Reviewing Contracts; What you need to know!

When it comes to reviewing contracts, it isn’t always as simple as dotting your i’s and crossing your t’s. Before signing any type of document it is important to read everything carefully, paying close attention to the little things that can often get overlooked. Guiding us through the topic of reviewing contracts, Murray Gottheil and his colleagues at Pallett Valo LLP have developed a list of the most common issues to consider;the following highlights 5. For the full list follow the link at the bottom of this blog.

1. What is the Context?

Context is everything. Before jumping into any contract, consider the following;

• What is the other side’s reputation for honest dealing? 
• How much money is involved? 
• How important is the contract to you? 
• How important is the contract to the other side? 
• How much do you have to invest to perform your obligations or to reap the benefits of the contract? 

• How does the “golden rule” apply? (For those of you who are unfamiliar with the golden rule, it is “He who has the gold, rules”.)

• Interest stated at a monthly rate is not enforceable at more than 5% per annum in Canada unless an annual equivalent rate is stated. The annual equivalent rate of 1% per month is not 12% per annum, but 12.68% per annum.

• Charging more interest after default than before default is enforceable in Canada, unless the contract pertains to real estate, in which case it is not enforceable.

• Non-competition agreements are often unenforceable, but may be enforceable if carefully structured and appropriately limited both in geographic and temporal scope. Whether or not enforceable in court, their mere inclusion may persuade a party not to compete, or a third party not to deal with another for fear of incurring liability to the party in whose favour the non-compete provisions are included in the contract.

• In commercial leases, there is often a restoration clause tucked away in fine print that requires the tenant to restore the premises to base building standards at the end of the lease. This can prove quite costly and many tenants are not aware of the obligation until the lease is terminated.

• In commercial leases there is sometimes a hidden security interest which allows the landlord to register its security and interfere with the tenant’s ability to obtain financing.

• Penalty clauses are usually unenforceable, but if carefully structured may be enforceable.

• In software development contracts, often what is missing is a provision that says that the customer owns the copyright in the software and the source-code and that the developer has waived its moral rights.

• In promissory notes, an acceleration clause on default is often missing. Consideration should also be given as to whether it is appropriate to provide for penalty-free prepayment of the balance owing, or whether or not the note is to be treated as a negotiable instrument.

• In employment agreements, the right to change the employee’s responsibilities or transfer the employee among offices is often missing, as are provisions that address ownership of intellectual property.

• In order to determine what is missing from any particular contract, the best approach is to look at checklists and examples, which are readily available from many sources, including legal publishers and law firms.

For Example: 
Promises such as these raise questions as to specifically how much effort or expense a party is required to devote and what happens if its efforts are unsuccessful; so be sure to read carefully and ask questions if it is unclear.

 2. Tricks and Traps

Contracts have tricks and traps. Here are some of them;

3. What is missing?

The most difficult part of reviewing a contract is identifying what is missing. Watch for the omission of the following;

4. Agreements to Agree

Contracts often have various “agreements to agree” scattered throughout them, and they are not typically legally enforceable. To avoid agreeing to something that you may not want to, or be conscious of, be sure to read everything carefully, and slowly-don't rush.

An agreement to agree on future price changes or quotas in a distributorship agreement or agreements to agree on rent payable during the renewal term of a lease. Sometimes the “agreements to agree” are so fundamental to the contract that they may render the entire agreement unenforceable.

5. What is the level of commitment?

There are some agreements in which the promises made by one party are always stated as "mandatory" obligations while the promises of the other party are always stated to require the party to "attempt" to do things. In acknowledging this, it is imperative when reviewing a contract that you pay close attention to the way it is written-even the slightest change in phrasing can make a huge difference. 

“The Purchaser shall” is different than “The Purchaser shall use its best efforts to” which is different from “The Purchaser shall use reasonable commercial efforts to” which is different from “The Purchaser shall use efforts to”. 

In all, before dotting your i’s and crossing your t's consider the above prior to signing any contract or legal document. Don't get yourself into a bind, be cautious before you sign. 

Read the full list for more advice on reviewing contracts!

For other information regarding Pallett Valo LLP visit their website

http://pallettvalo.com/

Note: Before writing, reviewing or negotiating your own contract, you should speak with a experienced commercial lawyer who can help you navigate your way through these and other issues.

5 Reasons To Review Your Financial Plan Annually

Five Reasons To Review Your Financial Plan Annually

As your financial advisors at Continuum II, you have heard us tell you about the importance of an annual review. With tax season quickly approaching, and contribution deadlines coming to a close, now is the perfect time to review how you are doing.

When it comes to managing your finances, having a financial plan is essential. If you have finances, you need a financial plan. Just as car insurance protects your vehicle, a financial plan helps to protect your assets over time. To ensure your strategies align with your goals, your financial plan should undergo regular examination. Emphasizing this, the following lists 5 reasons to review your financial plan annually. 

1. Your goals might have changed.

Because you may have multiple goals, your financial review should explore each of your goals separately, highlighting which goals take priority.

For Example:

• If you’ve been saving for a new home you might want to adjust your savings to reflect current real estate condition.
• If your children are approaching post-secondary age. When is the last time you checked the cost of post-secondary tuition costs?  

This is also the time to check the asset mix of your investment portfolios. Doing this ensures that your investments continue to meet your needs and preferences. In addition, it allows you to perform any rebalancing that might be necessary in light of the past year’s market performance.

 *If your situation has changed, your advisor can make suggestions, helping you to make adjustments as necessary

2. You may be paying more taxes than necessary.

Your annual review is a great time to ask your adviser about tax-efficient strategies you might be missing. Such strategies include knowing the types of accounts to invest in, and where to hold equities versus fixed income investments. Different types of investments get different tax treatments. Take advantage of tax savings by contributing to tax-advantaged vehicles such as a RRSP or a TFSA. Tax-efficient saving strategies will help you reduce taxes and boost your after-tax income.

Your advisor can help you structure a tax efficient portfolio, determining which investments should be held in tax-deferred accounts and which securities should be held in taxable accounts in order to maximize after-tax returns.

3. Your estate plan may be out of date.

One of the most important aspects of estate planning is having a will. A person’s last

will and testament is the foundation of any estate plan. A recent study in the USA suggests that less than 50% of American’s have a valid will-A figure that is relative to what we would expect to find here in Canada!

Use your annual review to make sure your estate plan continues to reflect your current family status and financial situation. Ensure that key individuals know where to find relevant documents and information. Marriage, divorce, birth and death are the four big events that affect estate plans, but you may also want to consider other factors that could influence your planning.

For example:

If you’re concerned about your grandchildren’s education costs, you might want to look into contributing to an RESP now while you are alive. Grandparents may be able to open a family plan RESP, which can have multiple children in a family as beneficiaries. If one child ends up not going to university, a family plan allows his or her siblings to use the money in the plan.

4. Your retirement plan might not reflect your latest priorities.

An important part of your annual review should be to take stock of your retirement plan from the viewpoint of both lifestyle and financial needs. Has your retirement date changed? Are your savings on track to meet your retirement income goals? Or will you need to work longer than originally planned?  

It is also a good idea to review what your anticipated retirement expenses will be. Many factors could change the expense side of the equation, ranging from health and marital status to your evolving interests and tastes. On the income side, use your annual review to check your progress toward establishing your retirement income plan. If you’re nearing retirement, an advisor can help you determine how your current wealth could be structured to provide the income level you need – or identify shortfalls and recommend strategies to address them.

Check your tax assumptions and determine whether they need to be adjusted.

• If you expect your income tax rate to be lower in retirement you might want to consider maximizing your tax-deferred savings now.

If you’re already retired, use your annual review to revisit your investment withdrawal

strategy. Leaving your tax-advantaged assets in place allows them to potentially

grow tax-deferred, or tax-free (in the case of TFSAs). Your investment withdrawal strategy should be structured in a way to help you achieve maximum tax efficiency, and should be customized to your overall investment strategy.

5. Your insurance needs and beneficiaries might need updating.

Insurance is great protection against the unexpected, so it’s wise to evaluate your insurance plan annually. If you are just starting out and your family is growing, you might want to increase the amount of your life insurance. Doing so protects your loved ones from a devastating loss of income on top of the emotional pain of losing a parent or spouse. Most people find that, as they get older – and as their net worth climbs and their children reach adulthood – they need less life insurance.

Another important type of insurance to acknowledge during your financial review is disability insurance. Do you have disability insurance? If not it is also a great way to protect your income if for some reason you can’t work. In all, it is important to remember the following when reviewing the insurance portion of your financial plan.

• Life insurance can be used for estate planning or to pass on the family cottage. For some Canadians, if a cottage has been in the family for generations, transferring the property from one generation to the next can trigger substantial capital gains taxes.
•  One strategy to the taxes can be to set up a life insurance policy to fund future capital gains taxes triggered by the death of the cottage owner.
• As you age you might also benefit from looking into long-term care insurance, which provides funding for when you are no longer able to care for yourself.
• A final consideration in your annual review is a simple check of your beneficiary designations for insurance policies, RRSP’s and TFSA’s. It’s easy to do, but it could have a negative impact if it’s neglected.

To summarize, reviewing your financial plan annually helps you to stay focused on your financial goals and protect the assets you’ve worked hard to establish. By managing the present, you can better prepare yourself for the future.

If you have any questions, please feel free to contact us at the office.

Also, don’t forget the deadline for RRSP contributions is March 2^nd

Top 10 RRSP Strategies

  Top 10 RRSP Strategies

                                            It's that time of year again; Tax time. 

With the March 2nd deadline for RRSP contributions quickly approaching, your financial advisors here at Continuum have developed the following strategies to help you maximize your RRSP.

1. Contribute early: Make your RRSP contributions as early as possible. Early in life, and early in the calendar year; both make a positive difference.

2. Contribute the maximum: Take advantage of compounding and get the maximum tax break by contributing the limit. In respect to 2015, you can invest up to 18% of your 2014 income, to a maximum of $24,270 (less your pension adjustment or past service pension adjustments for 2014).

Note: Don't forget you can "carry forward" any unused contribution room to subsequent years (until age 71).

3. Invest monthly: While it may be easier said than done, finding even the smallest amount to invest into your RRSP every month can make a huge difference. Make a plan, and have the money automatically deducted from your account each month. You may also choose to belong to a Group RRSP, making your RRSP contributions through a payroll deduction via your employer.

Note: If your financial situation should change, adjust your monthly contributions accordingly.

4. Contribute to a spousal RRSP: A spousal RRSP allows the spouse with the higher income to contribute to an RRSP owned by the lower-income spouse. The spouse with the higher income takes the immediate tax-deduction, but the money will be be taxed in the other spouses hands (usually at a lower rate) when it is withdrawn.

5. Resist the 'Dip': While it can be tempting, you must consider the consequences before dipping into your RRSP. 

• You cannot re-contribute your withdrawn amount
• Withdrawals can erode your potential lifetime limit
• Withdrawals attract tax at your marginal tax rate
• You cannot replace the tax-deferred growth that you lose when you make a withdrawal

Note: While we don't encourage dipping into your RRSP, special circumstances allow you to access your money without consequence. For example: The Home Buyer's Plan and The Life Long Learning Plan.

6. Diversify: To achieve long-term growth you should diversify your investment portfolio. By diversifying your portfolio, you protect yourself against the day-to-day fluctuations in any one category. Don't limit yourself-avoid inflation and maximize your purchasing power.

7. Consolidate your investments: This is a good strategy if you don't want to spend a great deal of time managing several plans. While you should still keep a diversified portfolio, you can usually combine your investments under one RRSP umbrella. By doing this you will get one consolidated statement, making it easier to track your plan.

8. Designate a beneficiary: While this can sometimes be difficult, it is important to designate a beneficiary for your assets in the event of your death. Without one, your account will go through your estate and could be subject to probate and other fees.
Note: Think carefully when designating your beneficiary, as different rules apply depending on if it is a spouse or another party. (This strategy does not apply in Quebec)

9. Get extra Help: We are here to help you make the right long-term investment decisions. Together we should review your plan at least once a year to make sure that it is still on track with your long-term goals.

10. Have a plan: To sum it up, maximizing and managing your RRSP comes down to having an effective plan. It is important to know that investing alone is not a plan. Map out your long term goals and don't just invest and forget. Manage your portfolio and help yourself maximize your financial future.

If you have any questions or concerns, don't hesitate to call us at the office. 

Crude Oil vs. TSX

While a recent spike in Crude Oil prices gives promise in the wake of a significant decline, it does not alleviate the turmoil amongst investors. In such a situation however, it is important to remain calm and to evaluate all of the surrounding factors within the market. It is the nature of the market to rise and fall, and as long as you remember the following, and manage your portfolio cautiously, there is no need to panic.

In light of recent drops, many people are under the impression it is an automatic statement of fact that Oil and the Stock Market move in lockstep. In the financial world we would call this a correlation of 1, meaning that both figures move in the same direction simultaneously. A Negative correlation would be -1, and would mean when stocks go up, commodity prices automatically move down. Interestingly, over time the TSX and Crude Oil have moved together, moved opposite of each other and had no relationship at all. (No relationship at all would be a correlation of 0). As shown in the charts below, the TSX on its own as well as Oil on its own, going back to 1977, have differed over time. This means that while there have been instances of reciprocity between Crude Oil and the TSX, such parallels are not always at play. In acknowledging this we must also acknowledge that there are many factors that can affect commodity prices, supply and demand being two of the most prominent. Eventually, over time, lower prices will likely self-correct and in turn we should not always forego volatile investments (the risk factor of the risk/reward mantra of investing). With this, we must maintain a neutral sentiment and watch closely for evolving industry trends, paying specific attention to all changes within the industry to ensure low impact on your portfolios.

 Summary: Should we be worried about the price of oil and the impact on our portfolio? 

While there are many factors to consider, some factors can be self-monitored to help ensure your collection of investments remain stable. At the current time, if you do the following, the answer is no, you should not hit the panic button. 

·        Follow a Pension Style of Investing (Investing over time)

·        Your personal situation has not recently changed

·        Maintain a well diversified portfolio

·        Try to avoid making emotional decisions

Want to chat further about this or your portfolio in particular, we are here and happy to discuss.

15 Money and Financial Planning Tips for 2015 - From Lise Andreana

I love the number 15 since my birthday falls on the 15th of the month and in 2015 I will reach a landmark birthday! Sssshhhhhh! From the perspective of time past, and with over 20 years of helping people to achieve their financial goals, it is easy to see those who have made their dreams a reality and those who have fallen short. The major difference between these two groups is habits. As 2015 kicks off, it is a good time to reflect on your financial goals and the habits you need to develop to achieve success. Here are 15 tips designed to improve your relationship with money in 2015.

1. Before taking on more debt or a large expense consider how secure your pay cheque is. Once a new cost like a bigger mortgage or a second car is taken on, it may be very hard AND expensive to scale back.

2. If you do not already have one, build up an emergency fund equal to at least three month's income. That way you will be prepared when the unexpected happens.

3. Avoid unnecessary fees and interest charges. Never carry credit card debt, the interest rate charges can exceed 20%. Those charges eat away at your ability to save for your important goals, like buying a home, saving for your children's education, and retirement. Pay your bills on time. Paying bills or credit cards even a few days late can affect your credit rating.

4. Does your employer offer a retirement savings matching plan? Many Canadians neglect to sign up for this free benefit. Take advantage of your employer's generosity, sign up and contribute to your employer's retirement matching plan. Typically these offer a $1.00 match for every $1.00 you contribute. Where else can you get a 100% return on your investment?

5. Top up your savings to RESPs, RRSPs and TFSA. Resolve to increase your contributions this year. By increasing your contributions by a mere 5% annually you can painlessly increase your overall savings.

6. Insure smart by insuring what is important. How important is it to protect that new printer you bought or next year's vacation? Compare that to the importance of protecting your family's income during sickness or your premature death. Check your employer's disability insurance program and top it up if necessary. Employer group life insurance plans are notoriously low. If you are raising a family, make sure your life insurance coverage exceeds 10 years income.

7. Raising a family on a budget? Buy low cost term insurance. Making big bucks? Are you in a high tax bracket? Check out cash value life insurance as a tax sheltered savings vehicle and estate preservation tool.

8. Check the amortization period of your mortgage. Does it coincide with your expected retirement date? If not, ask your mortgagor how to increase your payments so you can retire debt fee.

9. The beginning of a new year is the perfect time to rebalance your investment portfolio. Book an appointment with your financial advisor and ask them if your asset allocation has changed and how to best get back on track.

10. Check your retirement goal - are your savings on track? Here is a simple test. Take your current retirement savings and multiply by 4% - this is your safe withdrawal rate. For example, $100,000 in savings provides annual income of $4,000. Add to this what you expect to receive from CPP, OAS and other pension plans for an idea of your retirement income. How does this compare to your retirement income goal? Can you retire now, or should you keep working and saving?

11. Planning to retire early? Consider how your life expectancy will impact your retirement lifestyle. Retiring too early means forgoing additional years of savings and the longer your savings will need to last. An extra year or two of working and adding to savings can make all the difference between a frugal retirement and a comfortable one.

12. Take the time to review the beneficiaries listed on your RRSPs, TFSA, and life insurance policies. After all, your circumstances change over time, so might your wishes for your estate. Your financial advisor has many good ideas to help you plan your affairs in a tax efficient manner that meets with your wishes.

13. Resolve that this year is the year you get a will! Too many of us put off having our wills written. Dying without a will leaves your loved ones with an enormous burden and may even see your assets go to unintended beneficiaries.

14. Make your charitable donation as tax efficient as possible. Donate appreciated investments in kind where ever possible and avoid paying capital gains tax.

15. Plan to keep your financial house in order. Working with one of Continuum II's CFPs (Certified Financial Planner) will help ensure you set realistic goals and put a strategy in place to meet them on your timeline. The good financial habits you put in place this year will last you a lifetime.