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What should you do with an inheritance? Tips from a financial expert

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Did you recently receive an inheritance, or are you expecting to collect one soon? Whether the value of your inheritance is large or small, it’s important that you make the most of it.

An inheritance can include money as well as investments and other assets, such as real estate. Discussing what you will inherit ahead of time and outlining plans for what to do with any extra money is more important than ever, especially in today’s rapidly changing economic landscape.

Although Canada’s inflation rate fell from four per cent in August to 3.8 per cent in September, it remains well above the Bank of Canada’s two per cent target, and many Canadians continue to struggle with a high cost of living.

I’ll explain what you should do after receiving an inheritance and provide some helpful tips on how to handle the extra money.

WHAT SHOULD YOU DO AFTER RECEIVING AN INHERITANCE?

The most crucial piece of advice I can offer after receiving an inheritance is not to rush.

It can be tempting to immediately spend or invest money you’ve inherited. Depending on your family situation, you may have been told about your inheritance in advance or it could come as a complete shock, especially if the individual’s passing was unexpected.

Ideally, the person granting the inheritance should have completed the Canada Revenue Agency’s estate planning checklist or worked with an estate planner to:

  • Create a will
  • Name beneficiaries
  • Plan their funeral

It’s important to note that inheritance laws and regulations can vary by province and territory. But generally, if you’re the beneficiary of an inheritance, you should be contacted by an executor, the legal representative appointed to execute a will.

This representative is responsible for communicating with beneficiaries, handling legal paperwork, and transferring the inheritance to the listed recipients.

ARE THERE ANY TAX IMPLICATIONS?

One of the first things you’ll need to do after receiving an inheritance is to figure out your tax liability, or the amount of tax debt you owe.

Canada does not have an official inheritance tax and many assets, such as tax-free savings accounts (TFSAs), certain life insurance payouts, and personal property, can be passed on to beneficiaries without tax.

For taxable assets, such as real estate or certain investments, the CRA will take out their share of taxes before leaving you with the rest of the money.

The executor should inform you of the taxes you owe on your inheritance. If you’re still unsure, it’s best to contact a tax professional to avoid running into any surprises.

HOW SHOULD YOU USE YOUR INHERITANCE?

Not sure what to do with your inheritance? Here are a few smart ways you can spend or invest this money to get the most out of it.

1. Invest in tax-advantaged accounts

Money received from an inheritance in Canada is not considered taxable income. Despite this, it’s still a good idea to put this money towards maximizing your contributions to tax-advantaged accounts, such as:

  • TFSAs
  • Registered retirement savings plans (RRSP)
  • First home savings accounts (FHSA)

All of these accounts can be used as investment vehicles and allow your money to grow in a tax-deferred or tax-free account.

2. Start a business

Have you always wanted to start a business? Instead of applying for a small business loan, potentially risking your credit and paying high interest rates, you can use your inheritance as a way to start your entrepreneurial journey.

Just be sure you do your research and create a solid, actionable business plan. You shouldn’t jump into any business venture blindly.

3. Contribute to your child’s RESP

It’s never a bad idea to invest in your child’s future by opening or contributing to a registered education savings plan (RESP).

Although RESP contributions cannot be deducted from your taxable income, these payments could make you eligible for the Canada Education Savings Grant (CESG), which provides free government money that your child can use once they start their post-secondary education.

4. Set money aside for an emergency fund

A recent survey commissioned by the Healthcare of Ontario Pension Plan (HOOPP) revealed that 44 per cent of participants between the ages of 55 and 64 said they have less than $5,000 in savings.

Whether you’re in your 20s or close to retirement, having an emergency fund that can cover three to six months’ worth of living expenses is essential. If you fall ill, become injured, lose your job, or fall victim to other emergencies, this money can help make sure you’re able to keep up with your bills.

5. Pay down high-interest debt

If you have high-interest credit card debt, personal loan debt, or a car loan that involves owing more than the vehicle is worth, consider paying it down with your inheritance. Paying off high-interest debt can save you a lot of money on interest payments in the long run.

6. Donate to charity

If you’re already in a financially sound position or simply want to give back, consider donating your inheritance to charity. By doing so, you can claim a number of charitable tax credits on your income tax return.

WHAT’S THE BEST WAY TO HANDLE AN INHERITANCE?

Ideally, the best way to use your inheritance is to put it in an investment vehicle so it can continue to grow. However, if you have high-interest debt or a dwindling emergency fund, it’s best to take care of these items first.

Christopher Liew is a CFA Charterholder and former financial advisor. He writes personal finance tips for thousands of daily Canadian readers on his Wealth Awesome website.

 

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Democrats devastated by Vice-President Kamala Harris’ defeat |

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Supporters of Vice-President Kamala Harris say they are devastated the Democratic party leader lost the United States presidential election. Harris was set to address Democrats at her alma mater Howard University in Washington, D.C. after conceding the race in a phone call with Donald Trump. (Nov. 6, 2024)



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Democrat Elissa Slotkin wins Michigan’s open Senate seat, defeating the GOP’s Mike Rogers

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DETROIT (AP) — Democratic U.S. Rep. Elissa Slotkin has won Michigan’s open U.S. Senate seat, giving Democrats a bittersweet victory in a swing state that also backed Republican President-elect Donald Trump in his successful bid to return to the White House.

Slotkin, a third-term representative, defeated former Republican congressman Mike Rogers. Democrats have held both Senate seats in Michigan for decades, but this year were left without retiring incumbent Sen. Debbie Stabenow.

Michigan’s was among a handful of Senate races Democrats struggled to defend. They lost their U.S. Senate majority despite Slotkin’s narrow win.

The race was incredibly close. Just minutes before it was called for Slotkin, she addressed supporters in Detroit, acknowledging that many voters may have cast their ballots for her while also supporting Trump, who won the state’s electoral votes over Democrat Kamala Harris.

“It’s my responsibility to get things done for Michiganders. No matter who’s in office, just as I did in President Trump’s first term,” said Slotkin. “I’m a problem solver and I will work with anyone who is actually here to work.”

Slotkin’s win provides some solace for Democrats in the state, many of whom entered Election Day with high confidence following sweeping victories in the 2022 midterms. Democrat Gov. Gretchen Whitmer still controls the executive branch and Democrats held onto the Senate, but their state House majority was in peril.

And Republicans also captured a mid-Michigan seat vacated by Slotkin, considered one of the most competitive races in the country.

Slotkin, a former CIA analyst and third-term representative, launched her Senate campaign shortly after Democratic Sen. Debbie Stabenow announced her retirement in early 2023. With a largely uncontested primary, Slotkin built a significant fundraising advantage and poured it into advertising. Her high-profile supporters included former President Barack Obama and Stabenow, who helped her on the campaign trail.

On the Republican side, Rogers faced multiple challengers for the party’s nomination, including former Reps. Justin Amash and Peter Meijer, the latter of whom withdrew before the Aug. 6 primary. Rogers served in the U.S. House from 2001 to 2015 and chaired the House Intelligence Committee.

Trump won Michigan in 2016 by just over 10,000 votes, marking the first time a Republican presidential candidate had secured the state in nearly three decades. This time, he expanded that margin to about 80,000 votes.

Slotkin and other Michigan Democrats focused much of their campaigns on reproductive rights, arguing that Republican opponents would back a national abortion ban, although Rogers said he wouldn’t. How effectively the issue motivated voting in a state where reproductive rights were enshrined in the constitution by Michigan voters in 2022 remained to be seen on Election Day.

About 4 in 10 Michigan voters said the economy and jobs is the top issue facing the country, according to AP VoteCast, a sweeping survey of more than 110,000 voters nationally, including about 3,700 voters in Michigan. About 2 in 10 Michigan voters said immigration is the most pressing issue, and roughly 1 in 10 named abortion.

Slotkin used her funding advantage to establish her narrative early, aiming to connect both with her base and disillusioned Republicans.

“For the Republicans who feel like their party has left them over the last few years, you will always have an open door in my office,” Slotkin said during their only debate.

The Canadian Press. All rights reserved.



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Dodgers star Fernando Valenzuela remembered for having ‘the heart of a lion’ at his funeral

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LOS ANGELES (AP) — Fernando Valenzuela was remembered for “having the heart of a lion” throughout his stellar pitching career with the Los Angeles Dodgers during a funeral highlighting his Catholic faith on Wednesday.

Archbishop José Gomez sprinkled holy water on Valenzuela’s casket and later waved incense over it. Nearby a portrait of a smiling Valenzuela rested against the altar.

“His death came too soon,” the Rev. James Anguiano said in his sermon.

The public Mass at the Cathedral of Our Lady of the Angels in downtown Los Angeles included fans wearing Dodgers gear, some in Valenzuela’s No. 34 jersey. Many held up cell phones to record moments.

Valenzuela died on Oct. 22 at age 63, three days before the Dodgers began their eventual run to the franchise’s eighth World Series championship, beating the New York Yankees in five games last week. No cause of death was given.

“I really think Fernando hoped to witness the Dodgers win the World Series this year but you know he did witness the Dodgers as champions,” Anguiano said. “Fernando had a front-row seat, perfect from heaven.”

“I know like I’m standing here that Fernando is up there, he’s letting us know he’s doing well and he’s celebrating along with the Dodgers in their World Series championship,” said Mike Scioscia, who caught Valenzuela in many of his starts in 1981, including a five-hit shutout on Opening Day.

The Dodgers went on to win the World Series that year, in six games against the Yankees. The Mexican-born Valenzuela is the only player to earn the NL Cy Young Award and Rookie of the Year honors in the same season.

Scioscia, at times speaking in Spanish, eulogized Valenzuela for having “the heart of a lion.”

“He was 20-years-old in 1981 when he was going through Fernandomania and he just kept perspective the whole way,” Scioscia said. “Fernando never got too big for his britches. He was always well-grounded, he knew that he had a talent and he wanted to go out there and do it every time. He always felt he was the best in the world but he never told anybody about it.”

Fernando Valenzuela Jr. gave a tearful eulogy of his papá in Spanish, pausing to wipe his face with a white cloth. Valenzuela’s wife, Linda, and other children Ricardo, Linda and Maria sat in the front row, along with his grandchildren.

“Fernando no longer has to look up nor does he have to look down,” Anguiano said, referring to Valenzuela’s skyward glance during his unusual delivery. “Fernando is alive and present in our hearts and in our lives.”

The nine-member Mariachi Sol de Mexico played and sang throughout the service. It concluded with eight pallbearers ushering his casket covered in white roses to a waiting hearse.

Former Dodgers Orel Hershiser, Ron Cey, Reggie Smith, Jerry Reuss, Manny Mota, Justin Turner, Rick Sutcliffe, Nomar Garciaparra and Jesse Orosco were among the mourners. They were joined by former Dodgers owner Peter O’Malley, current president and CEO Stan Kasten, team COO Bob Wolfe, team general counsel Sam Fernandez and actor Edward James Olmos.

Valenzuela’s colleagues on the team’s Spanish-language broadcasts, Jaime Jarrín who retired in 2022 and, José Mota, were there.

___

AP MLB:

The Canadian Press. All rights reserved.



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