C O M M U N I C A T O R

YOUR WINDOWINTO THE WORLD

OF FINANCIAL

PLANNING

In this issue:Page 1:Market Commentary

Page 2:Registered Education Savings Plans

Page 3 & 4:Trasferring of Assets

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DANNY’S MARKET OUTLOOKThe summer months were mixed for the equity markets as most economic indica-tors continued to trend negatively while corporations fared better than expectations. The recovery from the global financial crisis has stalled and the world economy faces increasing danger of turmoil and recession. In the U.S., the Fed announced a plan to swap shorter maturity government securities for longer dated ones to give a shake to the slow moving US economy. It will replace short-term Treasuries in its portfolio with long-term bonds in an attempt to bend the yield curve. However, this initiative may fail to reduce the 9.1 percent unemployment rate in the country. In addition, more disappointing economic data was released showing that housing starts in the U.S. dropped by 5 percent to an annual rate of 571,000 while econo-mists estimated for the rate to be as high as 590,000.

S&P lowered Italy’s long-term credit rating from A+ to A and cut its short-term rat-ing from A1+ to A1, citing a weak economic outlook and ongoing political grid-lock. The market trades over optimism or pessimism about Europe, as the political forces in Europe have the power to make this go away. U.S. stocks rose, bouncing back from their first losing session in six, as the market hoped for resolution to Europe’s debt crisis and as the Fed meeting began. The financial markets have lost confidence in the ability of developed countries to gain control over their sover-eign debts. This had gone beyond the weakest economies of Portugal, Ireland and Greece to include major European economies, the U.S. and Japan.

The IMF has modeled what would happen if financial turmoil pushed European Banks into loss, while US growth slowed and Asian banks suffered real estate losses. The developed countries would fall back into recession, while Asian growth would fall by 3% and commodity price would plunge. Some slowing would occur as business completed rebuilding depleted stocks.

The INVESTWISE team anticipates elevated market volatility for the remainder of the year. Despite the occasional optimism seen in the equity markets, we advise investors to focus on the economic fundamentals that ultimately drive the economy. Previously in the period from May to June, we advised clients to change the alloca-tion of their portfolios to hold more money market assets and restart the DCAF to take advantage of the lower price. We continue to observe the market carefully and take advantage of any market anomalies and opportunities that may become avail-able.

ISSUE 22 OCTOBER 2011

Upcoming EventsStay InformedAs part of our ongoing effort to educate our clients with relevant & timely information, we are very pleased to offer our INVESTWISE Client Education Workshop Series.

We believe strongly in the importance of education. The aim of these workshops is to bring to light new concepts and ideas that you may not have considered before—or clear up some old misconceptions that you may have had about others.

We encourage and value your participation in as many workshops as possible. We will notify you personally if we feel that a presentation is of particular interest to you. In the meantime, if you have any questions about future workshops please call Lisa at (905) 470-5989 ext. 213, or e-mail her at lbusch@dundeewealth.com

RESP SEASON It’s that time of year again, your children or grandchildren are back in school. Andwhat better time is there to think about investing in their futures? The research shows that in today’s job market (and more so in the future), university and college graduates are more likely to keep jobs during an economic down-turn, and tend to earn more than Canadians without a post-secondary education. Starting an RESP early can help with the ever-growing costs of post-secondary education.

There are two types of plans: Family RESPs and Individual RESPs. The Family RESP allows one or more of your children to be the beneficiary of the plan, so long as there is connection by blood or adoption. Once the child reaches 21, contributions can no longer be made. The Individual RESP allows only one child to be the beneficiary of the RESP. Unlike the Family RESP, there is no age cap and no restriction on the relationship between the subscriber and the beneficiary. The subscriber can continue to invest into the RESP for 22 years after the plan was established.

So how does an RESP work?

• The subscriber first establishes the RESP and names the beneficiary (or beneficiaries in a Family RESP) • Contributions called Education As sistance Payments (EAP’s) are made to the plan • Government grants, such as the Canada Education Savings Grant (CESG) are added if applicable. • When the beneficiary is prepared for post-secondary schooling, the RESP will make payments to the beneficiary to assist in financing their education, make payments in the form of accumulated income, or return your contri-butions tax free

To open an RESP, make a contribution to an existing RESP, or learn more about RESP’s, please contact the INVESTWISE team at (905) 470-5989.

What are Eligible Educational Institutions?

An eligible institution where the student is able to receive Educational Assistance Payments (EAPs) from the RESP, is a post-secondary institu-tion that is:

1. a university, college or other speci-fied institution in Canada 2. an educational institution in Cana-da certified by Human Resources and Social Development Canada provid-ing skills training 3. an educational institution outside Canada providing post-secondary education in a course of at least 13 weeks in duration

Are there age limits for receiv-ing the CESG?

Beneficiaries that turn 16 or 17 dur-ing the year will receive CESGs to the extent that one of the following situations is in place:

1. There has been at least $2,000 con-tributed to an RESP for the benefi-ciary and not withdrawn prior to the year in which the beneficiary turned 16, or

2. At least $100 per year has been contributed to an RESP for the ben-eficiary and not withdrawn in at least four years before the year in which the beneficiary turned 16.

Looking for the Best Rates? Contact Us Today

Long-Term GIC Rates1 Year 1.80%

18 Months 1.75%

2 Years 2.10%

2.5 Years 1.90%

3 Years 2.20%

4 Years 2.41%

5 Years 2.71%

Short-Term GIC Deposits30 Days 0.90%

60 Days 1.00%

90 Days 1.30%

120 Days 1.45%

180 Days 1.60%

270 Days 1.60%

All rates are annualized and subject to change without notice at any time. GIC rates shown are as of October 12, 2011 based on information received from the issuers.DundeeWealth does not guarantee the rates posted will remain in effect for the entire business day. Please contact our office for accurate rates at the time of interest. Minimum investment amounts apply.

Mortgage Rates (Prime Rate 3.00%)

TERM*

6 Month 4.40%

1 Year 2.75%

2 Years 2.84%

3 Years 2.89%

4 Years 2.99%

5 Years 3.44%

7 Years 4.49%

10 Years 4.79%

VARIABLE** RATE

5 Years 3.54%

*Rates calculated semi-annually, not in advance.** Rate is Prime Rate plus a factor of 0.60%. Rate changes when Prime Rate changes. Rate is calculated daily.

All interest rates shown above are as of October 12, 2011, and may change without notice. They are calculated on a per annum basis, unless indicated otherwise.

Mortgages provided by Dundee Mortgage Services powered by Invis.

BASICS Q&A FOR TRANSFERRING OF ASSETS

Transferring assets can be a confusing subject. What is the best way to trans-fer assets without being subjected to enormous tax implications? No body wants to government to take their hard earned money.

1) What is the spousal rollover?

According to tax law, assets may be rolled over or transferred to a spouse with no immediate tax implications. Essentially, the spouse will assume the same cost and market value of the transferor. The spousal rollover is as-sumed to be in place upon the death of a taxpayer.

2) What are deemed dispositions?

Deemed dispositions are when assets are assumed to be sold for tax pur-poses which will most likely result in capital gains or losses. An actual sale does not need to be made. There are various situations that can give rise to deemed dispositions for Canadian taxpayers, one of the most important being on death. If a Canadian taxpayer dies and does not have a spouse as defined under the Income Tax Act (ITA) it is assumed that they have just sold all of their assets for fair market value. This can have a material effect on the estate of a deceased taxpayer.

Example:Ian Mackay, a widower, recently died at the age of 78. Following is a list of his assets on the date of his death:

Asset Cost Market Value Taxable AmountUnregistered stock portfolio $150,000 $300,000 $75,000RRSPs $200,000 $400,000 $400,000Home $50,000 $200,000 $0 (see below)Cottage $100,000 $200,000 $50,000Total Taxable Amount $525,000

Unregistered StocksSince these are unregistered, a capital gain will occur on death of $150,000. For tax purposes, capital gains are included for tax purposes at 50% so the taxable capital gain is $75,000.

RRSPsNone of the money in the RRSP has ever been taxed so the entire market value of the RRSPs ($400,000) will be included for tax purposes.

HomeDue to the Principal Residence Exemption, the entire gain on the principal residence is exempt from tax.

Contact Information202-80 Tiverton Court,Markham, ON L3R 0G4Phone: 905-470-5989Fax: 905-470-5979

Danny W. LeungCFP ®, CIM, CSWP., FMA, FCSI, TEPDirector, Private Client Group, Portfolio Manager, Branch ManagerExt: 208Email: investwise@dundeewealth.com

Anders ManClient Service AssistantExt: 210Email: aman@dundeewealth.com

Beverly CulbertsonAdministrator Ext: 213Email: bculbertson@dundeewealth.com

Lisa BuschAdministrative AssistantExt: 213Email: lbusch@dundeewealth.com

Elin LeungOffice ManagerExt. 206Email: elin@investwise.com

We’d love to hear more feedback from you about your experiences with us as part of the INVESTWISE family. Please feel free to send us your questions, concerns, and testimonials by calling Lisa at 905-470-5989 ext. 213 or by emailing her at lbusch@dundeewealth.com.

Thanks to all who have kept communicating with us thus far.

BASICS Q&A FOR TRANSFERRING OF ASSETS (CONT’D):

CottageA taxpayer (and his/her spouse) can only have one Principal Residence in a given tax year so the $100,000 capital gain on the cottage will be included for tax purposes at $50,000 (50% of the capital gain).

As we can see from this example, Ian’s estate will have to report income of $525,000.

If Ian had had a spouse when he died the entire amount of his estate could have been transferred to his spouse with no immediate tax implications

3) What is an estate freeze?

An estate freeze is a method of establishing the value of an estate at a point in time while the asset owner is still alive. By doing this ownership of the assets will pass to another individual, usually a family member, and they will be responsible for any subsequent tax. There may be tax implications at the time the freeze is done.

4) How do you do an estate freeze?

There are a number of ways to effect an estate freeze:

The simplest approach is to give the asset away. The taxpayer just transfers ownership to another individual. For example:

Kevin Tyburn is 72 years old. He has an unregistered stock portfolio with an Adjusted Cost Base (ACB or tax cost) of $150,000 and a current mar-ket value of $300,000. He wants his daughter Helen to eventually have the portfolio. Instead of waiting until his death he simply transfers owner-ship to Helen in 2008. By giving the portfolio to Helen he has incurred a deemed disposition for tax purposes and has triggered a $150,000 capital gain ($300,000 – $150,000). 50% of this or $75,000 will have to be re-ported by Kevin as a taxable capital gain in 2008. However, Helen now has a stock portfolio with a cost of $300,000. Any subsequent growth will be Helen’s responsibility.

The main problem with this approach is that the taxpayer loses control of the asset. In our example, if Kevin had had a change of heart later it would be too late.

If you would like to disucss transferring of asssets or require further infor-mation, please contact our office at 905-470-5989.

This newsletter is solely the work of Danny Leung for the private information of his clients. Although the author is a registered Portfolio Manager with DWM Securi-ties Inc., a DundeeWealth Inc. Company, this is not an official publication of DWM Securities Inc. The views (including any recommendations) expressed in this newsletter are those of the author alone, and they have not been approved by, and are not necessarily those of, DWM Securities Inc.