I am currently juggling accounts at six different banks because it is my understanding that each bank provides a maximum of $100,000 of Canada Deposit Insurance Corp. coverage. I have visited the CDIC website (cdic.ca) several times and remain confused. Question: If I have multiple accounts at a single CDIC-insured bank, does the $100,000 CDIC limit apply to each account or to total holdings at the same institution? My husband claims that he was told by his bank that it applies to each account, but that is not my understanding of how CDIC insurance works. Could you please clarify the situation for me? I can’t be the only person confused by the rules.
In the interest of promoting marital harmony, let me start by saying you’re both partly right.
The key thing to understand is that CDIC insures up to $100,000 for each deposit category at each institution. Because there are several deposit categories, a person could have much more than $100,000 at the same institution and still receive full CDIC coverage.
For example, registered retirement savings plans, tax-free savings accounts, registered education savings plans and non-registered chequing accounts are considered separate deposit categories, with each benefiting from its own $100,000 limit. Joint accounts held in more than one name are also a separate category, as are deposits held in trust.
So if you have, say, $300,000 in deposits spread across four or five different categories at the same institution, you could very well be able to stay under the $100,000 CDIC limit for each category. The same goes for your husband.
Keep in mind, however, that all non-registered accounts in one individual’s name at the same institution are treated as part of the same category. For example, if you have $50,000 in a chequing account, $40,000 in a non-registered savings account and $20,000 in non-registered guaranteed investment certificates at the same bank, you will be $10,000 over the combined $100,000 limit for non-registered deposits held in one name at the same bank.
The good news is that some financial institutions provide convenient ways for customers to stay under the $100,000 limit. For instance, many discount brokers offer multiple versions of their high-interest investment savings accounts (ISAs), each of which qualifies for its own $100,000 of CDIC coverage. BMO InvestorLine, for instance, offers ISAs from Bank of Montreal, Bank of Montreal Mortgage Corp. and BMO Trust Co. At TD Direct Investing, clients can choose ISAs from Toronto-Dominion Bank, TD Mortgage Corp., TD Pacific Mortgage Corp. or Canada Trust Co. These products make it easy to keep more of your money insured under the same roof, potentially eliminating the need to open accounts at separate institutions to avoid going over the $100,000 cap.
Juggling accounts at six banks sounds like a lot of work. Armed with a better understanding of CDIC’s rules and the savings options available, you may want to review your accounts to see if you need to keep all of them open. You might find that you can consolidate your holdings at fewer institutions and still benefit from full deposit insurance. If that’s not the case, then you’re doing the right thing by spreading your money around to make sure all of it is insured in the highly unlikely event that one of your financial institutions goes bust.
I have held A&W Revenue Royalties Income Fund units AW-UN-T in a non-registered account since 2008 and am sitting on an unrealized capital gain. Regarding the proposed merger of the royalty fund with A&W Food Services of Canada Inc., will exchanging my units for shares constitute a deemed disposition for capital-gains purposes? This was not addressed in the royalty fund’s news release or in your recent article.
Details about the tax treatment of the deal have not yet been disclosed. While it’s clear that a capital gain (or loss) would apply to any units redeemed for $37 in cash – which is one of the options available, subject to proration – the tax consequences of exchanging units for shares of the combined company haven’t been communicated.
But stay tuned.
“The tax matters will be part of the disclosure to unitholders in the circular and materials provided for the special meeting, and the company is mindful of not getting ahead of that disclosure with any selective communication,” said Trevor Zeck, a partner with FGS Longview, a public-relations firm working with the Vancouver-based burger chain, in an e-mail.
The royalty fund has said it plans to mail the management information circular to unitholders in September in advance of a special meeting to vote on the transaction, with closing expected in October if the deal is approved. The circular will also be posted on Sedar.com.
Canadian stock markets were closed on Monday, Aug. 5, for the Civic Holiday, while U.S. markets remained open. So how could the value of Canadian indexes change that day?
I don’t know what website you were viewing, but I can assure you that the S&P/TSX Composite Index did not change on Aug. 5. Perhaps you were looking at the index’s closing value from the previous Friday and assumed it was a live quote for the Monday. Whatever the case, you may have noticed that U.S. indexes surged higher Tuesday after plunging the previous day, but the S&P/TSX opened Tuesday sharply lower. That’s because Canadian markets were essentially playing catch-up after being closed Monday.
E-mail your questions to jheinzl@globeandmail.com. I’m not able to respond personally to e-mails but I choose certain questions to answer in my column.