It is July 1, 2023, Jim and Pam Halpert have just left your office after their first

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It is July 1, 2023, Jim and Pam Halpert have just left your office after their first interview with you. In preparation for the interview, you had sent them a list of the various documents that they should bring in order to make the interview as efficient as possible and they had done so. As a result, you were able to gather almost all the information you need to prepare a comprehensive financial plan for them as of August 1^st, 2023.

During the discussion, you found out that your services had been recommended by a friend of the Halperts, who is one of your top clients. You realize that you will need to do your best work in order to keep an important client impressed with your financial planning services. The Halperts understand that you are a fully commission-based financial planner at Life & Legacy Planning Counsel Ltd. and you are able to sell securities and insurance products.

During the interview, Jim and Pam, who are in their mid 30's, talked at length about their one and only daughter Cece, who is 7 years old. As an only child, it is difficult for Jim and Pam not to spoil Cece. They wish they could spend more time with her, however both parents spend a great deal of time at work.

Fortunately, the private school that Cece attends runs a child care program after normal

school hours until 6 p.m. Jim and Pam switch as to which one picks up Cece from school. In the morning, Jim generally drops her off at 7:15 a.m. so that she can attend her morning swim class. Cece has really taken to the sport of swimming in the last couple of years and is expecting to participate in the provincial championships next year. Cece's coach mentioned to Jim at a recent swim meet that he could expect to spend about $4,500 a year in swim fees for Cece to continue to swim competitively. Jim had not kept track of the amount he had spent to date, but he was not surprised at the amount once he did a rough calculation of the cheques he had written over the past year.

Once Jim started thinking about the swim expenses, he started thinking about the other cheques he had written relating to Cece. There were the twice-a-year cheques he writes to the private school for $6,000 each. Then there was the monthly withdrawal from the joint chequing account that was put into a fixed income mutual fund for the future funding of Cece's university education. A friend had told him he should buy some mutual funds in an "in-trust" account and put it under Cece's Social Insurance Number. By doing so, he was told the income would be Cece's. Jim set up the account a little over FIVE years ago and contributes $550 a month to the account. As of the last statement from the mutual fund company, the mutual funds were worth about $35,000. When you asked him why he chose a bank fixed income mutual fund he told you that the account at the bank was easy to set up and that he liked bonds because they do not go up and down in price like stocks.

The return on the funds has been 2.0% according to the most recent statements that Jim has looked at and he does not expect the rate to change very much in the future. Jim expects Cece to go to a prestigious US university and wants to be able to have about $35,000 Canadian in today's dollars to give to Cece for each of the expected four years she will attend university. Although they believe inflation has been running in the 1.5 % to 2.5% range, Jim has heard that education costs have been escalating at about 6% and would like you to use that rate in calculating whether he is saving enough.

The main reason the Halperts came to meet you was to ask for your opinion on what they should do with a $50,000 inheritance that Pam had just received from a great aunt's estate. The money was unexpected since Pam did not know that she was included in her aunt's will. They have asked you what alternatives are available for investment, and the pro and cons of each alternative. Pam mentioned that she had heard that for Ontario's Family Law purposes that it is best to keep the funds separate because they would not be included in the net family property value calculation. She therefore asked you to consider only options where the funds would not be co-mingled with funds from Jim.

During the one and a half hour meeting, you found out that Jim is age 36 and is a national sales manager at a specialty electronics company. His current remuneration is an annual salary of $110,000 plus a benefits package. The package includes group health coverage, group life insurance equal to two times his salary, dental coverage with a yearly maximum of $1 000, 100% short-term (3-months) and 50% long-term disability insurance coverage of his salary and a pension plan. Both he and his employer contribute to the pension plan. Jim said he did not understand exactly how his pension plan worked especially since the pension plan ocumentation would not state what his final pension would be even though he knew exactly how much he was contributing each year. In fact, he said he was not overly concerned since he expected not to work with the same company until he retires at age 62. He said given what was happening in the industry, he expected to work with two more companies before then. He provided you with a copy of his most recent group RRSP statement. It showed that he and his employer each contributed $2,000 to the plan annually into a balanced mutual fund selected by Jim. The fund has had an average rate of return, over the past five years, of 5.5%. The current value of Jim's group RRSP is $11,500.

Pam is a Vice President of Marketing at a medium-size labour-sponsored venture capital corporation. She thinks that she has done well considering she is only 35. She hopes to retire at the same time as Jim. Her salary is $100,000 for the year. She is registered as a spouse on Jim's benefit package at his work as she has no benefits at work other than a group RRSP. She contributes $500 a month to the group RRSP (invested in a short-term bond fund) matched by $250 from her employer. She only started contributing to the group RRSP last month, so it is currently worth $750. She had hesitated starting contributions to the plan because she does not understand the difference between her group RRSP, Jim's pension plan and the type of plan her sister has through her employer. Her sister Brittany has a registered pension plan to which only her employer contributes. Brittany will receive 2% per year she works with her employer times the average of her final three year's salary. You made a note to include a discussion on the various employer retirement pensions in the retirement planning section of the financial plan. From the Halperts' paystubs, you noted that Jim had about $35,000 in payroll deduction and Pam about $32,000 (these deductions do NOT include their payments to group RRSPs).

The Halperts last visited a lawyer to have their wills prepared shortly after Cece was born. Pam thought that it might be time to review the wills again, and has asked you to provide a list of any special clauses that should be included in their wills. No powers of attorney are in place and the Halperts do not seem to understand the importance of these documents. You think that it would be a good idea to explain the difference between a will and a power of attorney, and why it is important to have both documents in place.

While talking about estate planning, Pam indicated that they are very active in their church and she would like to donate $100 000 to the church at her death. She asked you for recommendations on how this can be accomplished. This would be in addition to the $3,000 a year she donates for various causes sponsored by the church. Jim and Pam assume that their estates at their expected ages of death (Jim 88; Pam 92) will be sufficiently large to handle the bequest to the church and leave the cottage for Cece. They are not concerned about leaving any specific amount (except the cottage itself) to Cece on the assumption that she will be in her 50's and should be self-sufficient by then.

The Halperts have not really analyzed their investments before. In the past, they have invested mainly by word of mouth from friends. As a result, they have a mix of various investments. Jim for instance bought $5,000 worth of gold mining stock two years ago from a broker who called him at home one night. He was not sure of its worth today, but believes it might be worth only about $1,000. Pam had invested in government bonds in the past and her bonds are now worth about $8,350.

Besides the inheritance money in Pam's savings account, there is $12,000 in the joint bank account. Their joint investment account at the bank's discount brokerage has $87,000 in it comprised of $28,500 in money market mutual funds, and the other $58,500 in various investments consisting of $10,000 of a Latin American equity mutual fund (original cost $17,500), $40,000 CDN in a US equity index mutual fund (original cost $28,000 CDN) and $8,500 of a labour sponsored venture capital corporation (original cost $8,500).

Pam is wondering if they should sell these investments to pay down some of the mortgage, but is not sure of the tax consequences involved in this strategy. The last time Jim and Pam visited their bank branch, they were convinced to arrange for a $10,000 unsecured line of credit with an interest rate of prime + 4%. Prime is currently 2.5%. They were told that it was important for all homeowners to have a line of credit in case of emergencies. Jim has found it convenient to use the line of credit to purchase items when the credit card limit is reached. At the interview, Jim stated that his credit card limit of $7,000 was maxed out and they had further debt from using $7,500 from the line of credit. Pam simply shook her head at that point in time during the interview and commented that they usually payoff only the bare minimum on both paying about $300/month total.

In addition to the house, the Halperts own a nice recreation property with a cottage on it. Jim inherited the cottage from his aunt who passed away three years ago. He estimates that the cottage is currently worth about $550,000 and was worth about $450,000 when he inherited it. He believes that due to the demand that aging baby boomers will put on recreation properties, the cottage will escalate in value at a rate of at least 12% per year. Both parents want Cece to inherit the cottage.

Jim provided you with the following estimated costs of maintaining the cottage:

Cottage Maintenance
Property Taxes	200/mos
Insurance	550/yr
Utilities	750/yr
Repairs & Maintenance	1,200/yr
Miscellaneous cottage/boat Expenses	700/yr

Other expenses that Pam and Jim have include the following:

Lifestyle Expenses
Food	6,000 /yr
Dry-cleaning	60/mos
Auto Insurance	1,900/yr

Gas	300/mos
Auto repairs & Maintenance	100/mos
Cable TV	75/mos
Property Taxes	3,600/yr
Home Phone	50/mos
Cell Phones	175/mos
House Repairs, Maintenance & Landscaping	1,500/yr
Personal Care	150/mos
Entertainment	325/mos
Utilities (house)	225/mos
Clothing	5,000/yr
Gifts	2,400/yr

The Halperts like to take a vacation together as a family to more exotic locations once a year. Last year they went to China for two weeks and the year before they had gone to Costa Rica. They felt it created a bond among the three of them. It also made up for when they could not go away the first few years after Cece's birth. The trips for the three of them usually averaged about $15,000 once the airfares and packaged tour costs were included.

Jim's marriage to Pam is his second one. He has two children aged 12 and 14 with his first wife, Karen. Karen has sole physical custody of the children, although Jim and Karen share joint-legal custody. Jim pays $1,200 per month for child support. The support is to continue until each child reaches 18, or 25 if they both pursue post-secondary education. Jim's ex. Wife has recently remarried and is wondering if he could get his support payments lowered if he went back to the court.

Neither Jim nor Pam believes the government is managing its money properly and they do not expect that any government social safety net will be available to them when they retire. They would prefer not having retirement benefits such as Canada Pension Plan and Old Age Security included in their retirement forecasts.

The cars the Halperts own are always new since they trade the vehicles in every three or four years. They tend to trade them in as the new car warranty is about to expire which is typically at about 100,000 km. The vehicle Jim usually drives is a Range Rover sport utility truck which cost $75,000 two years ago and worth about $50,000 today. The second vehicle, which Pam drives is a three-year-old Acura TL worth about $27,000 today. The outstanding loan on the truck at 5% is $22,000 and the loan on the TL is $6,000 at 6%. The monthly loan payments on the truck are about $800 and the loan payments on the car are about $500.

During the interview, you suspect that Jim would be more willing to take investment risks, than Pam. Pam appears to be more moderate, or even conservative in her willingness to seek risk. You know that you will have to conduct a risk profile analysis to determine if the Halperts have the capacity for risk, regardless of their willingness. The Halperts however, (according to Jim), believe that they can earn an 8% return on their RRSPs and non-RRSP investments. You believe a discussion concerning current returns is necessary given that the Halpert's expectations may be a little unrealistic.

The Halpert family is happy in their home, which they purchased a little over two years ago. It is registered in both of their names. They estimate that the house is worth $550,000 now (they paid about $400,000 for it). The original mortgage 2 years ago was $200 000 and their monthly mortgage payment is $1,187 (5.2% @ 25years original amortization, 5-year term). The Halperts are happy that mortgage rates are reasonable since their mortgage is coming up for renewal in 3 years. They do not want to see their interest rate increase, in fact Pam would prefer to see it decrease if at all possible. The bank also insisted there be life insurance on the house before the mortgage received approval, so Jim arranged some when they closed the deal but is not sure what coverage they have.

After examination of their RRSP investments, it appears that Jim and Pam have similar investment risk profiles in their RRSPs. You noted that this may be in conflict as their risk profiles are likely different. A possible answer for this, is that Jim usually purchases the RRSPs for both of them near the March 1^st deadline each year. He uses funds from the joint account. Jim typically makes these investment decisions based on what he finds most attractive from a potential return perspective and also what he considers the options that are the easiest to buy. Currently their RRSP holdings are:

RRSP Holdings	Jim	Pam
RRSP - GIC/fixed term	8 000	4 500
RRSP - Bond mutual Funds	5 000	9 500

A friend of Jim's asked him if he and Pam "maximize" their RRSP contributions each year, and Jim said yes, but he told you that he is actually uncertain as he is not sure what the maximum was. Jim has asked that you explain to him how to calculate their annual maximum RRSP contribution limit so he actually knows if he and Leslie are "maximizing".

As it relates to planning assumptions, Jim and Pam agreed with your suggestion that any projections or calculations be based on a 2.1% inflation rate (as per the FP Canada 2023 Guidelines).

Thoroughly read the Case Study for Jim and Pam Halpert and complete the following.

Provide a discussion and recommendations regarding CI protection, including:

• Current situation (what happens currently if one or both clients suffers a CI))

• What would you recommend they change?