Spread through several accounts including RRSPs and RESPs, I have positions in the BMO, RBC, and CIBC Monthly Income Funds. On a comparative basis, how do you rate the TD Monthly Income Fund? - Michael B.
 

The TD fund has the best one-year total return of the four you mentioned, with a gain of 12.9% to Oct. 31. Over three years, however, the RBC fund comes out ahead. All of these are balanced funds so if we use the percentage of the portfolio that is invested in stocks as a measure of risk, the CIBC and TD funds show the most equity exposure at 65.9% and 63.8% of total assets respectively. The BMO fund has 50.3% of its portfolio invested in the stock market while the RBC fund is the most conservative at 42.5%.

Investors who depend on a monthly income fund for steady cash flow might be uncomfortable with the TD fund's pattern of frequently changing the amount of its monthly distribution. The fund was paying out 4c a unit each month until the end of December 2008. It then cut the distribution by 25%, to 3c. In July 2009, it moved it back up to 3.6c a month and in September it went to 4.8c. Anyone relying on the fund for predictable income would find all this very frustrating.

By contrast, the other three funds have maintained their distributions at the same level for at least 18 months. The BMO and CIBC funds each pay 6c per month while the RBC fund pays 4.75c. - G.P.
 

When the market is down, very often we hear people have incurred financial losses. I was told when the market is down and you liquidate stock or funds then you incur loss. If you stay invested (market is going to rebound), no loss is incurred. Is there any other way to incur loss, even if you have not liquidated any stock during market downturn? - F.K.
 

Of course. There is no guarantee that a particular stock you own will go back up even if the broad market rises. And it will be a long time before many stocks regain the highs they reached before last year's market meltdown. Some may never get there. - G.P.
 

I have many RRSPs with various maturity dates in future years in three banks. I've been advised to transfer all of them into one brokerage house, which I'm afraid will only create more paper work, confusions, delays, and frustration when dealing with just one broker.
 
What problems will I be facing as far as tax forms are concerned when I turn 69 next year, assuming that I will withdraw only the minimum required percentage each year? - H.T.
 

None. You don't have to terminate your RRSP until Dec. 31 of the year you turn 71. It used to be 69 but that was changed a few years ago. So you won't have to worry about minimum withdrawals for a while yet.

It sounds like all your RRSPs are currently invested in guaranteed investment certificates (GICs). It's a good idea to consolidate them but at this stage in life you need to be careful about how you reinvest the money as the GICs mature. Don’t let a broker influence you to taking on more risk than you are comfortable with. - G.P.
 

How will the new Harmonized Sales Tax (HST) in Ontario and B.C. affect my mutual fund and ETF holdings? I live in Alberta, but most financial investment companies are based in Ontario. Will I still pay a higher management fee? - Tyler B.
 

It is very possible that you will. The HST will apply to companies registered in each province. This creates a real dilemma for organizations that sell nationwide, such as mutual fund companies. The HST will be applied to their management fees and other expenses and will therefore be passed on to customers no matter where they live. There has been talk that some companies will create special fund units for Alberta residents only but so far nothing specific has been announced. - G.P.
 

My father has willed his estate to me and my sister. The main part of the inheritance will be his principal residence. What are our liabilities as far as inheritance tax or estate tax? Thank you for your assistance. - Herb W.
 

Canada has no estate tax or inheritance tax so your liability as far as those are concerned is nothing. In fact, you have no tax liability at all. When your father passes, the executor of his estate will satisfy all debts, including taxes. The residue of the estate will then pass to you and your sister tax-free.

There is no tax on the sale of a principal residence. If the house is sold after your father's death, and has not subsequently increased in value, tax on the sale will be zero. - G.P.

I am a 56-year-old female with a spousal RRSP. I'm not really retired but I did not work in 2009 and have no income (my husband still works full time). Someone has suggested taking $5,000 from my RRSP to put into my TFSA and do this every year that I have no or little income to get the money out of the RRSP at a lower tax rate rather than leaving it in there until I'm 71. What do you think? - Cathy F.
 

I agree with the advice you received. You will pay no tax on the RRSP withdrawal because you have no income and you can then tax-shelter the money in the TFSA so that it will never be taxable. The one drawback is that your husband will lose some of the spousal tax credit he would otherwise be entitled to, so you won't completely escape a tax cost. I suggest you calculate how much that will be before you make a decision. You can get an approximate figure by downloading Schedule 1 of the 2008 tax return from the Canada Revenue Agency website. Go to http://www.cra-arc.gc.ca/E/pbg/tf/5000-s1/5000-s1-08e.pdf  - G.P.
 

I have recently taken some profits on U.S. stocks that have done very well since March and the proceeds are in a U.S. dollar account. I like the buy recommendation on RIM in the Internet Wealth Builder as a long-term position. What are your thoughts on buying the stock on the NYSE with U.S. dollars and holding them there until there is a rebound in the greenback somewhere down the road as opposed to purchasing them on the TSX with Canadian funds? - Gary H.
 

It makes no difference from a price perspective whether you buy a Canadian-based stock in Toronto or in New York. The price adjusts each minute to reflect movements in the currency exchange rate. The only reason to buy in U.S. dollars is if you already have American currency available to invest, which you do. So in your case, you should go ahead and buy the shares on Nasdaq to avoid having to pay an exchange rate to convert back to Canadian currency. - G.P.
 

Let's assume that I have a GIC within my TFSA. When this GIC reaches maturity I may wish to replace it with one from a different institution. To purchase  this new GIC, will I be deemed to have withdrawn the funds from my TFSA and have to wait until Jan. 1 of the following year to make the purchase? I do not wish to lose the interest while waiting to re-invest! How does one make such a transaction within the TFSA? - William C.
 

You have two options in this situation. The first is to withdraw money from the existing TFSA when the GIC matures while leaving the account open. This should cost you nothing however you cannot contribute the cash to a new account until after Jan. 1 unless you have contribution room available. If not and you buy a GIC in a new account before then, it will be considered an overcontribution and the tax penalty in that case is severe.

The second option is to open a new TFSA elsewhere and transfer the assets to it. However, there will probably be a fee for doing this. If you close the existing account entirely, that fee may be even higher. Check with the financial institution that holds the current plan for details of their policy in this regard. - G.P.
 

My wife and I each have invested $5,000 in TFSAs for 2009 and expect to do so again in 2010. I wonder if you could comment on the following:
 
Can we name each other as successor account holder AND name our daughter and son as beneficiaries - or is the latter not necessary? The goal being that in order to avoid probate, if one of us dies the other would get the TFSA but in the event we die simultaneously the kids would get them.

If you think we should name the kids as beneficiaries (and if I understand correctly, you suggest not to name joint beneficiaries as this could complicate matters) I assume we probably should each name one child as beneficiary of our account.
 
Another question for you: while I realize our limit is $5,000 each per year, can we invest our $5,000 for 2010 at a different financial institute or are we limited to one TFSA account? My thinking here is that often you can get a higher interest rate for a few months when opening a new TFSA. - Bill H.   
     

Succession laws are determined by each province and territory so a strategy that may work in one part of the country may be offside elsewhere. Certainly, you should each name the other spouse as successor account holders; that can be done in all jurisdictions except Quebec. If you are given the option by the financial institution that holds the plans to name both a successor holder and a beneficiary, it is important to clarify that the beneficiary designation will only apply if the named successor holder is deceased. You may wish to obtain legal advice about this as this is a brand-new area of succession law.

As with RRSPs, you may have as many TFSAs as you wish. There is no legal limit on the number of plans but the more accounts you open the more complicated it becomes to keep track of them.

I would also like to comment on your remark about "a higher interest rate". I am aware that many people are using TFSAs to invest in GICs. During this period of low interest rates, I think that is a bad idea. The whole purpose of a TFSA is to maximize tax-sheltered profits. A GIC at 3% will only produce $150 interest a year on a $5,000 investment. If you get 3.5%, that only adds $25 more. I suggest you consider moving to a self-directed plan so you can broaden your range of options. - G.P.
 

Let's assume that I have a GIC within my TFSA. When this GIC reaches maturity I may wish to replace it with one from a different institution. To purchase  this new GIC, will I be deemed to have withdrawn the funds from my TFSA and have to wait until Jan. 1 of the following year to make the purchase? I do not wish to lose the interest while waiting to re-invest! How does one make such a transaction within the TFSA? - William C.
 

You have two options in this situation. The first is to withdraw money from the existing TFSA when the GIC matures while leaving the account open. This should cost you nothing however you cannot contribute the cash to a new account until after Jan. 1 unless you have contribution room available. If not and you buy a GIC in a new account before then, it will be considered an overcontribution and the tax penalty in that case is severe.

The second option is to open a new TFSA elsewhere and transfer the assets to it. However, there will probably be a fee for doing this. If you close the existing account entirely, that fee may be even higher. Check with the financial institution that holds the current plan for details of their policy in this regard. - G.P.