Definition of Attribution Rules

Attribution Rules

Legislation under which interest, dividends, or capital gains earned on assets you transfer to your spouse will be treated as your own for tax purposes. Interest or dividends relating to property transferred to children under 18 also will be attributed back to you. The exception to this rule is that capital gains relating to property transferred to children under 18 will not be attributed back to you.

Income Splitting

This is a tax planning strategy of arranging for income to be transferred to family members who are in lower tax brackets than the one earning the income, thus reducing taxes. Even though attribution rules limit income splitting, there are still a number of legitimate ways to do so, such as through the use of spousal RRSPs.

Accrued Income

income that has been earned but not yet received. For instance, if you have a non-registered Guaranteed Investment Certificate (GIC), Mutual Fund or Segregated Equity Fund, growth accrues annually or semi-annually and is taxable annually even though the gain is only paid at maturity of your investment.

Life Income Fund

Commonly known as a LIF, this is one of the options available to locked in Registered Pension Plan (RPP) holders for income payout as opposed to Registered Retirement Savings Plan (RRSP) holders choice of payout through Registered Retirement income Funds (RRIF). A LIF must be converted to a unisex annuity by the time the holder reaches age 80.

Registered Retirement Income Fund (Canada)

Commonly referred to as a RRIF, this is one of the options available to RRSP holders to convert their tax sheltered savings into taxable income.

Gross Household Income

Gross household income is the total salary, wages, commissions and other assured income, before deductions, by all household members who are co-applicants for the mortgage.

Accrued Income

income that has been earned but not yet received. For instance, if you have a non-registered Guaranteed Investment Certificate (GIC), Mutual Fund or Segregated Equity Fund, growth accrues annually or semi-annually and is taxable annually Even though the gain is only paid at maturity of your investment.

Backdating

A procedure for making the effective date of a policy earlier than the application date. backdating is often used to make the age of the consumer at policy issue lower than it actually was in order to get a lower premium.

Back To Back Annuity

This term refers to the simultaneous issue of a life annuity with a non-guaranteed period and a guaranteed life insurance policy [usually whole life or term to 100]. The face value of the life insurance would be the same amount that was used to purchase the annuity. This combination of life annuity providing the highest payout of all types of annuities, along with a guaranteed life insurance policy allowed an uninsurable person to convert his/her RRSP into the best choice of annuity and guarantee that upon his/her death, the full value of the annuity would be paid tax free through the life insurance policy to his family members. However, in the early 1990's, the Federal tax authorities put a stop to the issuing of standard life rates to rated or uninsurable applicants. Insuring a life annuity in This manner is still an excellent way to provide guaranteed tax free funds to family members but the application for the annuity and the application for the life insurance are separate transactions and today, most likely conducted through two different insurance companies so that there is no suspicion of preferential treatment given to the life insurance application.

Compound Interest

Interest earned on an investment at periodic intervals and added to principal and previous Interest earned. Each time new Interest earned is calculated it is on a combined total of principal and previous Interest earned. Essentially, Interest is paid on top of Interest.

Contingent Owner

This is the person designated to become the new owner of a life insurance policy if the original owner dies before the life insured.

Dollar Cost Averaging

A way of smoothing out your investment deposits by investing regularly. Instead of making one large deposit a year into your RRSP, you make smaller regular monthly deposits. If you are buying units in a mutual fund or segregated equity fund, you would end up buying more units in the month that values were low and less units in the month that values were higher. By spreading out your purchases, you don't have to worry about buying at the right time.

Endowment

Life insurance payable to the policyholder, if living on the maturity date stated in the policy, or to a beneficiary if the insured dies before that date. For example, some Term to age 100 policies offer the option of taking the face amount of the policy as a cash payout at age 100 if the policyholder is still alive and paying all required income taxes on the amount received or leaving the policy to pay out upon death whereupon the payout is tax free.

Fiat Money

Fiat Money is paper currency made legal tender by law or fiat. It is not backed by gold or silver and is not necessarily redeemable in coin. This practice has had widespread use for about the last 70 years. If governments produce too much of it, there is a loss of confidence. Even so, governments print it routinely when they need it. The value of fiat money is dependent upon the performance of the economy of the country which issued it. Canada's currency falls into This category.

Incontestable Clause

This clause in regular life insurance policy provides for voiding the contract of insurance for up to two years from the date of issue of the coverage if the life insured has failed to disclose important information or if there has been a misrepresentation of a material fact which would have prEvented the coverage from being issued in the first place. After the end of two years from issue, a misrepresentation of smoking habits or age can still void or change the policy.

Insurable Interest

In England in the 1700's it was popular to bet on the date of death of certain prominent public figures. Anyone could buy life insurance on another's life, Even without their consent. Unfortunately, some died before it was their time, dispatched prematurely in order that the life insurance proceeds could be collected. In 1774, English Parliament passed a law which restricted the right to be a beneficiary on a life insurance contract to those who would suffer an economic loss when the life insured died. The law also provided that a person has an unlimited insurable Interest in his own life. It is still a legal stipulation that an insurance contract is not valid unless insurable Interest exists at the time the policy is issued. Life Insurance companies will not, however, issue unlimited amounts of coverage to an individual. The amount of life insurance which will be approved has to approximate the loss caused by the death of the individual and must not result in a windfall for the beneficiary.

Life Income Fund

Commonly known as a LIF, This is one of the options available to locked in Registered Pension Plan (RPP) holders for income payout as opposed to Registered Retirement Savings Plan (RRSP) holders choice of payout through Registered Retirement income Funds (RRIF). A LIF must be converted to a unisex annuity by the time the holder reaches age 80.

Living Will

This is a will which specifically expresses the testator's desire not to be kept alive on life support machines, should the occasion arise.

Money Laundering

This is the process by which "dirty money" generated by criminal activities is converted through legitimate businesses into assets that cannot be easily traced back to their illegal origins.

Non-Medical Limit

This is the maximum value of a policy that an insurance company will issue without the applicant taking a medical examination, although medical questions are invariably asked during the application process. When a non-medical issue is made through group insurance, in most cases, medical data is not requested at all.

Owner

This is the person who owns the insurance policy. It is usually the same person as the insured but it could be someone else who has the permission of the insured to be the owner, like a spouse, a common-law-spouse, an offspring, a parent, a corporation with insurable Interest or a business partner with insurable Interest. In order for someone else to be an owner of your policy, they have to have a legitimate insurable Interest in you.

Registered Retirement Income Fund (Canada)

Commonly referred to as a RRIF, This is one of the options available to RRSP holders to convert their tax sheltered savings into taxable income.

Rule of 72

This is a very important rule to know. The rule is that the number 72 divided by the rate of return of your investment equals the number of years it takes for your investment to double.
For example
* At 1% your money will double in 72 years.
* At 2% your money will double in 36 years.
* At 3% your money will double in 24 years.
* At 4% your money will double in 18 years.
* At 5% your money will double in 14.4 years.
* At 6% your money will double in 12 years.
* At 7% your money will double in 10.3 years.
* At 8% your money will double in 9 years.
* At 9% your money will double in 8 years.
* At 10% your money will double in 7.2 years.

Spousal Registered Retirement Savings Plan

This is an RRSP owned by the spouse of the person contributing to it. The contributor can direct up to 100% of eligible RRSP deposits into a spousal RRSP each and every year. Contributing to a spouses RRSP reduces the amount one can contribute to one's own RRSP, however, if the spouse is a lower income earner, it is an excellent way in which to split income for lower taxation in retirement years.

Split Dollar Life Insurance

The split dollar concept is usually associated with cash value life insurance where there is a death benefit and an accumulation of cash value. The basic premise is the sharing of the costs and benefits of a life insurance policy by two or more parties. Usually one party owns and pays for the insurance protection and the other owns and pays for the cash accumulation. there is no single way to structure a split dollar arrangement. The possible structures are limited only by the imagination of the parties involved.

Suicide Clause

Generally, a suicide clause in a regular life insurance policy provides for voiding the contract of insurance if the life insured commits suicide within two years of the date of issue of the coverage.

Underwriter

This could be the person (broker or agent) who helps you choose the proper type of life insurance or disability insurance and the insurance company for your particular needs. This could also be the person at the insurance company's head office who reviews your application for coverage to determine whether or not the insurance company will issue a policy to you.

Will

This is a legal document detailing how you want your assets to be distributed upon your death. you may also stipulate how you wish to be buried or who you would like to take care of any surviving dependent family members. In my opinion, it is very important to be quite specific about your wishes for the distribution of special assets such as the antique grandfather clock, the classic silver tea set or the antique piano. If you think that your beneficiaries may dispute how your things are to be distributed, consider stipulating that an auction be held in which all beneficiaries may bid on the item which they value and all moneys collected are then shared in the same manner in which you distributed your other liquid assets. your might want to remember that a will is automatically revoked upon marriage unless the will specifically states that the will is made in contemplation of marriage.

Canadian Life and Health Insurance Association (CLHIA)

An association of most of the life and health insurance companies in Canada that conducts research and compiles information about the life and health insurance industry in Canada.

Daily Interest Accumulation

Account in which Interest is accrued daily and credited to the account at the end of a specified time.

Estate Planning

An insurance program designed to provide funds for insured's dependents upon death of the insured, and to also conserve, as much as possible, the personal assets that the insured wants to bequeath to heirs.

Guaranteed Interest Annuity (GIA)

Interest bearing investment with fixed rate and term.

Guaranteed Interest Certificate (GIC)

Interest bearing investment with fixed rate and term.

Interest Option

one of several investment accounts in which your premiums may be invested within your life insurance policy.

Interest Rate

Rate charged or paid for the use of money, normally expressed as a percentage

Life Underwriter

Insurance Agent.

Personal Line of credit (Credit Insurance)

A bank's commitment to make loans to a borrower up to a specified maximum during a specific period, usually one year.

Policyowner

The person who owns and holds all rights under the policy, including the power to name and change beneficiaries, make a policy loan, assign the policy to a financial institution as collateral for a loan, withdraw funds or surrender the policy.

Underwriter

Person that uses various types of evidence to evaluate the insurability of a client.

Underwriting

Evaluating and classifying potential risk of a client.

Unearned Premium

Premiums paid for coverage not yet provided.

Whole Life

Component that provides life coverage during the insured's life.

Deed (Certificate of Ownership)

The document signed by the seller transferring ownership of the home to the purchaser. This document is then registered against the title to the property as evidence of the purchaser's ownership of the property.

Gross Household Income

Gross household income is the total salary, wages, commissions and other assured income, before deductions, by all household members who are co-applicants for the mortgage.

Holdback

An amount of money required to be withheld by the lender during the construction or renovation of a house to ensure that construction is satisfactorily completed at every stage.

Interest Rate Differential Amount (IRD)

An IRD amount is a compensation charge that may apply if you pay off your mortgage principal prior to the maturity date or pay the mortgage principal down beyond the prepayment privilege amount. The IRD amount is calculated on the amount being prepaid using an Interest rate equal to the difference between your existing mortgage Interest rate and the Interest rate that we can now charge when re-lending the funds for the remaining term of the mortgage. For more information, click on compensation amounts.

Earnest money

A deposit made by potential home buyers during negotiations with the seller. The sum shows a seller that a buyer is serious about purchasing the property. The money usually is counted toward the down payment.

Single-family home

A detached house.

Townhouse

one of a row of houses connected with common side walls.

Awning Windows

Single level windows that tilt outward and up.

Back Charge

Billings for work performed or costs incurred by one party that, in accordance with the agreement, should have been performed or incurred by the party to whom billed. owners bill back charges to general contractors, and general contractors bill back charges to subcontractors. Examples of back charges include charges for cleanup work or to repair something damaged by another subcontractor, such as a tub chip or broken window.

Backfill

The replacement of excavated earth into a trench around or against a basement or crawlspace foundation wall.

Backing

Frame lumber installed between the wall studs to give additional support for drywall or an interior trim related item, such as handrail brackets, cabinets, and towel bars. In This way, items are screwed and mounted into solid wood rather than weak drywall that may allow the item to break loose from the wall. Carpet backing holds the pile fabric in place.

Backout

Work the framing contractor does after the mechanical (heating, plumbing & electrical) subcontractors finish their phase of work at the rough stage prior to insulating to get the home ready for a municipal frame inspection. Generally, the framing contractor repairs anything disturbed by others and completes all framing necessary to pass a Rough Frame Inspection.

Bay Window

A window that projects outward in a curve.

Construction Documents

All drawings, specifications and addenda associated with a specific construction project.

Crown Molding

A molding used on cornice or wherever an interior angle is to be covered, especially at the roof and wall corner.

Dormer Windows

dormers are located on the second floor and project or extend out through the roof to provide window space.

Drive Under

A style of home where the garage is located in a basement.

Fuse

A device often found in older homes designed to prEvent overloads in electrical lines. See Circuit Breakers.

aterial used to cover the interior framed areas of walls and ceilings

Palladian Window

one larger window with a circle top window above and usually has two smaller, rectangular windows on each side.

Radius Window

A window with an arched top.

Soffit

The underside of the roof overhang or porch ceiling that covers the rafter bottoms. This horizontal surface usually has vents to allow air into the attic.

Sole Plate

See Bottom Plate.

Transom

A small hinged window directly above a door.

Walk Through

A final inspection of a home before "closing" to look for and document problems that need to be corrected.

Widow's Walk

A platform with a rail around it, built onto the roof of a house. The platform is accessible by stairs or a ladder from the interior of the house. See Plan #10433 for an example.

Window Buck

Square or rectangular box that is installed within a concrete foundation or block wall. A window will Eventually be installed in This "buck" during the siding stage of construction.

Window Sash

The operating or movable part of a window; the sash is made of window panes and their border.

Zone

The section of a building that is served by one heating or cooling loop because it has noticeably distinct heating or cooling needs. also, the section of property that will be watered from a lawn sprinkler system.

Zone Valve

A device, usually placed near the heater or cooler, which controls the flow of water or steam to parts of the building; it is controlled by a zone thermostat.

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