Financial Planning F inancial planning is a comprehensive and ongoing process that can help you achieve your goals in life — both personal and financial. It takes six major aspects into account and involves thinking about these things together: financial management, asset management, risk management, tax planning, retirement planning and estate planning. This chapter gives you the strategies, tools and guidance you need to get started on the road to financial success. You may already be looking for partners to help you manage your financial plan. They may include financial planners, accountants, banking representatives, investment advisors, lawyers and insurance brokers. When choosing experts to manage your financial plan, it’s important to choose carefully. Look for credible companies with a solid history. Ask questions about the products they offer, any fees they charge, how they are compensated and how they track the progress of your financial plan. Also ask your friends, family and colleagues to tell you about their experiences and their opinions, and to provide referrals. With a basic understanding of financial planning, as well as the right experts on your team, you will soon be headed firmly in the right direction. The information in this chapter is current as of December 31, 2015, and is for information purposes only. It is not intended to be used as direct investment, legal or tax advice, nor is it intended to replace the advice of an independent investment, tax, accounting or legal professional. 48 Managing debt 50 Starting a family 52 Tax basics 54 Tax instalment payments: an overview of the first few years 57 Incorporation 59 Investing basics 61 Protecting your lifestyle 64 Professional liability protection 4 47 @CMA_Docs
Transcript
Financial Planning
F inancial planning is a comprehensive and ongoing process that can help you achieve your goals in life — both personal and financial. It takes six major aspects into account and involves
thinking about these things together: financial management, asset management, risk management, tax planning, retirement planning and estate planning.
This chapter gives you the strategies, tools and guidance you need to get started on the road to financial success.
You may already be looking for partners to help you manage your financial plan. They may include financial planners, accountants, banking representatives, investment advisors, lawyers and insurance brokers. When choosing experts to manage your financial plan, it’s important to choose carefully.
Look for credible companies with a solid history. Ask questions about the products they offer, any fees they charge, how they are compensated and how they track the progress of your financial plan. Also ask your friends, family and colleagues to tell you about their experiences and their opinions, and to provide referrals.
With a basic understanding of financial planning, as well as the right experts on your team, you will soon be headed firmly in the right direction.
The information in this chapter is current as of December 31, 2015, and is for information purposes only. It is not intended to be used as direct investment, legal or tax advice, nor is it intended to replace the advice of an independent investment, tax, accounting or legal professional.
48 Managing debt
50 Starting a family
52 Tax basics
54 Tax instalment payments: an overview of the first few years
T here are many complexities within the Canadian taxation system. While it’s not necessary to understand everything, having
a basic knowledge can help you to maximize your earned income and net worth.
Dr. Krista WhitneyResidentNorth Bay, Ont.
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TAX STATUS: SALARIED OR SELF-EMPLOYED?In Canada, the tax system is based on self-assessment, which
means taxpayers calculate the taxes they owe. Those amounts
are verified by the Canada Revenue Agency (CRA) through a
review and audit process. The CRA also assesses provincial and
territorial returns, with the exception of Quebec’s.
Salaried employeesSalaried employees — physicians who are employed by the
government, for example, including residents and general
practitioners who are paid flat rates — do not need to do
many calculations other than filing annual tax returns.
Your employer deducts taxes and other amounts, such
as Employment Insurance and Canada Pension Plan contri-
butions, directly from your earnings every pay period. Your
employer provides you with a T4 slip reporting this infor-
mation on a calendar-year basis.
Self-employed individualsIf you’re self-employed, you can generally deduct — from
your gross income — all business-related expenses incurred
to earn that income. This applies to most physicians who
opt for fee-for-service arrangements, alternative payment
plans and by-the-hour payment.
The list of potential tax deductions is extensive, but should
generally be assessed by a tax advisor on a case-by-case
basis, as there are limitations and special rules for specific
cases.
Your ministry of health will not deduct the taxes you
may owe from your income; instead, you will receive all
your professional earnings in full, barring a few very spe-
cific deductions, such as union dues. You are responsible
for paying all taxes owing each year. You may need to
make quarterly instalment payments to the CRA that are
approximately equal, in total, to the estimated amount of
tax you will owe at the end of the year, if that amount is
greater than the statutory thresholds.
Self-employed individuals are personally responsible for
reporting their professional income to the tax authorities.
To help you with this, your provincial or territorial minis-
try of health will send you an annual statement of your
professional earnings. This information will also be shared
with the federal and your provincial or territorial govern-
ment to minimize the possibility of tax fraud and
potential oversights.
OTHER TAX CALCULATIONSIn addition to your professional income, all other earnings
and revenues are generally taxable. Other earnings might
include government benefits (such as employment insur-
ance benefit payments) and investment income.
Tax treatment Certain types of income are treated differently for tax pur-
poses. For example, capital gains or losses are calculated by
determining the increase or decrease in the value of capital
property from the date it was acquired to the date it was
disposed of or sold. Capital property includes things such
as investments and real estate, excluding your principal
residence.
If you have capital gains, only half of the capital gains are
included in your income in the year of disposition, while the
other half is not subject to any tax. See the sidebar text for
an example.
Tax deductions and creditsBe aware of the various tax deductions and tax credits you
may be eligible for. These include tax deductions for eligible
registered retirement savings plan (RRSP) contributions and
tax credits for eligible charitable donations, and tuition and
education amounts.
GETTING HELP FROM A TAX ADVISORYour situation may change or grow in complexity from
year to year. A tax advisor can prepare your tax return and
provide valuable tax planning advice. He or she has spe-
cialized knowledge of the Canadian tax system that could
have a significant effect on the calculation of your taxable
income — especially if you are a self-employed physician.
How capital gains are taxedIf you paid $1,000 for an investment, such as
a stock or mutual funds, and thereafter you
sold it for $1,500, you would have incurred a
$500 gross capital gain. If the stock or mutual
funds sold were held in a taxable investment
account, such as your personal non-registered
investment account, 50% of the gross capital
gain would be taxable to you in the year you
sold the investment. Therefore, $250 of net
taxable capital gains would be reported on
your personal tax return.
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Tax instalment payments: an overview of the first few yearsRoxanne Forster, Financial Consultant A s a resident, you are paid a salary and your
income tax is withheld and remitted to the appropriate tax authorities. But as soon as
you become a physician in practice who is considered self-employed, you will be responsible for declaring your income and paying the taxes owed each year. iS
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Calculating tax instalment payments can be complicated, and
many rules apply. To avoid potentially serious financial conse-
quences, you would be wise to understand how tax instalments
work before you start your practice. Below, we will walk you
through your first four years in practice.
UNDERSTANDING TAX INSTALMENTS: THE BASICSMany physicians need to make personal quarterly instalment
payments to the Canada Revenue Agency to cover their esti-
mated tax liability each year. If you decide to incorporate your
professional practice, you may also need to submit corporate
tax instalment payments.
When you file your personal tax return each year, your tax
advisor will help you calculate the amount of total tax you
owe for the year. He or she will also help calculate the quar-
terly instalment payments you will owe for the coming year.
If the quarterly instalments you paid in a given year total
more than what you end up owing for that year (and your calcu-
lations are verified by the tax authorities), the government will
refund the overpayment to you. Conversely, if you have not paid
enough, you will have to pay the difference when income taxes
are due — no later than April 30 following the taxation year.
How much do you remit each quarter as a self-employed individual? There are three acceptable ways to estimate your tax
instalment payments:
1. The no-calculation option: This is the best option for you
if your income, deductions and credits stay about the same
from year to year. The government will suggest quarterly
payment amounts in instalment reminders, and you just
pay that amount.
2. The prior-year option: This is the best option if your cur-
rent-year income, deductions and credits will be similar to
last year’s amounts, but significantly different from those
in the year(s) before last year. The Canada Revenue Agency
website offers instructions on using this method.
3. The current-year option: This is the best option for you if
your current-year income, deductions and credits will be
significantly different from those in the last two years. It
involves estimating your total tax owing for the current
year. See the Canada Revenue Agency website for details.
If you expect to earn less taxable income in any given year,
speak to a professional tax advisor to decide whether you
should reduce your instalment payments.
Keep in mind that if you choose to make instalment
payments that differ from the amounts suggested on your
instalment reminders, and you underestimate the amount
required to meet your tax liability, you may find yourself
owing interest and penalties on the unpaid balance.
When do you make your tax instalment payments? Self-employed people, including physicians, are allowed to file
their tax return on June 15 of the following year (instead of the
usual April 30 deadline). However, any taxes owing must still be
paid by April 30; otherwise, interest charges begin to accrue on
the balance owed.
Instalment payments are due March 15, June 15, Septem-
ber 15 and December 15 of each year. If you understand how
the system of tax instalments works before you begin your
practice, you can figure out how much money to put aside.
Failing to make instalment payments on time can have seri-
ous consequences, including penalties and high interest
charges, compounded daily.
Even though you are generally not required to make instal-
ment payments in the first year of practice, you still need to
put money aside. You will owe unpaid taxes when you file
your return for that first year, and it will be much easier to get
through this adjustment period — and to avoid borrowing
the funds — if you have planned ahead.
MAKING TAX INSTALMENT PAYMENTS: HOW IT WORKS Year 1: Your first year of practice is a special situation. Normally,
as a self-employed physician your instalment amounts are calcu-
lated based on your income tax return from the previous two
years. But in your first year of self-employment, you have no pre-
vious self-employment income on which to base this calculation.
In a nutshellzz You are generally not required to make instalment pay-
ments in your first year of practice.
zz As a result, you may have a large amount of income tax
FAST TRACK
• To save time and money, consider
working with a tax advisor to help you
maximize your after-tax income.
• If you are self-employed, your income is
taxed in the province or territory where you
earn it, regardless of where you live. This
means that, in some cases, you may
have to pay taxes in more than
one jurisdiction.
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due when you file your tax return for your first year of
practice.
zz Consider setting aside enough of your earnings, in a savings
account, to cover your taxes. That way, you can avoid bor-
rowing the funds.
Year 2: Instalment payments are due March 15, June 15,
September 15 and December 15 of each year. Based on the
taxable income reported on the income tax return you filed
for your first year of self-employment, your tax advisor can
help you determine your quarterly instalment amounts. The
federal government may also send you instalment remind-
ers that include a suggested payment amount.
In a nutshellzz Suggested instalment amounts from the government are
normally based on the last two years of self-employment,
but you will have had only one year of self-employment
income.
zz The total suggested instalment amounts may be lower
than your total tax bill for the year. The government may
ask you to make only the final two instalment payments
(based on the preceding year), rather than all four, since
you may not have had income in the year before the pre-
ceding year.
zz If after making your instalment payments there is a balance
owing, you must pay the difference by April 30 of the follow-
ing year.
zz Consider setting aside some money to cover what could be
a large payment at tax time.
Year 3: In your third year of practice, the government will
once again mail instalment reminders to you, indicating the
suggested amounts you owe. Now that you’ve been in prac-
tice for two years, the suggested payments will capture two
years of self-employment income. If your practice income
has changed significantly since Year 1, consult your tax advi-
sor to determine whether these suggested payments are
enough or whether you should be putting additional money
aside for an April 30 tax liability.
Year 4: In the fourth year of your practice, your instalment pay-
ments will probably stabilize. As in previous years, the government
will mail instalment reminders to you, indicating the suggested
instalment amounts you owe. These amounts are based on the
income you declared in your two most recent tax returns.
Best tip for instalment paymentsIn the first few years of practice, work with
your tax advisor to make sure you’re not
living beyond your means. You may feel
richer than you are if you don’t anticipate
what your tax liability is and put some
money away to pay your income tax.
Overview of Instalment Payments
2016 – Year 1 2017 – Year 2 2018 – Year 3 2019 – Year 4
Self-employment history
No self-employment income in 2014 or 2015.
No self-employment income in 2015. Self-employment income in 2016.
Self-employment income in 2016 and 2017.
Self-employment income in 2017 and 2018.
How the tax instalment amounts are calculated
Generally not applicable. Income tax instalment amounts (if requested) are based on the 2015 and 2016 income taxes owing, as reflected in your tax returns.
The government will mail instalment reminder notices to you, if applicable.
Income tax instalment amounts are based on the 2016 and 2017 income taxes owing, as reflected in your tax returns.
The government will mail instalment reminder notices to you.
Income tax instalment amounts are based on the 2017 and 2018 income taxes owing, as reflected in your tax returns.
The government will mail instalment reminder notices to you.
Action required from you
Generally, no instalment payments are required. You pay any tax owing by April 30 of the following year.
The government may ask you to make only the final two instalment payments instead of all four and to pay the difference by April 30 of the following year.
Make your quarterly instalment payments. Adjust the amounts if necessary. Confirm your 2018 final balance of income taxes owing by April 30, 2019 and ensure any balance owing is paid by that date.
Make your quarterly instalment payments. Adjust the amounts if necessary. Confirm your 2019 final balance of income taxes owing by April 30, 2020 and ensure any balance owing is paid by that date.
M any physicians in Canada incorporate their medical practice because of the large tax savings available over time.
Below, we’ll discuss the main advantages and possible disadvantages of incorporating, and demonstrate why it’s wise to analyze your per-sonal financial situation before making an incorporation decision.
FAST TRACK
Incorporating your medical practice can
offer two tax opportunities to help you
achieve your financial goals:
• Save money through tax deferral and lower tax
rates on active business income earned by your
corporation and retained within it
• Benefit from enhanced tax-deferral
strategies through effective
investment and withdrawal
planning.
WHAT IS INCORPORATION?Incorporation is the creation of a new legal entity. The cor-
poration you create becomes the owner of your medical
practice, while the shares of the corporation are owned by
you (the physician) and, under certain circumstances, your
family members. Typically, you also become an employee,
director and officer of the corporation.
Most incorporated medical practices are established as
Canadian-controlled private corporations and earn active
business income, which means they are generally eligible
for reduced tax rates on that income. Generally, income
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For 2016, the small business tax-rate reduction will result
in a tax rate of approximately 14.5% on the first $500,000 of
income. In contrast, investment income is not active business
income and is not eligible for this reduced tax rate.
The small business tax rate varies by province and territory.
Please note that there are provincial and territorial small busi-
ness deduction limits as well, which may vary from the
$500,000 federal limit.
POTENTIAL ADVANTAGES OF INCORPORATING
Tax deferral Perhaps the most significant potential benefit of incorporation
is the ability to defer tax on income earned within the corpora-
tion. Tax deferral allows you to invest (and grow) money that
would otherwise be paid in taxes.
Once the medical practice has deducted all of its eligible
expenses, any income remaining in the corporation is taxed at a
lower rate (up to a certain limit, as noted above) than it would
be if it were earned by and taxed in the hands of an individual.
Keep in mind that it is the corporation, not the individual
physician, that benefits from the reduced rate. For you to receive
income as an individual, the corporation must pay you a salary,
bonuses or dividends.
The tax treatment of salary, bonus and dividend income will
vary. A concept called “integration” keeps the total tax paid (cor-
porate and personal) similar regardless of compensation type.
Your tax professional and financial advisor can help you deter-
mine when each compensation type is most appropriate for you.
As an officer of the corporation, you ultimately make the
decisions about how and when remuneration is paid from the
corporation.
Income splitting Income splitting is the practice of sharing or “splitting” taxable
income between taxpayers, so that a lower overall rate of tax is
paid than would be the case if the income were not shared or split.
In the case of an incorporated medical practice, income earned
by the practice may be paid out in the form of dividends to the
corporation’s shareholders. If your family members are sharehold-
ers of your professional corporation, tax savings can be achieved
when income flows to those members who are taxed at a lower
marginal rate than you.
Tax savings Generally, when it comes to saving taxes in a professional cor-
poration, funds need to be retained in the corporation.
During your working years (when the money you earn, if
it were earned by you directly, would be subject to high
marginal tax rates), the funds can be retained within the
corporation and taxed at lower corporate rates. When you
retire from active practice, and your total taxable income
is generally lower, you can withdraw the retained funds
and pay a lower rate of personal tax.
POTENTIAL DISADVANTAGES OF INCORPORATING
Increased costs and complexities Incorporating can be complex and costly. The costs associated
with incorporation include initial set-up costs, ongoing legal and
accounting fees, and payroll taxes. When you consider incorpo-
ration, assess whether these increased costs might eliminate the
financial advantages of incorporating.
There can also be additional planning costs and expenses
associated with incorporation, for things such as setting up
family trusts, drafting shareholders’ agreements and revising
wills to reflect the new corporate structure.
Finally, every corporation must ensure that records and books
are kept up to date and that taxes are paid. These ongoing tasks
may include making corporate tax instalments, making payroll
remittances, filing annual corporate tax returns and financial
statements, maintaining separate bank accounts and recording
directors’ resolutions.
Retirement income for the incorporated physicianIf, while in practice, you take only dividends from your profes-
sional corporation, the income is not considered pensionable
for the purposes of making Canada Pension Plan (CPP) or
Quebec Pension Plan (QPP) contributions. This means you
won’t be making any CPP/QPP contributions on this income,
but you also won’t be eligible to receive CPP/QPP income in
retirement. Also, dividend income does not create contribution
room within your registered retirement savings plan (RRSP).
CONCLUSIONBased on the advantages and disadvantages discussed above,
incorporating can make the most sense for those individuals
who are able to retain significant funds within the corpora-
tion and where income splitting with family members is a
possibility.
However, it can be difficult to predict the benefits of
incorporation over the long term. Your circumstances can
change, as can tax laws, which might eliminate or diminish
the tax advantages of incorporation that are available
today. Conversely, changes in your circumstances or in tax
laws might make incorporation more beneficial.
Work with a financial advisor, who can ensure that you
remain compliant with relevant tax laws and can take
advantage of any new opportunities that may arise.
The information in this article is current as of December 5, 2015, and is for information purposes only. It is not intended to be used as direct invest-ment, legal or tax advice, nor is it intended to replace the advice of an independent investment, tax, accounting or legal professional. iS
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Investing basicsGreg Alexander, CFP®, Senior Financial Consultant A s a young physician, you might be wonder-
ing whether you should start investing right away. On one hand, if you have significant
student loan debt, you may feel pressure to pay it off first. On the other hand, you’re probably aware that physicians don’t generally have pension plans or other retirement benefits, so it may be wise to consider investing sooner rather than later.
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• A comprehensive financial plan,
including a well-diversified portfolio, is
key to helping you achieve your
financial goals.
• Work with a financial advisor
to develop a customized
plan for your future.
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The idea behind investing is fairly simple: make your money work
for you. You do this by investing in various products. The types of
investments you choose will depend on four main factors:
zz Your investment goals: What are you saving for?
zz Your time horizon: How long can you hold an asset?
zz Your risk capacity: How much risk can you afford to take?
zz Your risk tolerance: How much risk are you comfortable with?
BUILDING YOUR PORTFOLIOWhile there are many different investments to choose from, there
are five basic building blocks that typically make up a portfolio.
Cash and cash equivalents: These are short-term invest-
ments, such as treasury bills, money market funds and guaran teed
investment certificates (GICs). They’re generally the safest
type of investment, but tend to offer the lowest returns.
Bonds: With a bond, you are lending money to a government,
municipality, corporation, federal agency or other entity, known
as an issuer. The issuer gives you interest on your money and
eventually pays back the amount you lent out.
Stocks: When you buy stocks, or equities, in a company, you
become a part owner of the business, and you may receive a
portion of any profits that the company allocates to its owners
(i.e., dividends). If shares in the business rise in price, you bene-
fit from capital gains.
Mutual funds: These investment funds are operated by a com-
pany that pools money from various investors and then invests it
in stocks, bonds, money market securities and other types of
investments. These assets are managed by a professional money
manager, who selects securities based on a specific strategy.
Exchange-traded funds (ETFs): ETFs are similar to mutual
funds. The primary difference is that ETFs are traded on an
exchange, as are stocks. ETFs are a great way to access small
or niche markets, index investing or short-term trading.
Generally speaking, the returns for each of these investment
products are proportional to the underlying risks: a lower-risk
investment will provide relatively lower returns with less vol-
atility (or fluctuations in value over time). A higher-risk
investment may provide relatively higher returns, typically
with greater accompanying volatility.
DIVERSIFICATIONEnsuring that your investment portfolio includes a diversified
mix of assets can help you achieve your goals. Diversification
consists of choosing securities with different risk and return
characteristics, so that they will respond differently to the
same market conditions. This process reduces the overall level
of risk that your portfolio is exposed to and increases the
probability of achieving your financial goals within the time
horizon you have established.
Diversification is put into practice by allocating your funds
across asset classes. An effective asset allocation for achieving
a retirement goal in 30 years may be very different from the
asset allocation required to help save money to buy a new
house in eight years. This is why teaming with the right finan-
cial advisor is such an important component of a successful
wealth management plan.
COSTS OF INVESTINGKnowing the costs related to investing is important because
costs affect your financial returns. It is equally important to
understand the value you receive for these costs.
As a result of new regulatory requirements, various costs
will now be disclosed in account statements to help investors
gain a better understanding of the fees they are paying.
With respect to mutual funds and ETFs, the most impor-
tant fee to understand is the management expense ratio
(MER). MERs are calculated annually and paid out of a mutual
The MER includes the costs of professional investment man-
agement, trailing commissions (also known as trailer fees) paid to
financial advisors, administration costs and operating expenses.
In addition to the MER, if you are working with a financial
advisor to purchase mutual fund units, there may be upfront
costs to buy the units, or fees that must be paid if you sell the
units before a defined period of time has passed (typically five
years or more).
Alternatively, if you buy and sell individual stocks, ETFs and
bonds, the costs are typically in the form of commissions on
their purchase and sale.
When you are making your investment plans, it is impor-
tant to understand and plan for the costs you may face. Make
sure you have your questions answered before you proceed.
WORKING WITH A FINANCIAL ADVISORHow can a financial advisor help? Advisors typically have
tools that can help to identify your risk tolerance and risk
capacity. They can suggest an asset allocation that will help
you meet your objectives and help with monitoring your
financial plan to ensure your asset allocation is adjusted as
needed over time.
Your advisor will construct a portfolio for you that takes
into account the tax treatment of the various types of invest-
ment gains (including interest, dividends and capital gains)
you may receive.
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Protecting your lifestyleMarc Ranger, CFP®, CIM, Senior Financial Consultant H ave you ever thought about what would
happen to your family’s finances if an accident, illness or death interrupted your
career? While it’s not pleasant to think about, the risks are real. However, many of these risks can be managed with an effective strategy, using life and health insurance as risk-management tools.
FAST TRACK
• Three main types of insurance can
help secure quality of life for you and your
loved ones: disability, life and critical illness.
• There are two types of life insurance: permanent
and term. Permanent life insurance can play an
important role in your financial planning by
helping you secure quality of life for yourself and
your loved ones, providing you with the
flexibility to build estate wealth and
diversifying your assets in a tax-
efficient manner.
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Have you ever thought about what would happen to your
family’s finances if an accident, illness or death interrupted
your career? While it’s not pleasant to think about, the
risks are real. However, many of these risks can be man-
aged with an effective strategy, using life and health
insurance as risk-management tools.
There are three main types of insurance, outlined
below, to consider adding to your personal risk-manage-
ment strategy when you start your practice. These
distinct types of coverage can:
zz provide an income if an accident or illness prevents you
from working, whether over the short or long term;
zz leave a tax-free inheritance for your family to replace your
future income in the event of your death;
zz provide a significant tax-free lump sum if you are diag-
nosed with a serious illness that is covered by your policy.
DISABILITY INSURANCEGiven that physicians’ financial well-being can depend
significantly on their ability to earn an income, disability
insurance is likely the most important coverage that all
physicians should get, starting when they are new in
practice. In fact, statistically you are more likely to
become disabled during your working years than to die
prematurely.
Disability insurance provides you with a monthly
income benefit if you become disabled and are unable to
practise medicine as a result of an accident or illness
(even a temporary illness, such as a depressive episode or
recovery from surgery). This form of insurance assists you
to maintain your lifestyle by helping to cover your living
expenses and enabling you to keep making payments on
student or other loans—or even to contribute to a regis-
tered retirement savings plan (RRSP) or tax-free savings
account (TFSA).
The amount of income you need to replace, in the event
of a disability, should be based on your net income after
professional expenses, but before taxes. Disability benefits
are not taxable as long as the premiums are paid personally.
If you purchase disability insurance at the start of your
career, it is recommended that you choose an option that
is indexed for inflation and “own occupation” insurance.
Own occupation protects you in the event that you are
unable to work at your chosen profession, even if you are
able to perform other jobs.
Other types of disability insurance coverage pay an
income benefit only if you are unable to perform any job.
Physician-surgeons, in particular, need coverage that rec-
ognizes them as disabled if they lose the use of a hand or
finger.
Discussing your specific situation with your insurance and
financial advisors is essential when making decisions about
disability or other types of insurance.
LIFE INSURANCELife insurance gives your beneficiaries a tax-free payment,
called a death benefit, which can be used to pay immedi-
ate expenses that follow your death, such as funeral costs,
legal fees, estate liquidation and taxes. The death benefit
can also be used to pay off debts, such as your mortgage,
business loans and student loans.
The proceeds from the life insurance policy can also
maintain or supplement your family’s lifestyle by generating
a survivors’ income that can cover any long-term expenses
you may have in place, or replace your future income.
There are two types of life insurance — temporary (also
called term) and permanent. Over your lifetime, you may have
either type or both types of life insurance. That’s because
some planning needs may be short term or temporary in
nature, while others will focus on the longer term.
For instance, the coverage needed to pay off debts may
be temporary, but the need for future income replacement
may be permanent and may need to increase over time
because of inflation. As you progress through your career,
your life insurance needs may evolve and permanent life
insurance can be utilized as a valuable and tax-efficient
estate planning tool that is part of your financial plan.
The table below summarizes some of the differences
Term life insurance Permanent life insurance
• Provides coverage for a specific period, with premiums that are less expensive than premiums for permanent life insurance
• Does not accumulate any cash value
• Commonly has a coverage period of five, 10 or 20 years
• Some policies include provisions that allow you to convert to permanent lifetime coverage without having to prove that you are still in good health
• Some policies include provisions that allow you to renew for another coverage period of the same length, without having to prove that you are still in good health
• Most policies will terminate when the insured person reaches age 80 or 85
• Provides lifetime coverage, with premiums that are more expensive than premiums for term life insurance
• Premium deposits in excess of the insurance costs are invested and grow within the policy, on a tax-advantaged basis
• May offer premium deposit flexibility — depending on the product, you may be able to stop paying premiums on a predetermined date
• Forms part of a tax-efficient estate plan that provides a wide range of benefits for you, your family and your professional corporation
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between term and permanent life insurance. When you are
choosing coverage, it is important to accurately assess your
insurance needs and your financial goals, and to choose the
coverage that meets both.
CRITICAL ILLNESS INSURANCECritical illness insurance provides a lump sum payment if you
are diagnosed with one of the conditions covered by your pol-
icy. This type of policy generally covers cancer, heart attacks,
strokes and up to 25 other “catastrophic” illnesses, providing
you survive for a minimum period. That period is usually 30
days, though for some illnesses the survival period is 90 days.
The tax-free lump sum benefit you receive can help
finance your recovery, so you don’t have to change your
lifestyle. You can use the money as you please: to pay your
mortgage, pay down debt, pay for child care, adapt your
home in response to your illness, receive home care, seek
alternative medical care and/or even take a vacation to
recover from the stress of your illness.
INSURANCE TAILORED TO YOUR NEEDSMany provincial and territorial medical associations offer
insurance solutions developed exclusively for physicians.
These solutions have been designed specifically to add
financial value, meet the unique needs of physicians from
the start of medical school, and grow with your career.
Some independent insurance brokers also offer individual
disability insurance products on a volume basis, which
allows for some customization for medical students and
residents.
Whatever you choose, consider working with a certified
insurance advisor, as well as a financial advisor, to ensure
that you understand the benefits and costs of the options
available to you. As noted above, insurance available through
a provincial or territorial medical association can provide
you with cost-effective protection that can grow with your
career. Individual insurance can be added to this base to top
up your insurance protection and tailor it further to meet
your specific needs.
Northern Health welcomes newly licensed physicians! Receive up to $20,000 for signing on and $15,000 for relocation. Discover why physicians are choosing to develop their careers in our communities.
ü Lucrative rural incentivesü Innovative primary care modelsü Family friendly lifestyleü Affordable housingü Endless opportunities for outdoor recreation and adventure
For more informationCheck out: physicians.northernhealth.caContact Susan Kelly-Easton, Regional Manager of Physician Recruitment250-649-7244 or [email protected]
DIVERSE MEDICAL PRACTICE, OUTSTANDING LIFESTYLE
now this is living!
the northern way of caring
HRAD073
Seattle
now hiring• General Practitioners• Internists• Emergency Physicians• Dermatologists• Psychiatrists• Physiatrists• Anesthesiologist• Pediatricians• General Surgeons• Pathologists• Obstetrics/Gynecologists
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Professional liability protectionNick Farinaccio, Director, PTMA Relations and John Feeley, Vice-President, Member Relevance
Professional liability protection provides residents with assistance in the event of medico-legal difficulty. Most health care
institutions require that physicians and other reg-ulated health care professionals provide evidence of professional liability protection. The Canadian Medical Protective Association (CMPA) offers res-idents and licensed physicians medico-legal advice and assistance and, when appropriate, pays compensation to those patients proven to have been harmed by negligent medical care. CMPA also provides education aimed at helping physi-cians manage medico-legal risk in their practice and enhance patient safety. See CMPA’s website at www.cmpa-acpm.ca for articles, guides, and eLearning activities.
MEDICAL MALPRACTICE SUPPLEMENT CMPA generally assists members in the event of difficulties arising
in Canada as a result of professional work done in Canada. If you
expect to treat non-resident patients, either regularly or occasion-
ally, you are best advised to review the CMPA’s document entitled
“Treating non-residents of Canada” (weblink) which will explain
CMPA’s scope of assistance. Depending on your practice, you may
wish to pursue additional protection from a private insurer.
TAX TREATMENT OF CMPA MEMBERSHIP FEESThe annual membership fee paid to CMPA (less any reimburse-
ment from a provincial reimbursement or other program) is
deductible as an expense against the business income you earn
as a self-employed medical practitioner. The rules for a salaried
physician (such as a resident or Fellow) are more complex.
Consult your tax advisor to decide on the best approach for you. iSto
The CMPA determines membership fees based on your region and type of work (TOW). Select the type of work that most accurately reflects all your professional responsibilities. Fees by TOW code and fee region are listed on the reverse.
Work abroad (TOW)
Humanitarian work abroad — excluding the USA and all other countries where the U.S. legal system is applied, minimum period 3 months and maximum period 12 months. Members must confirm eligibility for assistance with the CMPA prior to leaving Canada. 8
Teaching/Research work abroad — excluding the USA and all other countries where the U.S. legal system is applied, minimum period 3 months and maximum period 12 months. No clinical or patient contact. Members must confirm eligibility for assistance with the CMPA prior to leaving Canada. 9
Postgraduate training (TOW)
Clinical fellows and physicians pursuing a structured university affiliated program not recognized by the College of Family Physicians of Canada (CFPC) or the Royal College of Physicians and Surgeons of Canada (RCPSC), or a provincial/territorial medical regulatory authority, with a maximum of 36 months.* 13
Residents who are registered in a program of postgraduate training recognized by the CFPC or the RCPSC, or a provincial or territorial medical regulatory authority. This code is also used by international medical graduates registered in a program to obtain a licence for independent practice.* 12
Residents who are registered in a program of postgraduate training recognized by the CFPC or the RCPSC, or a provincial or territorial medical regulatory authority. This code will include eligibility for CMPA assistance in medical-legal difficulties arising from independent practice of medicine outside of the program whether remunerated or not. With moonlighting. Residents who moonlight must hold licensure or registration acceptable to the regulatory authority (College) in the jurisdiction where the moolighting takes place. Residents who limit their clinical activities to moonlighting (e.g. locum) for more than two consecutive weeks must change to a practising physician code. 14
* This code includes extra resident shifts, but will not include CMPA assistance in medical-legal difficulties arising from independent practice of medicine outside the program whether remunerated or not. No moonlighting. Clinical fellows who moonlight must select the appropriate practising physician code, not code 14.
Specialties (in alphabetical order) (TOW)
Administrative medicine — Medical executive/Medical advisor/ Medical expert – no clinical or patient contact. 20Allergy 42 Anesthesiology 90Biochemistry — Medical 24Cardiology 70
Clinical associates and hospitalists — on a medical service (must not include CCU, ICU, NICU work or emergency department shifts or consultation as part of specialist services).* 31Clinical associates and hospitalists — on a surgical service. Includes assistance at surgery, pre/post-operative care (must not include labour and delivery, independent surgical practice, fracture care, CCU, ICU, NICU work or emergency department shifts or consultation as part of specialist services).* 32
* This code is not appropriate for specialists or family physicians who have a general practice. It is also not appropriate for physicians eligible for Resident code 12 or 14.
Critical/Intensive care medicine 53Dermatology 44 Diagnostic radiology 45 Emergency medicine — This code is also appropriate for family physicians or general practitioners who work primarily in the emergency department. 82Endocrinology and metabolism 46 Gastroenterology 47Genetics — Medical 48Geriatric medicine 27Gynecology/Obstetrics without labour, delivery or surgery, and restricted to office practice. Includes infertility treatments. 39Hematology 50Immunology — Clinical 42Infectious diseases 52Internal medicine and its subspecialties not elsewhere noted 54Microbiology — Medical 25Neonatal-perinatal medicine 66Nephrology 55Neurology 56Nuclear medicine 58
Obstetrics with or without gynecology 93Obstetrics/Gynecology without labour, delivery or surgery, and restricted to office practice. Includes infertility treatments. 39Occupational medicine 51
Oncology — Medical 59Oncology — Radiation 65Ophthalmology 60Pain medicine without general or spinal anaesthesia 38Palliative medicine 27
Pediatrics — primary professional work in pediatrics, may include shifts in emergency department. If work is restricted to developmental pediatrics, choose code 27. 61Physical medicine and rehabilitation 27 Psychiatry and addiction medicine — including general practitioners whose work is restricted to psychotherapy and/or addiction medicine. May include shifts in the emergency department of a psychiatric hospital. 36 Public Health and Preventative medicine (Community medicine) 28Respirology 62Rheumatology 63Sport medicine 64
Surgery — Assistance (no other professional work) 33Surgery — Cardiac 91Surgery — General 83Surgery — Gynecologic without labour and delivery. If work is restricted to office gynecology, choose code 39. 84Surgery — Neurosurgery 92Surgery — Orthopaedic 94Surgery — Head and neck (otolaryngology) including cosmetic procedures restricted to the head and neck. 77Surgery — Pediatric 85Surgery — Plastic 86Surgery — Thoracic 87Surgery — Vascular 89Surgical consultations/Office surgical practice. This code is also appropriate for physicians whose practice is restricted to minor cosmetic procedures. If work is restricted to office gynecology, choose 39. 37
Urology 88
Family medicine or General practice (TOW)
Family medicine or General practice (private office, CLSC, hospital or ward work, walk-in/urgent care clinic, home care, nursing home, or chronic/long-term care facility). Includes assistance at surgery. If work is restricted to one area of care, e.g. addiction medicine (psychiatry), geriatrics, hospitalist work, occupational medicine, palliative care, sport medicine, or psychotherapy (psychiatry), select the appropriate code from the Fee Schedule. If work is restricted to minor cosmetic procedures, choose code 37. These family practice codes are not appropriate for physicians who hold specialist certification and continue to perform clinical work in their specialty.
• Excluding anaesthesia, obstetrics (labour and delivery), shifts in the emergency department, and surgery 35
• Primary professional work in family medicine including shifts in the emergency department; if working primarily in the emergency department, choose code 82 73
• Including obstetrics (labour and delivery); also includes anaesthesia, surgery, and shifts in the emergency department 78
• Including anaesthesia and surgery; also includes shifts in the emergency department 79
UPDATED October 15, 2015
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2016 Type of work codes and fees by regionSelect the type of work (TOW) code (see reverse) that most accurately reflects all your professional responsibilities. If you have more than one type of work code and/or work in more than one fee region, please contact the CMPA for assistance with your selection.
ALL CMPA FEES ARE GST/HST EXEMPT. For Québec Region fees include a 9% applicable Québec tax. * Residents and Fellows usually join the CMPA for the academic year (July to June).
Type of workcodes
Québec Ontario British Columbia and AlbertaSaskatchewan, Manitoba, Atlantic and the Territories
