivor benefits for common-law partners of deceased individuals. These programs are important income components for retirement planning. Additionally, as long as both partners are over the age of 60 and are receiving CPP payments, it is now possible to share a portion of CPP benefits, proportional to the time spent together. This CPP sharing provides an income-splitting benefit that can lower overall income taxes for the couple. Sharing of pension credits following a separation is also possible. However, for same-sex couples this potential sharing of CPP is limited, applying only to same-sex partners that separated on or after July 31, 2000.
Changes in pensions
Pension plans are a very important source of retirement income for those fortunate to have been members of plans provided by public or private sector employers during their working years. Spouses of plan members often enjoy a number of benefits, such as a survivor pension and the ability to split a pension after the dissolution of a relationship. As with the right to marry and the tax law changes to recognize same-sex relationships, it was only recently that Ontario modernized its pension legislation to amend the definition of the term spouse. In 2005, the new terminology gave same-sex spouses the same rights as those enjoyed by opposite-sex spouses. It is important to note that the definition of the term spouse varies according to the specific legislation. For example, in pension plans governed by Ontario legislation, couples are considered to be spouses if they are married, have been living together in a conjugal relationship continuously for at least three years, or are the natural or adoptive parents of a child. However, for tax purposes the cohabitation period required is only one year.
Legislation in British Columbia and several other provinces provides same-sex couples with the same rights to spousal pension benefits as opposite-sex couples, including the ability to name a same-sex partner as the beneficiary of a pension.
Changes in employment benefits
Many large companies have instituted policies that prohibit discrimination on the basis of sexual orientation. In fact, a large proportion (88%) of Fortune 500 companies, many of which operate in Canada, have such policies. However, only 62% of Fortune 500 companies provide domestic partner health insurance benefits to their employees.
Changes in taxes
With equality granted for all Canadian tax purposes in 2001, the ability to save and defer taxes as part of both a financial plan and an estate plan became available to same-sex couples. Income-splitting strategies such as the use of spousal RRSPs, prescribed-rate loans between spouses, pension income splitting, and the transfer of certain tax credits between spouses provide excellent opportunities to reduce the overall tax bill a couple faces. Naming of a spouse or common-law partner as a beneficiary provides a mechanism for tax-deferred rollover or transfer of RRSPs, RRIFs and TFSAs to a surviving spouse after the death of the holder.
Making investment or bank accounts joint with right of survivorship will also facilitate the tax-deferred transfer of these assets upon the death of either spouse.
When it comes to estate planning, the seamless equality for same-sex couples found in tax rules is not reflected in provincial legislation. A person who dies without a Will in place is considered to be intestate. Unfortunately, intestacy rules in several provinces do not provide for same-sex partners, or for commonlaw partners in general. Instead, assets go to the closest blood relationships – such as parents, children or siblings – requiring a common-law partner to fight using other provincial
legislation for a share of assets or for financial support. This can be especially difficult if family members of the deceased partner did not support the same-sex relationship. For this reason, having a properly worded Will can help to financially protect a surviving same-sex or commonlaw spouse.
Powers of attorney
When Wills are drafted or updated, it is also important to set up powers of attorney (POAs) to protect both spouses. This will allow your trusted partner to take care of your finances and your health-care decisions should you become unable to do so yourself. If POAs are set up as enduring POAs through the use of specific wording in the documents, your choices and decisions will be carried out even if the partner who is granted the POAs becomes incapacitated.
An important aim of any financial or estate plan is to ensure that adequate financial resources are available to help meet the needs of both you and your partner. Life insurance can be updated to ensure that same-sex partners are named as beneficiaries, helping to provide sufficient funds when needed. Health insurance in the form of disability, critical illness, and long-term care insurance should also be considered. Long-term care insurance is especially important as assisted care facilities may not be supportive of same-sex relationships. To avoid the potential for discrimination based on sexual orientation at traditional long-term care facilities, there is a need to build sufficient savings into your financial plan, or to consider funding a long-term care insurance policy.
As a married or common-law couple you can benefit from the legislative changes in Canada concerning same-sex relationships. It’s essential to have an estate plan, prepare or update Wills and powers of attorney, and review your insurance needs. Updating beneficiary designations will help to ensure the needs of your partner are met, and the transition of assets according to your wishes. Feeling confident about the future comes from knowing where you stand now and how to get where you want to
A customized financial plan can put you on the right path.
For more information please visit www.bmo.com/wealthmanagement
Timeline – Same-Sex Rights in Canada. CBC News, 2012. http://www.cbc.ca/news/canada/timeline-same-sex-rights-in-canada-1.1147516
Morneau Sobeco Handbook of Canadian Pension and Benefit Plans. Bethune A. Whiston, Lois C. Gottlieb. CCH Canadian Limited, 2005: p391.
Portrait of Families and Living Arrangements in Canada. Statistics Canada, 2012.
When Sons and Daughters Come Out. PFLAG Canada, 2010. http://www.pflagcanada.ca/pdfs/glb-mychild.pdf
The LGBT Financial Experience – 2012-2013 Prudential Research Study. Prudential. https://www.prudential.com/media/managed/Prudential_LGBT_Financial_Experience.pdf
The 40-70 Rule: Helping Adult Children Communicate with their Aging Parents. BMO Financial Group, 2013.http://www.bmonesbittburns.com/IA/IAHomepage/NewsToBrowser.aspIA_ID=EDMAH&LANGUAGE=EN&NEWS_ID=39&VERSION=null
The LGBT Financial Experience – 2012-2013 Prudential Research Study. Prudential. https://www.prudential.com/media/managed/Prudential_LGBT_Financial_Experience.pdf
Portrait of Families and Living Arrangements in Canada. Statistics Canada, 2012. http://www12.statcan.ca/census-recensement/2011/assa/98-312-x/98-312-x2011001-eng.cfm
The History of Canada’s Public Pensions. Canadian Museum of History. http://www.historymuseum.ca/cmc/exhibitions/hist/pensions/cpptimeline_e.shtml
How to Apply for a Canada Pension Plan Credit Split (upon Separation or Divorce). Canada Revenue Agency, 2013. http://www.
Ontario Pension Act Amended to Include Same-Sex Spouses. James Langton. Investment Executive, June 15, 2005.
Gay and Lesbian Relationships. The Canadian Bar Association, British Columbia Branch, 2010. http://www.cba.org/dev/BC/public_media/family/163.aspx
LGBT Equality at the Fortune 500. The Human Rights Campaign. Site accessed May 12, 2014. http://www.hrc.org/resources/entry/lgbtequality-at-the-fortune-500
Seniors. Egale website. Accessed May 12, 2014. http://egale.ca/category/equal-families/seniors/
“BMO (M-bar roundel symbol)” is a registered trade-mark of Bank of Montreal, used under licence.
BMO Financial Group provides this publication to clients for informational purposes only. The information herein reflects information available at the date hereof. It is based on sources that we believe to be reliable, but is not guaranteed by us, may be incomplete, or may change without notice. It is intended as advice of a general nature and is not to be construed as specific advice to any particular person nor with respect to any specific risk or insurance product. Comments included in this publication are not intended to be legal advice or a definitive analysis of tax applicability or trusts and estates law. Such comments are general in nature for illustrative purposes only. Professional advice regarding an individual’s particular position should be obtained. You should consult an independent insurance broker or advisor of your own choice for advice on your insurance needs, and seek independent legal and/or tax advice on your personal circumstances.
BMO Nesbitt Burns Inc. and BMO InvAvnbAvvI1vvIc. are wholly owned subsidiaries of Bank of Montreal and Members of the Canadian Investor Protection Fund and IIROC. ®
What should I invest and How do I invest
By Imogen Clarke, The Fry Group
With all the uncertainty that has arisen from 2020, with lockdown threatening businesses and the warning of a second wave, the topic of investments has taken on new meaning. Nowadays, more people are concerned with what makes for a good investment, or, if you’re a novice, how to best invest.
For instance, you might be unsure about the reliability of the company you’re looking to invest in, as well as the long-term prospects of your investment.
If you are unsure of your investments, then it is best to seek advice from financial experts like The Fry Group, who deal with tax, wealth and estate planning. They will see that you have a strong financial plan in place to help meet your objectives. They will develop a strategy that is built around your needs and asses any risks that could hinder your plans.
There are some things you’ll need to consider for your strategy; for instance, are you looking to make investments that are more of a risk and will take longer to come to fruition? Or, alternatively, are you wanting a faster approach that will result in a steady income? Whether or not you decide to play it safe all depends on your current financial situation and whether you have the means to take more of a risk. Do you have any other debts that take precedence over your future plans? Is your investment strategy realistic?
With the aid of a specialist – or investment manager – you can design an investment concept that works for you and your goals, and start to build a regular income from your investments. There are four main areas when it comes to assets (groups of investments) that you can consider:
Your investment manager will test the risks associated with your investment, and if it proves to be a positive investment choice, then you will be able to invest more over time.
So, how do you decide where to invest?
According to The Fry Group, ESG investing (Environmental, Social and Governance) is a good option for investors looking to support businesses that meet their similar ethics.
The main areas of ESG investing include:
- Environmental challenges (climate change, pollution, etc)
- Social issues (human rights, labour standards, child labour, etc)
- Governance considerations relating to company management
According to The Fry Group, “Many investors choose to consider ESG investing in order to ensure any investment decisions reflect personal beliefs and values. As a result, they choose to support companies who are making informed, responsible decisions which take into account their wider societal and global impact. In this way investors can achieve peace of mind that their investments are creating a positive effect.”
ESG investing is also more relevant now than ever, as more businesses are looking to present themselves as an environmentally conscious corporation that recognises the values of their consumers.
As The Fry Group puts it, “In the past, ESG investing has been seen as a niche investment approach, for a relatively small number of people with specific requirements. This has changed significantly in recent years, with a growing awareness of environmental issues such as climate change and an increasing understanding of social issues and human rights. As a result, many people are increasingly interested in reflecting their opinions and lifestyle choices through the way they invest.”
So, if you want your investments to pave the way for your personal values and reflect your own morals, then this is the route to go down. But how does it all work?
There are four areas of ESG investing:
- Responsible ownership and engagement: when companies are encouraged to make necessary improvements.
- Avoidance or negative screening: whereby businesses are ‘graded’ based on how ethical their business practices are and are avoided altogether if their methods are not approved.
- Positive screening strategies:when companies meet the ESG goals and are approved for investments.
- Impact investment strategies: the purpose of this is to use investment capital for positive social results such as renewable energy.
You will need to take into account your own personal objectives as well as the objectives that meet the ESG investment criteria. And, in terms of financial performance, ESG investing can be hugely beneficial. Those who opt for ESG investing perform a more in-depth analysis into long-term and future trends that affect industries, meaning that they are better prepared for changes in consumer values when they arise. And, with all the unpredictability that this year has offered us so far, isn’t it better to do the research and have all angles covered?
Investment Roundtable: Live with Jim Bianco
With Q4’s macro picture still looking grim amid the return of exponential coronavirus waves in Europe and the U.S. and Europe, we speak with veteran macroanalysis strategist Jim Bianco, CMT for a data-driven deep-dive into the global economy and financial markets on Sept. 7th at 12pm EDT.
- Learn from Jim’s unique combination of quantitative and qualitative analytics which provide an objective view on Rates, Currencies and Commodities to make smart investment decisions
- Identify important intermarket relationships he is watching with respect to Global Equities
- Roadmap a global outlook for 2021 in view of socio-political backdrop giving viewers key takeaways and intermarket perspectives on global investing.
Jim’s robust technical analysis includes a broad look at trends and themes in the markets, market internals, positioning such as the Commitment of Traders (COT), sentiment, and fund flows. Don’t miss out on this exclusive session from one of the investment world’s most insightful thought leaders.
Equity markets react to a rise in Covid-19 cases, uncertain Brexit talks and the upcoming US election
By Rupert Thompson, Chief Investment Officer at Kingswood
Equity markets had another choppy week, falling for most of it before recovering some of their losses on Friday and posting further gains this morning.
At their low point last week, global equities were down some 7% from their high in early September. US equities were down close to 10%, hurt by the large weighting to the tech giants which at least initially led the market decline.
The market correction is nothing out of the ordinary with 5-10% declines surprisingly common. Indeed, a set-back was arguably overdue given the size and speed of the market rebound from the low in March. As to the cause for the latest weakness, it is all too obvious – namely the second wave of infections being seen across the UK and much of Europe and the local lockdowns being imposed as a result.
These will inevitably take their toll on the economic recovery which was always set to slow significantly following an initial strong bounce. Indeed, business confidence fell back in September both here and in Europe with the declines led by the consumer-facing service sector. A further drop looks inevitable in October – fuelled no doubt in the UK by the prospect that the latest restrictions could be in place for as long as six months.
The job support package announced by Rishi Sunak did little to boost confidence. Its aim is to limit the surge in unemployment triggered by the end of the furlough scheme in October. However, the scheme is much less generous than the one it replaces as the government doesn’t want to continue subsidising jobs which are no longer viable longer term. A rise in the unemployment rate to 8% or so later this year still looks quite likely.
Aside from Covid, for the UK at least, there is of course another major source of uncertainty – namely Brexit. Another round of trade talks start this week and we are rapidly reaching crunch time with a deal needing to be largely finalised by the end of October.
Whether we end up with one or not is still far from clear. That said, the prospects for a deal maybe look rather better than they did a couple of weeks ago when the Government was busy tearing up parts of the Withdrawal Agreement. With significant Covid restrictions quite probably still in place in the new year and the Government already under attack for incompetence, it may not wish to take the flack for inflicting yet more chaos onto the economy.
Markets remain unimpressed. UK equities underperformed their global counterparts by a further 2.7% last week, bringing the cumulative underperformance to an impressive 24% so far this year. The UK weighting in the global equity index has now shrunk to all of 4.0%.
It is not only the UK which faces a few weeks of uncertainty. The US elections are on 3 November. We also have the first of three Presidential debates this Tuesday. Joe Biden’s lead looks far from unassailable, a close result could be contentious and control of Congress is also up for grabs.
All said and done, equity markets look set for a choppy few weeks. Further out, however, we remain more positive – not least because the focus should hopefully switch from the roll-out of new lockdowns to the roll-out of a vaccine.
Business recovery from COVID-19 lies in implementing the practice of Open Book Management
By Suranga Herath is CEO of English Tea Shop, the leading independent speciality and organic tea company. Over the course of the...
Making Connectivity A Key Part of Cloud Strategy for Finance
By Eric Troyer, CMO at Megaport Finance organisations across the board are facing unprecedented disruption, with new technology entering the industry...
The Impact of Covid-19 on Planning
By Nilly Essaides, Sherri Liao and Gilles Bonelli, The Hackett Group The economic consequences of the coronavirus outbreak vary by...
Covid-19 can reboot belt and road initiative towards a sustainable future
A new CMS report reveals that Covid-19 has boosted Chinese enthusiasm for adopting the principles of BRI 2.0, leading to...
The (U)X Factor: The software bringing biometric payment cards to market
By Jonas Nilsson, Product Manager at Fingerprints With over 20 bank trials in progress and a second commercial roll-out imminent in...
Corporate treasuries under pressure need multi-banking trade finance technology
By Andrew Raymond, CEO, Bolero International The pressures on corporate treasuries in global trade have continued to mount since an...
How can financial services companies deliver great customer service and retain customer loyalty?
By Chris Angus, Senior Director, 8×8 The reality many banks are facing now is that given Amazon Prime can deliver...
Embracing digital automation without compromising on customer experience
By Mang-Git NG, CEO & Founder of Anvil Community banks have always prided themselves on their ability to serve their...
Two-thirds of finance professionals are now more efficient due to the Covid-19 crisis
The Covid-19 crisis is making a big impact on the efficiency of the UK’s finance departments, with 66% of financial...
Two thirds of people believe their work travel patterns have changed permanently
Alphabet research shows accelerating demand for mobility and EVs after lockdown Only 35% of people expect to return to normal...