Our Monthly Newsletters

How to delicately cover your assets

As some of you may know, I have a great love of music and a terrible sense of humour. It may come as no surprise then that I’m a huge Monty Python fan. One of my all time favourite short movies is Romance with a Double Bass, from 1974, starting John Cleese and his then-wife Connie Booth. The movie is based on an Antoine Chekhov short story about a rather hapless double bass player from the royal court and the princess who both find themselves accidentally skinny dipping. Much wonderful comedy occurs in their attempt to sneak the princess back into the castle inside a double bass case with her dignity still (mainly) intact.

If you’ve never seen this charming movie you should check it out – but be warned, it includes plot-driven nudity and far more of John Cleese than you’ve ever seen (or may want to see).

Keep your fiscal pants from falling down

Unfortunately, salvaging your finances doesn’t involve much hilarity, nor something as simple a double bass case. What it does absolutely require, however, is up-to-date powers of attorney (POA). Unlike a will, POAs are for when “you aren’t dead yet,” but otherwise incapable or unable to make decisions on your own behalf.

In Ontario, there are two types of POAs – one for property (which includes your financial affairs) and another for healthcare. Each is a separate document, and it’s absolutely vital you have these in place. Rather than talking to the specifics of each of these documents, I want to highlight some lessons around the practical uses of POAs that I’ve learned as a financial planner over the years.


  • Make sure it’s accessible 

    As obvious as this sounds, this is actually the most important thing I can tell you. Make sure your powers of attorney know where to get copies of your POAs. I once worked with a family where the mother had locked these documents in a safety deposit box, but the bank branch had closed years before and no one had any idea how to track them down. Eventually the court had to be involved to appoint a family member to look after their mom’s affairs.

  • Where healthcare is involved, you most likely should say “or” not “and” with joint attorneys 

    I recently attended a talk by Dr. Natalie Hertzman, Medical Director of St. Joseph’s Hospice here in London. She strongly emphasized to the crowd that in her experience, many medical situations require immediate decisions. As a palliative care doctor, she has had situations where they were unable to get confirmation from both appointed joint POAs in a timely fashion, leading to compromises in the medical care of the family member. If your healthcare POA says “John and Susan,” the doctors must get consent from both POAs before any action can be taken – and if John isn’t available, Susan has no authority. On the other hand, if it says “John or Susan” then either John or Susan can give instructions and the doctors can act immediately.

  • Family members have no right to financial information just because they’re family

If we have one constant issue with POA situations in our office, it’s that most people assume that if they’re immediate family, they’re entitled to information. This isn’t true – if you’re over the age of majority no one can act on your behalf or gain information to your accounts unless you have made them your POA for property or a court has granted them authority.

As a financial planner, some of the most uncomfortable conversations I’ve had are about this topic. Part of the confusion comes from the fact that for healthcare, in the absence of a POA, family does have some legal right to make decisions, but the same does not hold true for finances.


  • Sometimes, family is not the best choice for POA 

    Sometimes it’s not the best idea to make a family member a POA. Take for instance a business owner. In my case, my wife is the POA for my personal financial affairs, but I have a corporate POA appointed for my ownership interest in Quiet Legacy. Why? The business has regulatory and other requirements that would chew up a lot of Bridget’s time to get up to speed on, as her primary occupation is as a teacher. I’m comfortable appointing a trust company to handle my business interests, as they have staff who are trained on corporate rules and responsibilities. It’s way easier and more efficient to delegate this task to them. I’ve made provisions that if activated, they do need to consult with Bridget and honour her wishes when possible, but the legal responsibility falls to them, not her.

At the end of the day, you don’t want to be caught with your financial pants down, hiding behind a double bass. Make sure you check that your POA is up to date and effective for your circumstances. If you do, then you’ll always look on the bright side of life!

This information is general in nature, and is intended for informational purposes only.  For specific situations you should consult the appropriate legal, accounting or tax advisor.

Five easy ways to destroy your wealth, and leave your estate with less.

Believe it or not I’m an optimist – but sometimes it’s good to look at the dark side to figure out how not to end up in a bad place! This month I’m going to talk about the many ways I see people destroying their wealth.

  • Accumulating too much in your RRSP/RRIF

It sounds wrong, but one of the biggest tax traps in Canada lies in wait for those who are too good at saving. Due to quirks of the income tax rules, having too much money in your registered retirement income fund (RRIF) or registered retirement savings plan (RRSP) in your later years can come back to haunt you. Most commonly, chronic savers end up with their estate in the highest tax bracket in Ontario (53.5%) because every dollar in your RRIF or RRSP is counted in your income in your year of death. While you can roll your RRSP or RRIF to your spouse tax-free if they survive you, eventually, the piper comes calling from Ottawa. Ironically, I often see scenarios where the taxes generated in the estate are substantially higher than the taxes saved in the first place.

The second RRSP/RRIF tax trap happens at the time of the first spouse’s death. The surviving spouse often finds themselves thrown into Old Age Security (OAS) clawback status, as their RRIF minimum on the combined total pushes their now individual income over the clawback threshold of $76,910 in income. This can come as a surprise for folks who, when their spouse was alive, were able to income split and stay well below this threshold.

How to avoid:

Consider using excess RRSP funds to make charitable contributions. This helps drain the RRSP over time in a tax-effective way. In December of 2016, I wrote an article on a strategy involving an insurance gift to charity paid for by RRSP holdings, in which we were able to gift $400,000 at a net estate cost of $1300 to one of our clients.

2) Designating the kids as joint owners of assets (like a house) to avoid probate.

Fifteen years ago, I worked with clients whose mom had, after a conversation at her bridge game, decided it was a good idea to jointly register her house (a capital gains exempt asset) with her kids at the bottom of the Toronto housing market. Fifteen years later when mom sold the house, the family found out this resulted in capital gains assessments to her two children who did not live in the house. The net result was $75,000 in income tax between the two kids. All this to save $1800 in probate fees!

Never put someone on the title on your primary residence unless they live there too. For you its tax exempt – for them, it’s a secondary property and subject to capital gains.

Similar issues can arise if you jointly register your non-registered assets like Guaranteed Investment Certificates (GICs) and bank accounts with your children. While this can sometimes work, it can also create issues.

First, changing the ownership can trigger a disposition for tax purposes. Second, a number of Supreme Court rulings over the past 10 years have made this a bit of a legal “grey area” for estate purposes.

How to avoid:

If it’s a house, it’s almost always best if only the people who reside in the house are on the title. Non-registered accounts are often better handled through the use of an insurance-based GIC or segregated fund, where a beneficiary is named. These products, unlike their non-insurance equivalents, will bypass probate, without any of the legal grey areas of joint tenancy.

  • Trying to make a fast buck because of a hot stock tip


For whatever reason, human nature is often run by the fear of missing out (FOMO).  As you have likely seen, marijuana stocks, and cryptocurrencies have been dominating news headlines for the last few months. Some people have made a pile of quick and “easy” money, and started telling their friends. More recently, many people have been wiped out as the valuations on these “investments” have had huge swings. I have a hard time understanding how a company  with no sales can be valued higher than the largest breweries in the world, or how a currency created by computer can be considered more valuable than those backed by governments.

How to avoid:


Don’t go there. Seriously. If you still feel the urge, go buy a copy of Niall Ferguson’s book, The Ascent of Money, which is an engaging read through nearly 1500 years of financial market history, covering other “hot tip” time periods, such as the great tulip bubble of the 1600s. You will learn very quickly the human race has had centuries of hot tips leading to nasty results!


  • Waiting too long to implement smart estate strategies

There are many reasons people put off estate planning but it usually comes with a large cost. With a long enough timeframe, you can make significant changes that save you a pile of taxes on your estate.

One key timeframe is age range of 60-65. Many people have significant assets at this point in life, much of which is tied up in RRIFs or RRSPs. As you might recall from Point #1, this is not necessarily ideal.  Since OAS (and OAS clawback) kicks in at age 65, and you must start withdrawals at 72, many times we can reduce your RRSP holdings gradually between 60-65 with minimal tax implications. If your RRSP is large by age 72, your marginal tax rate may jump significantly, counteracting the benefits of your years of saving.

Additionally, we use insurance to help offset estate taxation, either directly by naming your heirs as beneficiaries of the tax-free payout, or indirectly by naming a charity, and having the estate use the tax receipt generated at the time of death. Ideally, you should set this up between ages 40-60. While this strategy is still feasible later in life, often the costs and potential health issues make this far more costly than starting while young.

People often view insurance premiums as an expense, not a smart investment in the future. Done right, these strategies can leave your family in a significantly improved financial position once you’re gone.

How to avoid:

Start having planning work done as soon as possible and don’t procrastinate. Every year you wait makes it slightly more difficult.

Alas, the greatest destroyer of wealth we see is divorce. No matter your age, the emotional and financial costs associated with divorce take a heavy toll. Aside from the adage of “choose your spouse well,” the best you can do if you find yourself in a divorce situation is to mitigate the costs.

How to mitigate:

Collaborative divorce is a growing trend, and we have seen it rising in popularity. The collaborative divorce process is designed to lead to more positive financial outcomes than the traditional method, by attempting to bypass the litigation often involved in divorce. This leads to (hopefully) lower legal costs.  At the heart of the process is the concept that both parties agree to aim for the best mutually-beneficial outcome, rather than favouring one side over the other. More information can be found at:  http://www.oclf.ca/


This information is general in nature, and is intended for informational purposes only.  For specific situations you should consult the appropriate legal, accounting or tax advisor.


Pirates, ghosts, and life insurance

As we’ve discussed a number of times, most likely it’s going to suck to be dead. And while there isn’t too much you can do other than deferring that reality, fortunately, there’s a lot you can do to mitigate the financial effects. (Not for you, mind you. You’re not going to need money where you’re going.)

The concept of life insurance largely predates what we think of as modern society. As early as 5,000 BC, sailing ships in China came up with the idea of protecting one another from pirates at sea using shared risk for their cargos. The idea was if pirates slaughtered a crew for its cargo, at least some of the assets being shipped would make it to port via another vessel.  Good for the business, but maybe not so much for the family of the poor sailors. We need to go forward another five millennia to find a better example of life insurance that leaves the surviving family members in a better place.

The burial club…for military men

The modern concept of life insurance seems to date back to about 100 BC, in Rome, where Caius Marius created a “burial club” for his troops, where everyone pitched in to pay for the funeral costs of fellow troops, and provide a stipend to surviving family. This was driven by a concern that Romans not buried with proper funeral rites would come back as ghosts and angrily haunt their friends and family.

It probably wasn’t hard to get the troops to buy in to this plan. We’ve all worked with someone who we really, definitely don’t want to be working with for eternity. Still, I don’t know about you, but I for one am glad that workplace clubs have gotten a bit more “positive” in nature over the last two millennia!

Life insurance today

While rules around insurance have changed a lot in the last 2000+ years, the basic concept has remained: you die, someone else gets money. Here in Canada, the key piece of this is that the government treats inheriting insurance money as a tax-free payout, hence the power and purpose of using life insurance for planning your estate. If you stop to think about it, relatively few assets are subject to zero tax in Canada: Your principal residence, your tax free savings account, and that, quite frankly, is about it. Everything else you might own has some kind of tax consequence. That leaves us with a lot of neat and interesting options.

(Still, it sucks to be dead. I suppose that goes without saying.)

Ryan’s top three reasons to have insurance as part of your estate plans

  • Replacement of lost income, or a guarantee there will be money for your beneficiaries.

There is absolutely no way to know how much money you’ll have when the grim reaper comes knock-knock-knockin’ at your door. As much as you have money today, you might not have any when the doorbell-of-doom rings and a guy with a cowl and scythe comes looking for you. Insurance will ensure (See what I did there?!)  that your family has funds no matter what.

This is particularly important for families where there are young dependants, or situations where you’re providing for someone else. It’s especially important if you have a family member with a special need or disability, and funds absolutely must be in place for their protection.

  • It’s often a cheaper way to pay the tax on your estate.

We often set up policies that pay taxes that come due on the death of the second spouse. In many cases, especially the younger you start, the insurance may be a lower cost-per-dollar to cover tax costs than actually paying the eventual tax bill itself.

These taxes most often arise from your RRSP, RRIF, defined contribution pension plan, or taxable capital gains (from investments, secondary properties, business assets, etc.), all of which get added to your income in your year of death. For many people this can be a very substantial amount of money.

As a quick proxy, add up all of your registered money in RRIFs, RRSPs and defined contribution pensions, as well as one half of the capital gains of your non-registered investments. Now, divide that number in half. That will give you a pretty close approximation of your worst-case tax owing on your estate in most provinces.

(You can take this strategy a step further, and use the insurance proceeds as a charitable gift as well, but that’s an article for a whole other day.)

  • If you have a corporation which holds significant passive investment assets, life insurance can be an extremely tax-efficient way to transfer funds out of your company, through your estate, tax free to beneficiaries.Under the current small-business rules, the insurance grows tax-free in your corporation, and eventually will pay out tax-free via your capital dividend account. It also helps to avoid some double-taxation traps on transfers of private companies. While the recent tax proposals might have an effect on this, at the moment, from what we know, this appears to continue to be a valid and viable planning strategy, and not affected by the proposed changes to date.One immensely important thing: generally, the beneficiary of your corporate owned-insurance policies should almost always be the corporation, not your family or any other beneficiary. If you don’t follow this rule, the tax consequences can be very, very severe.

Choosing the right type of life insurance

There are a whole pile of different types of insurance you can use, but for most estate planning purposes, it’s important to choose something that will last as long as you do. That usually means one of three options – a universal life, whole life, or term-to-100 policy.

Most importantly, it means you should work with someone who really understands how these policies work and compare. It often is misleading to compare these types of different insurance policies, and insurance companies solely on premium price and projected illustrations. A competent, trained specialist can help you sort through the otherwise mind-numbing features and benefits available, and the pros and cons of each in light of your own circumstances.

For most of us, life Insurance is not a whole lot of fun to think about, but it sure can make a big impact in your own estate planning. We’ve come a long way from pirates and burial clubs, but at the end of the day, doing it right and boring with insurance sure makes sense for most estates.

I can see the future from here!

I don’t know about you, but when I was a kid… I was promised we’d have jet packs by now!

Image Attribution Seg9585

Every night for the last 14 years, I’ve read a story to at least one of our kids. The days of them being too old for this will soon be upon us, but it’s a wonderful tradition we enjoy very much. We’ve read thousands of stories over the years, but inevitably, the family favourite is anything from Calvin and Hobbes, the legendary and timeless comic strip by Bill Watterson.

My favourite strip was written Dec. 30, 1989.  In it, Calvin marks the new year of the decade with incredulity. In Calvin’s words: “Big deal! Where are the flying cars? Where are the Moon Colonies? Where are the personal robots and zero gravity boots?”

I can understand where he’s coming from. It’s been almost thirty years. I – sorry I mean Calvin – still doesn’t have zero gravity boots!

The one exception 


One of the smartest investment managers I’ve ever met once commented that the only investment standard you can rely on to predict the future is that everything reverts to the average. The real challenge though is knowing what the average is, and being patient enough to wait for the valuation to return there.

What she meant by that was that sometimes prices for equities (or anything for sale, really) go way above or below what they should but, inevitably, will return to where they should be based on their long-term rates. It was probably the most astute piece of advice on investing I’ve ever been given.

Now, not everyone spends a lot of time looking at investment markets, so let’s use an example we’re all familiar with – housing prices. Over the last 100 years housing has increased at about the rate of inflation over the long term. In particular, a reasonable standard over that time period is that a house should be affordable if its cost is three to four times the household’s annual income. According to a very interesting article in the Globe and Mail in April 2017, housing in the GTA in September 2016 was more than eight times the average household income in the city at $627,395. Ironically, just after the article was written, the average price became $919,449, or 12 times the average household income in the GTA.

It doesn’t take a lot to imagine that 12 times family income is reaching a point where prices would have to lower. Sure enough, housing prices have started going down since last April, and the most recent data from the Toronto Realtor’s Association website shows prices started dropping over the fall.

So, knowing the value of items always reverts to the average, we know that either incomes have to increase significantly (by about 300 to 400 per cent) or housing prices need to drop. I don’t think it takes a lot to imagine which is the most likely scenario.

The problem is, I can’t tell you when that potential reversion to the average will happen – it could be tomorrow, or it could be in five years. But someday in the future, things will revert to normal and it’s likely to be painful for many GTA homeowners, unless they get some pretty hefty raises at work!

Applying this to your non-real estate investments


One of the most important fundamental aspects of investing is ensuring you rebalance your investments to keep your overall asset allocation on target.  As some holding increase or decrease in value, your original allocation of investments will change.  Rebalancing keeps taking you back to “the average” proportion of holdings in your portfolio with which you started.  I build this into almost every portfolio I set up for our clients.  If we believe that the only thing predictable about the future is that everything will eventually revert to the average, rebalancing is our only way to predict the future.

It’s not about what the hot pick is in your portfolio – it’s about ensuring your portfolio has the right balance of investments, based on your personal financial situation… In short, it’s boring investing. Not the sexy prediction of the future you likely wanted but, trust me, it’s the hottest investment tip I can give you.

In the meantime, please let me know if you hear of a company doing R&D on those zero gravity boots Calvin was talking about. Because, (and please forgive me the horrible pun) you know, that company’s stockings can only go higher, right?

The information provided is accurate to the best of our knowledge as of the date of publication, but rules and interpretations may change.  This information is general in nature, and is intended for informational purposes only.  For specific situations you should consult the appropriate legal, accounting or tax advisor.

Anna, the Ultimate Secret Santa

Karma Taken to a Whole New Level.

This month, I’m going to tell you a story I’ve been waiting to tell for almost two decades.

Early on in my career, I met an amazing lady who was well in her 80’s who we’ll call Anna. I worked with her for a number of years as her financial planner. Anna was a delight to work with – bright, articulate, very informed and opinionated. She was also worth a whole heck of a lot of money.

If you met Anna, she seemed like many seniors – very concerned about spending money, as she was worried she might run out. Her biggest concern in her late 80’s was that she was in great shape and planned to live a long time. That probably doesn’t surprise you, what might surprise you is why.

Anna planned to live a long time because she wanted to tick off “the greedy little buggers” (her words not mine).

See, Anna was worth nearly $10,000,000. She was a testament to a lifetime of chronic saving, and she had invested over the years in a wide variety of things. But the real growth area had been real estate and she’d been hanging onto some properties for a very long time.

Anna had some very greedy descendants, who had a good suspicion of just how much she was worth. They would try any number of tactics swindle her out of her money. She had seen everything from them trying to get her to sign deeds of properties, to elaborate tales as to why someone needed large sums of money in a hurry.

Being a sharp, strategic and crafty gal, her ultimate plan was to outlive most of them. But, just in case, she asked me to do some very creative planning work. And boy, did we ever have fun!

Making private transactions by bypassing the estate

Anna had one niece who had always been kind to her, and had no idea of Anna’s net worth.  Anna’s main goal was to make sure that the kind niece (we’ll call her Josie) was taken care of properly. Her other planning goal was to ensure that the Greedy Little Buggers (GLBs) got what they wanted, but in the most inconvenient way. All of this, of course, was the backup plan to Anna’s master plan of outliving her greedy family.

After some research, and coordination with Anna’s lawyer, we determined our best way forward was to move Anna’s cash holdings into the insurance-company version of GICs, as well as segregated funds. Both of these options come with a named beneficiary, which meant that she could have the funds completely bypass her estate and go directly to Josie. Unlike a will, which may be a public document, the insurance beneficiary designation is usually a private transaction and in most provinces not subject to public knowledge or scrutiny. This allowed her to quietly pass her cash to Josie, and leave the estate solely to the GLBs with little more than her extensive real estate holdings and the very significant capital gains tax consequences that would occur at her death.

How to create a cash crunch in the estate.

With the majority of her estate subject to capital gains, and most of the cash re-directed to Josie via insurance, her plan was to leave all the GLBs as joint executors with wording that they must all be in 100% agreement in order to sign off on any distributions. In her opinion, the most likely outcome was that they would bicker and argue with one another. They would ultimately have to sell or mortgage many of the desired properties in order to pay the tax bill and that it would take a long time for the estate to settle. She was just fine with that – the one and only time I have had a client who actually wanted to drag out their estate’s settlement period! As many of the GLBs were then in their 60’s and 70’s, she was hoping that by the time they received their “just due,” they wouldn’t be in any shape to enjoy the fruits of their many years of scheming.

The ultimate realization of her plans

Anna lived a long life, long enough to celebrate her 100th birthday in full control of her faculties.  Unfortunately, I didn’t get to remain her advisor as I took a promotion a few years after we structured her holdings and had to pass her accounts on to a colleague. My colleague did let me know several years later, however, when Anna passed away that she had outlived 2/3rds of the GLBs, and that the Josie had been stunned to receive a quiet but very significant inheritance when she expected and wanted nothing at all from her aunt.

As for me, I’m always going to remember with great fondness, a very kind, sweet, insanely smart and funny lady who took the time to knit my newborn son a sweater, all the  while reminding me of the truly important things in life.

Sometimes, Karma is sweeter than honey.

Do you have a great story about someone with character in your life and how you remember them?  If so, we would love to hear about them for a future newsletter.  Feel free to email us at ryan@quietlegacy.com if you do.

This newsletter should not be taken or relied upon as providing legal, estate planning, accounting or tax advice.  Clients should obtain advice from independent, professional advisors.

Growth your Wealth by Giving it away.

Help grow your wealth by giving to charity

I’m sure the first thought you had when you read the title of this newsletter is that I’m crazy. While that is entirely possible (my wife Bridget is nodding sagely in the background), it turns out it has been scientifically proven that you can help grow your wealth by giving to charity.

Professor Russell James of Texas Tech University published a 2009 study in The Journal of Educational Advancement that explains this in better detail. In this study, James analyzed data of more than 28,000 individuals in the United States over a 10 year period. In doing so, he discovered those who had active charitable-giving plans grew their net worth at a rate of 50 to 100 per cent higher than those who didn’t.

That’s a pretty significant difference.

You might be thinking older people with more money would have taken the time to plan, so what’s the big deal? The amazing part of these findings was that his study was examining the growth of net worth relative to when people started doing charitable planning. He also accounted for differences in initial wealth and age.

In research, we like to say correlation doesn’t mean causality. But in this case, my own experience leads me to think the professor’s findings do point to the likelihood that undertaking charitable planning earlier in life will help grow your wealth.

I’ve worked with all kinds of folks over the years and one thing that has struck me is how much working in and contributing to the non-profit sector can lead to a net benefit. Of course, this is provided that one is truly giving selflessly and not for personal gain.

First and foremost in my mind is that people who are inclined to support charity are almost always amazing, warm and compassionate people. Jerks just don’t survive long around a charity! Since, by definition, charity is a selfless act, selfish people generally don’t show up to the ball game, and certainly, the odd time when they do, they don’t feel welcome at the table and quickly leave.

People who interact with charity are prepared to make short-term personal sacrifices for the long-term collective good. The universe seems to be very good at providing long-term payoff for those willing to give of themselves now. People who give openly to charity – be it time or money – tend to build networks and trust as their long-term commitments develop. If you take the time to reflect on your social circle, I’m sure you’ll immediately identify somebody who exhibits deep personal integrity and compassion and who you hold in high regard for this reason. These are the kind of people who, in the long term, we all prefer to associate with, do business with and know we can count on. We all love to get to know people like this.

If you stop to think about it, it should come as no surprise that these kinds of people can have better financial prospects than those with a different set of personality traits. If you were an employer, wouldn’t you be more inclined to offer these people a job? If one of these people owns or runs a company, wouldn’t you prefer to do business with them over a competitor with a different set of values? And, to add a little more zest to the sauce, isn’t this kind of person more likely to lead a lifestyle that’s less consumer driven so they’re likely more inclined to save money at a higher rate?

So much of our view of philanthropy has been that some rich person has money and gives it away, but both my experience and James’ research point to a very different reality. Giving really does make your richer – not just in spirit, but literally in wealth.

Leaves are falling, but Interest Rates are Rising So What happens now?


Full disclaimer:  The pumpkin shown above is thinking about GIC interest rates from 1982.

With October here, leaves are turning quickly and falling to the ground. For the first time in years, however, interest rates aren’t following suit. The Bank of Canada has pushed rates up twice in a relatively short time period, bringing us up from historic lows. If they continue to rise, it will put us in a different financial climate for the next few years.

Effect on fixed-income investments

The major short-term effect of rising rates will be an increase in GIC and bond interest rates, and a corresponding rise on lending rates. The impact on you depends on what kinds of investments you hold.  It’s good news if you have a renewing GIC, but not so good if you have debt. If you own any bonds or related fixed-income investment funds – well, that’s potentially a mixed bag. For example, for investment funds that invest in bonds or fixed income (for illustrative purposes only):

When new bond offerings have higher rates, the market value of existing holdings will drop. Why? Well, if a $1,000 bond paying 2% over 10 years and interest rates on GICs rise to 3%, bond cannot be sold on the market for $1,000. Instead, the price offered would drop below $1000. The interest doesn’t change – just the bond’s market price. If the bond is sold for less, the effective interest rate is higher.  If the bond is held to maturity, it will miss out higher interest rates until it does mature.


If you have a defined-benefit pension plan where your pension is based on an amount multiplied by your years of service, the commuted value of these pensions will drop in a higher-interest-rate environment. Currently, commuted values are quite generous – because in a low-interest environment, you need more principal to generate retirement income. You’ll only care about this if you’re leaving work prior to retirement in the next couple of years.

The impact to life insurance policies

Over the long term, rising rates will generally be positive for dividends on participating whole life insurance. If you have a whole life policy, interest rates have a major effect on the annual dividend, and with time, these should rise with rates. Most insurance companies smooth out their dividends; however, to limit the impact of sharp changes in interest rates, any change in participating dividends will likely take a few years to fully implement. In the meantime, policyholder dividends may drop or hold as the new rate levels are phased in.

In general, however, higher interest rates are generally good news for insurance companies themselves.  If rates continue to rise, you can expect to see the industry as a whole expanding product lines – a significant change from the last 10 years where many small insurers began to limit lines of business because of the risk and capital requirements needed in a low-interest-rate environment.

Charitable Donations of Life Insurance

You can donate an existing life insurance policy to charity in your lifetime and potentially receive a tax credit for the fair market value of your insurance (as opposed to its cash value). In this situation, you pay an actuary to work out what the “replacement value” of your life insurance policy would be if you were to reacquire it at your current age and health status. In many situations, the value to acquire the policy could be significantly higher than what you originally paid for the policy so the charity can issue you a larger tax receipt relative to the cash value of the policy.

Like the commuted value of pensions and all other things being equal, a fair market valuation of an insurance gift is likely to be higher in a low-interest-rate environment than a higher one.

So what should you do?

Well, don’t panic for starters!  As you can see, rising rates are a mixed bag, with some positives and some negatives.  If portfolio holdings are diversified, in many cases, rising rates’ positive and negative attributes can potentially cancel each other out. If portfolio holdings are focused in one area, there is a potential for more volatility. Each situation depends on your investment goals and investment risk profile.

As always, your best bet is to review your financial and estate plans and make sure nothing you’ve read here will affect your plan.

The information provided is accurate to the best of our knowledge as of the date of publication, but rules and interpretations may change.  This information is general in nature, and is intended for informational purposes only.  For specific situations you should consult the appropriate legal, accounting or tax advisor.

Are you Migrating this fall? Three examples of charitable structure all working to preserve nature.

As  some of you know, one of my hobbies is photography, and in particular, bird & wildlife photography.  The egret you see above was migrating through Linde Shores Conservation area in late August, and put on a great show with 50 of its friends for me right at dawn.

We are very fortunate to live in a part of the world which lies on one of the major North American flyways.  While most people in this part of Canada think of Point Pelee in the spring for songbirds, or Aylmer for Tundra Swans, one of the coolest migrations in the fall is the Hawk & Raptor migration which is just starting as I send this newsletter.  Over 36,000 magnificent birds of prey will fly over Hawk Cliff, just east of Port Stanley on the Lake Erie shoreline.

If you go, you will also be witness to two charitably-owned environmentally sensitive properties in very close proximity.  One is the Hawk Cliff Woods owned by the Thames-Talbot Land Trust, a public land-trust foundation.  Its purchase of the property was partly funded by the Ontario Trillium Foundation, an agency of the province which is run as a Public Foundation.  The second property is Solitude Nature Reserve, operated by a Private Foundation.

Each of these organizations is doing some fantastic work in preserving the unique natural areas around Hawk Cliff, however, they represent  excellent, but different approaches to philanthropy and legacy.

Private Foundation, Public Foundation or Charity?
Charitable organizations are what we normally think of in terms of charities.  Charities like the Thames-Talbot Land Trust (TTLT) are run by a board of directors, and have an operational purpose that has a charitable mandate.  In the case of TTLT, the mandate of the organization is to preserve environmentally sensitive land and protect wildlife along the Thames River and Talbot Trail.
Charities like the Thames Talbot Land Trust are directly involved in a charitable mission.  To qualify as a charity, the organization must be involved in at least one of the following:

  • Relief of poverty

  • Advancement of Education

  • Advancement of Religion

  • Certain other purposes that benefit the community in such a way that courts have deemed charitable.

The last category is broad, but specific, and fortunately, the preservation of nature is amongst them, allowing the Thames Talbot Land Trust to continue their good work at Hawk Cliff and elsewhere.  Like foundations, Charities must disburse 3.5% of their assets annually towards their charitable mandate. In the case of a  land trust, this is easily met working to preserve their properties, and towards purchasing new sensitive areas for future preservation.

Private Foundations
A Private Foundation is run by a closely held group, where 50% or more of the directors are related.  Often these foundations are created upon the sale of a business, as the sale may generate a significant tax bill to the owners.  A private foundation is a very useful structure which allows you to generate an immediate tax credit, but then disburse the funds to charity at a later date or over time, allowing one time to determine charitable goals, etc.

Due to the close control of the charity, usually by the originator and his or her family, CRA puts some restrictions on what can be donated compared to other charities, and slightly different reporting.

Public Foundations 
A public foundation, like the Ontario Trillium Foundation (OTF) is operated, has an independent board of directors who are all at arm’s length.  OTF is actually a government agency of the province, which is different than most public foundations, but in principle, it operates in many of the same ways, even though it only has one donor.

Public Foundations grant money to any number of charities.  Like all charitable entities, they must disburse 3.5% of their holdings a year to maintain their tax status.

Just because a charity has “Foundation” in their name, doesn’t actually mean they are a foundation according to CRA rules.  Foundations generally are grant-providers to other charities, and not involved in operational capacities like registered charities.

How about you?

All of these structures provide our society with excellent benefits – as we see in the case of our examples involving nature-preservation efforts around Hawk Cliff.  Most people are likely to donate to a registered charity, but it is always wise to know there are multiple structures you can access to make a major impact in your community.
If you want to learn more about any of these structures, as always, drop me a line at ryan@quietlegacy.com

Disclaimer:  You are encouraged to seek legal advice prior to engaging in a charitable structure.

Procrastination and Planning

“Enraptured By Grace” – Acrylic, 2015

Danielle Gardiner

Visual Artist - www.philosopherswalk.ca

Procrastination and Planning

As you read this, I’m going to be returning from our big vacation for the year.  Bridget, the boys and I are going to the north end of Killarney Provincial Park, and spending seven days travelling by canoe through the Grace Lake and Nellie lake loop.  If you have never heard of it, Killarney was literally created by the efforts of the Group of Seven, and much of their most iconic work was painted at the park in this area.


We’re going to be travelling with our friend Bill and Danielle Gardner, who are respectively the Astronomer and Artist in Residence at the park.  Danielle was, in fact, the first Artist-in-residence  at the park since the Group of Seven themselves.  (Her work “Enraptured by Grace” featured here, is from her last trip on this loop)


We’re pretty excited.  Much like finances and estates, however, this trip has required a lot of up front work, to make it pay off.  I’d like to share some of what we have learned on this trip that can be applied to financial and estate planning.


If you have come to any of my talks, you know that a stat I love to quote is that only 20% of us “get off our butts” to make changes to our estate plans.  I’d hazard a guess that no backcountry hiker or canoeist would go out without a lot of planning!  (Or, they might end up going out in a completely different way…)


Things we’ve learned from our trip that you can use in your estate and financial planning


1)      Start planning early while its cheap and easy.  Our friends are expert backcountry folk –– being experienced, they knew a few quirks of the Ontario Parks reservation system that ensured we got backcountry sites before most people even knew you could register.  If we had waited, costs could have been higher, as we would have had fewer options for travel available to us. Estate planning works the same way – the sooner you start, the more options you have, and the cheaper they are.  Wait to long, and you will find its an expensive mistake.

2)      Pay for quality now to save yourself a hassle later.  One of our portage routes is known as “The Notch”, which is the steepest portage in the park.  We will have a 49lb Kevlar canoe to carry the five of us.  It wasn’t cheapest canoe, but given part of this portage is near-vertical, we’re going to be greatful we spent the money on it vs. the 70lb option that was half the price.

Cheaper doesn’t always mean better in financial and estate planning.  Its usually a trade off between long-term costs vs. short-term costs.  Smart people start with what the need for the long term, rather than finding the cheapest option now that might cost way more later.


3)      Lay down the game plan in detail, and plan for failure and changes to the plan as you go.  We have meticulously worked out our schedule.  Since we will be in one of the most remote areas, we need to know what food and gear we need, including planning for failures along the way, since there’s no going back once we get started.  Lots can happen to your financial life over the years, but people studies show who have worked with  a financial plan in place end up with 290% higher assets than those who don’t.  (Source:  CIRANO Study 2012)

4)      Get insurance – its cheaper than the alternatives.  Our friend Bill rents a special transponder for back country hiking/canoeing, that includes an insurance plan if anyone is hurt on the trip.  An air rescue from a remote area can run in the $10-20,000 range. If you are insurable, and a reasonable age, the rate of return on an insurance policy for your estate is often hard to beat with investments on a risk-adjusted basis.  This is particularly true for charitable gifts, and tax planning purposes.

5)      Be prepared to deal with bugs and other things that can through you off course.  Northern Ontario is having a miserably year for bugs.  We’ll have spray and bug nets to keep us on course. You can’t plan for everything.  Stuff will happen along the way, and that’s why its important to save and plan now, so you have capacity to be blown a bit off course with all the things we can’t envision right now.



Paint your Financial Picture.


If you have been putting off your estate or financial planning details, maybe its time to start painting in the sketches.  I’m currently chair of the Estate Planning Council of London, which has accountants, lawyers, trust officers, etc.  If its not something I can help you with, I’m happy to give you a few names of colleagues who are members of that group whom I trust can help you fill in the brush strokes.  Feel free to drop me a line.














A look under the Hood at our Own Estate Plans

July is a special month in my family – Bridget and I celebrate our 17th wedding anniversary on July 1st, as well as my Dad’s 76th birthday.  Mom would have been 74 on the 3rd, and I turn 43 on the 5th.  It’s a busy month on the home front for sure!

Last year we celebrated with our family trip to Gros Morne National Park, shown above.  This year, we are going to celebrate in my house by tweaking a few things in our estate plan.  (Exciting, I know, I lead a wild and crazy life!)  I’d like to share a piece of that with you, and talk about the impact of this change.

A few months ago, Bridget and I set up a second-to-die life insurance policy, which will pay out $250,000 upon the death of the second of us.  As you might recall from past articles, that’s when the bulk of tax comes due in most of our estates.  Rather than setting our kids as beneficiaries, we are going to make the beneficiaries our chosen charities.

This policy will ultimately save (based on todays tax rules)  our estate approximately $125,000 in income tax, as the charities will issue our estate a tax receipt for the amount received from the insurance.

Who we are supporting

In our case, there will be 6 charities each receiving a portion of those funds.  Two of these Charities (Amabile Choirs of London & The Clay Arts Centre) are local arts organizations which my wife has belonged to, and which she loves dearly.  Both have provided her with many friendships, much needed stress-relief from her job as a primary school teacher, and lifelong memories.

For my part, I’ve chosen two organizations as well that I have had long standing volunteer commitments to – The Secrets of Radar Museum (I was a co-founder), and The Brain Tumour Foundation of Canada, for whom I have volunteered for over a decade.

Our last two organizations, St. Joseph Hospice, and the Canadian Cancer Society are newer additions to our list.  Our family was extremely grateful to both organizations for the outstanding support our family we received while my mom was dying.

Why are we doing it this way?

A gift of insurance for us, makes sense for a few reasons:

  1. Its cost-effective. For a couple between the ages of 40-70, an insurance strategy is very cost-effective relative to other gifts.
  2. Its fast – unlike gifts made via bequest, the organizations will get their funds within a couple of weeks.
  3. It keeps our estate simpler – we have some complexities in our estate, and this keeps the charitable giving part simple and clean.
  4. We can change our minds easily and with no cost – all it takes to tweak is an updating of the beneficiaries.
  5. It sends a message to our kids about what is important to us.

How about you?

About 84% of Canadians give to charity each year, according to Statistics Canada, but less than 10% of us have thought about leaving something when we are gone.  Bridget and I are pretty excited at making a legacy of transformational gifts when we are gone.  (Well, maybe not so excited about the “when we are gone part”, but moreso about the transformational gift part!)

I know we’ll celebrate extra hard this July, if our gift inspires you to make your own.  Have a wonderful summer!