Tag Archives: non-registered accounts

How to Buy a GIC at BMO InvestorLine with the New (2015) Fixed Income Investment Screens

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When one of the GICs in my children’s RESP matured recently, I decided to re-invest the money in a new 1-year-term GIC. Since the last time I bought a GIC, BMO InvestorLine has re-designed their fixed income investment screens so the procedure has changed: here’s how I bought the guaranteed investment certificate.

Buying a Guaranteed Investment Certificate at BMO InvestorLine

  1. Sign in to your InvestorLine account.
  2. From the drop-down list at the right side of the screen, make sure you are looking at the information for the account within which you want to buy the GIC. For example, I made sure it was our RESP account, not my RRSP account.
  3. Hover the cursor on the Trading tab and from the list, click on Fixed Income.
  4. Click on the blue View GIC Offerings button.

GIC Offerings Page

The GIC Offerings screen has become much more complicated. Down the left side of the screen are the choices:

  • Quick Picks
  • Cashable
  • 1 year
  • 2 years
  • 3 years
  • 4 years
  • 5 years

And across the top of the data are tabs for:

  • Annual Pay
  • Compound
  • Semi-annual Pay
  • Monthly Pay

I wanted to buy a 1-year annual pay GIC, so from the list on the left side of the screen, I clicked on the 1 year box, then clicked on the Annual Pay tab.

Although I had not requested to see Cashable GICs, I notice three BMO cashable GIC products lead the list. All the other listed GICs are N/A for Cashable. In other words, they cannot be cashed before maturity.

Fortunately, BMO InvestorLine still lists the GICs in order from highest paying to lowest (if I ignore the BMO cashable products.)

Click on the name of the company offering the rate you want. For example, I clicked on Home Trust Co.

GIC Order Entry Page

The familiar GIC Order Entry screen opens.

  1. In the Amount box, type how much you want to invest in this GIC with a minimum purchase of $5000 in a RESP.
  2. Ensure the interest rate and payment terms you want are the ones beside the selected radio button.
  3. In the Daytime Phone Number box, type where you can be reached.
  4. Click on the button: Review Order
  5. Read the disclosure statement that warns you that BMO InvestorLine gets a commission from the sale. (You do not pay this separately. It is built into the lower interest rate you are getting for the GIC. So you will get the interest rate advertised and they will get some $$$ from the vendor.)
  6. Click on the Continue button if that’s ok.

The GIC Order Review Page

  1. Review the details of your request.
  2. If it all looks good,
    Type your trading password in the field: Please enter your trading password to submit this order:
  3. Click on the button: Submit Order

GIC Order Confirmation Page

Make a note in a secure location of the Order Reference Number in case of any problems.

As usual, your Cash Balance does NOT immediately reflect your purchase.

You’re done!

Does the New BMO InvestorLine Fixed Income Process Work Better for GICs Than the Old One?

Personally, I didn’t find it any easier. In fact, it took a few more clicks to get started with the purchase. It does look prettier, though. I’m glad they still show the GIC interest rates in the useful format of highest to lowest with no required clicks.

Overall, I’d rate the change as neutral, neither better nor worse, for GICs.

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Do you buy GICs in your RESP to keep the cash safe during the last few years before the educational institute gets it all? Please share your strategy with a comment.

Who Should I Name as the Beneficiary for my Non-Registered Investment Accounts?

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We only opened our first non-registered investment brokerage account recently. So I was interested to read some advice on naming the beneficiary for non-registered investment accounts in the book “How to Eat an Elephant” by Frank Wiginton. His comment made me do some further reading about the issue of non-registered investments and beneficiaries.

Who did Frank Wiginton Recommend We Name as the Beneficiary?

In the book, he recommended you and your investment team consider naming your minor child or children the beneficiary/ies of your non-registered investments: and naming your spouse as the trustee.

Why?

This approach allows the income generated by the assets to be taxed in the children’s hands and also in the “hands” of the trust, which could reduce the overall taxes to be paid on those assets. If the spouse is the direct beneficiary, he or she will be adding the income to their possibly already higher income resulting in more tax being paid.

What Can Go Wrong If I Name My Young Child at the Beneficiary?

If you do choose to go this route, you’ll want to talk to a taxation accountant and a lawyer. It’s important to get it right!

According to Manulife Investments in Wealth Transfer Mistakes, “once a minor reaches the age of majority, he or she will be entitled to the funds, without any restrictions.”
Remember what you were like at 18? Are you sure you want to hand your child a chunk of change at that age?

Also, the funds could get tied up in court or held by a Public Trustee if you do it wrong. You’ll want to “establish a trust to receive the funds on behalf of the minor.” That trust can have conditions on how the funds should be invested and when they should be paid out.

What About Probate Fees?

While reading an article called A Matter of Trust on the Fiscal Agents website, I found an interesting line: “If investments held in-trust for a child represent amounts legally transferred from an adult to a child, they do not form part of a deceased adult’s estate, thus avoiding probate fees.”

That suggests that it might be possible to avoid probate fees but only if the non-registered account is held in trust for the minor child *before* the person dies, not after. I suppose, grim though it may sound, if someone has a life-threatening illness, they might want to consider moving assets into a trust account for the child while they are still alive.

Obviously, you’d want to investigate the details of this option with your tax accountant and lawyer before taking any steps.

Does Naming a Minor the Beneficiary Make Sense for Small Accounts?

In our case, our non-registered account is small: so we opened it as a joint account with rights of survivorship. It isn’t cost effective to set up a trust at this point. But, hey, if our shares suddenly all triple in value, maybe it will be worth consulting professionals about it.

There are costs involved in creating a formal trust. There’s an initial cost for the time spent by the lawyer and accountant. But there are also ongoing costs as “formal trusts are required to file annual tax and information returns.”

So for us, this option will go on the “to be considered later” list. We don’t need a trust at this stage but who knows what the future might bring?

Related Reading

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Have you set up a tax-minimizing strategy for your accounts if you should die while your children are still minors? Please share your views with a comment.