Our Monthly Newsletters
As great as a family cottage is, it can turn your life upside down if you don’t do your planning work properly…
In the last few weeks, all across our country a great Canadian tradition has occurred — the winterizing of the family cottage. As long-time readers might recall, I grew up in a small town in Bruce County called Chesley, just a short distance to the many cottages along Lake Huron and Georgian Bay. While my family never had a cottage, we had many family friends who did, and who generously shared their vacation retreats with us.
It is hard to imagine, but back in the early 1980s, a cottage in Southampton area could be found for around $25,000, a number that boggles the mind in light of more recent listings in the neighbourhood of $1,000,000+. It appears that you can actually put a price on Lake Huron sunsets – although few can now afford the view!
One of my earliest memories of thinking about estate planning (because, as you probably know, I’m a geek), was when our close family friends whom we will call Peter, Paul and Mary inherited their parent’s cottage when their folks passed away in the early eighties. Mom and dad bequeathed the cottage to the kids equally, and it was a wonderful family property for the three kids, their spouses, and families for many years.
Unfortunately, Peter ended up divorcing his wife a decade or so later, and, as it turns out, a minor mistake in their mom and dad’s will turned out to have major implications. Here in Ontario, inheritance is automatically excluded from your marriage assets in the event of a marriage breakdown, however, any growth or income from the inheritance is not necessarily excluded, unless specifically stated in the will. 99% of the wills I have ever read include this important clause – but for whatever reason, their mom and dad’s will did not. That missing clause turned out to have some major implications.
Peter had inherited his third of the cottage at a time when cottage prices were still quite low – but at the time of his divorce, values had skyrocketed. Since his mom and dad had not had that specific clause in the will, his divorce settlement required him to include a portion of the increased value and rental income of the cottage as subject to division, and he ended up having to pay his ex-wife a good chunk of money.
With few other liquid assets, it became necessary for him to sell out his third of the cottage, but Paul and Mary didn’t have the funds to purchase his third, and they were unwilling to carry a mortgage on the property either. As a result, they had to collectively sell the cottage, in order to give him the liquidity to settle his divorce.
There was a kicker though – which was that each of Peter, Paul, and Mary were forced to declare a rather substantial capital gain on the sale of the cottage, which created extra taxation for each of the family members that year. Its safe to say that after this unwanted experience, a cottage wasn’t a place of family relaxation for anyone. Unsurprisingly, the three siblings decided not to purchase a new property together, and in fact, all three simply decided to rent cottages in the future.
Peter, Paul, and Mary’s situation was unfortunate – but its not the only case I’ve seen where a treasured family cottage becomes a major impediment to good sibling relations. Sometimes, even the best of intentions can lead to friction.
Doing it right
We often forget that the family cottage, or any real estate outside of our primary residence, is subject to capital gains tax at the point of sale, or, at the date of death, even if the cottage is not sold. Its vital to do some planning work well in advance, to ensure that taxation doesn’t become a major problem for the estate. Cottages, however, because of the emotional attachment, are often properties that we want to pass to the next generation intact, without selling. Someone has to pay the tax bill – or else the estate may have to sell the cottage to free up capital.
There are a couple of ways to minimize friction on an inter-generational cottage transfer:
Fund the tax liability with a life insurance policy. That way, liquidity will exist in the estate at the point of death to ensure there are sufficient liquid funds to pay the tax bill without needing to sell assets (like the cottage). This means your kids get the cottage intact (hopefully!), but it doesn’t necessarily address the complexities of having multiple children owning the cottage. They may inherit it intact – but they will still need to work together as co-owners moving forward, and should have agreements in place around a death, divorce, etc.
Create a testamentary family trust to own the cottage at your death, instead of leaving it to your kids directly. This way, the cottage would not ever be considered an asset of your children, and not subject to creditors or other claims. The children could be set up as trustees, so they control the property, even though they themselves wouldn’t own it outright. There are a few drawbacks to this, as the capital gains must be triggered every 21 years under current tax rules, and you should also leave funds for the maintenance of the cottage. Still, if you have concerns about the marital or financial stability of your children, this method may be effective with well-thought-out planning and solid advice from professionals.
Ultimately, in many cases, selling the cottage in your lifetime might be a cleaner and easier solution, although it will most likely trigger capital gains taxation. (To be fair, so would options #1 and #2, but voluntarily selling in your lifetime means you can control the timing.) You could look at timing charitable donations at the same time as the sale to minimize the impact.
Cottages are a wonderful family tradition, but planning around them can be complex – both for financial reasons, but also all of the emotions that come into play. If you or your folks have a cottage, make sure you talk to your tax, legal and other planners well in advance to ensure the gifting of the cottage is a joy, not a burden.
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.
Image courtesy of tausend und eins, fotografie
It’s that time of year again where people will dress up, disguise their identities and go knocking on your door, saying “Trick or Treat”. The experience at the doorstep can be either very pleasant, or highly terrifying. Personally, I’ve always been fascinated by the full range of disguises people manage to wear. Some people dress up to be as scary as possible, while others go severely out of their way to appear much more docile and tamer than they are in real life. The spectacle is quite impressive.
I did some advanced polling in my neighborhood, and there’s some creative costumes being put together this year for our neighborhood contest. Andrew decided that he’s going to dress up as a regular working Joe, so he doesn’t scare anyone. Elizabeth is making sure her costume has no plastics and is environmentally friendly. Yves-Francois has been a ghost the last few years, but he’s thinking about being more visible in this year, now that other kids aren’t taking over his neighborhood. Jagmeet wants to go trick-or-treating in Quebec where Yves-Francois hangs out, but it turns out he’d have to dress differently than he normally does to qualify according to their recent legislation, so it’s put him in a very awkward position. Everyone seems to think that Maxime is dressing as the boogeyman, and Justin…well, he’s come right out said he’s over the whole costume thing all together from this point forward!
It’s going to be tough to judge the contest this year. Everyone who’s supposed to be a judge has a different opinion on who’s costume is the scariest, and there doesn’t seem to be a clear winner.
Forget Halloween – the Federal Election will give us all the willies!
Historically, the treats often have turned out to be tricks
One alarming trend I’ve noticed in recent years is sometimes parties promise to give you a treat, but it turns out to be a trick. You may not notice this until your belly hurts, and you realize the candy they were handing out wasn’t quite what you expected. It’s very hard to tell though, at the door, if what you’ve been promised is a good treat or a bad trick. It’s important to realize is that virtually all parties have done this in recently, and that sometimes our political system causes us headaches when we try to plan:
Prior to the last federal election, the Conservatives lowered the minimum withdrawals for RRIFs for those forced to draw from their RRIF at 72. They made this seem like a beneficial tax cut – except for those who were chronic savers. For them this meant the government would generally get way more tax revenue from their estate, as the full balance of any RRIFs remaining at the death of the second spouse could end up being taxed at the highest marginal tax rate in the province. Here in Ontario, I saw many people defer taking out RRIF money at a tax rate of 35% or so, only to have it be taxed in their estate at 53.5%. In the end, the total tax they paid on their RRIF ended up being significantly higher at death than it would have been if they took more out in their lifetime.
This is a classic example of a “stealth tax” – it would be political suicide to raises taxes directly – so the government found a way to spin a tax increase to look like a tax break. If you’ve been putting off withdrawing your RRIFs, then it might be time you sit down with someone to discuss if this is the right option for you.
The latest federal Liberal government introduced new small business tax measures that created utter havoc in the planning community shortly after their election, making it seem like it would only affect those abusing the tax system to shelter funds. Unfortunately, this was not the case – past governments wrote the tax rules to encourage small business owners to save via their corporations, in lieu of access to pensions and other benefits that might be found in traditional employment.
Our tax system was built on the concept of equal tax consequences to keep funds held in corporations roughly equal in taxation personally. The new rules altered this significantly to encourage business owners to stop holding wealth in their corporations. The initial proposed rules would have been highly punitive (almost retroactively) to those who followed the rules in good faith for nearly 30 years. After consideration and consulting with various professions, the government finally settled on a more reasonable approach that met their policy objectives, but also allowed some breathing space for business owners. Many of us still argue, however, that the final version of the rules punishes small business owners unfairly, but the situation is significantly better than it could have been based on the government’s initial position.
One of the worst “tricks” has been when one party replaces another and wants to “wipe the slate clean” for ideological reasons. In Ontario, one example that comes to mind is the basic income pilot project that was running to determine if a government-backed guaranteed income program might be less costly than running welfare and social services support programs. Unfortunately, when our government changed part way through the 3 years of the project, the new government killed the pilot almost instantly, without a chance to analyze the results. In my mind, that was horrible “trick” and a shame – the concept has been talked about for years in Canada, and it was finally being scientifically tested to see if it was a net positive or net loss – and now we’ll never know. That could have had a significant positive impact on retirement planning, especially for low-income seniors if the theory was true.
Make your vote count
Your retirement plans, investments and estate plans may all hinge on the results of the election and who comes to power. CBC has published a very well laid out website that allows you to read through a detailed but high-level summary of each party’s promised candy at:
Take the time, do your research and think about the impacts your vote might have on your investments, retirement and estate plans. Be sure to reach out and ask questions of your professional advisors in tax, law and financial planning. Hopefully, that’ll help us all keep the candy-induced stomach aches away for another four years. Most of all remember not to
eat vote for any candy where the package has been tampered with!
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.
Can you believe its already Fall? The last quarter of the year is an ideal time to transfer RRIF accounts between institutions, set up a RRIF if you turned 71 this year, or to purchase an annuity from registered funds. Drop us a line at 226 884 5545 if you would like assistance.
For so many of us, the nighttime sky represents peace and tranquility. One night in London this past month was the exact opposite due to a massive gas explosion. In the aftermath, our city’s generosity shows us the future of giving – and how our charitable rules need to be updated for the modern era.
As I’m sure many of you heard on the news, London’s Old East Village was rocked by a massive gas explosion on August 14 after an inebriated driver drove into a home on Woodman Ave. Fortunately – by no small miracle – there were no deaths, thanks to some good luck—the family who owned the house was away that night—and the timely intervention of our wonderful first responders who immediately cleared the surrounding neighbourhood. As I write this, I’m pleased to hear that the last injured firefighter has returned home from the hospital. According to the CBC, as of Aug 26, three homes have been destroyed and multiple others damaged. I know several people who live in the neighbourhood and I’m grateful they’re safe, despite the devastating losses endured in the neighbourhood.
As the saying goes, out of every dark cloud comes a silver lining, and rarely has such a statement been a more literal metaphor. Tens of thousands of dollars have been raised through various community, online, and business fundraisers to support the affected families. As is often the case in times of disaster, the best of humanity shines bright. Others opened their homes and businesses to provide shelter to those who lost everything. Despite the circumstances, it has been a heartwarming time, especially in the era of social media, where empathy seems, at times, to be a rare commodity.
Amid all this generosity, the wide variety of methods of giving our community has used has been remarkable:
Traditional donations to local charitable services organizations
Fundraising events, like the one at Aeolian Hall
Personal financial support to friends and family affected
Cash donations at checkout of local businesses
Gifts of time and volunteerism
While we tend to think about giving as a charitable act involving a receipt, much of the time, the way we actually give is very different. This is because charitable organizations have a relatively small mandate in Canada. To be a registered as a charity, you must meet one of the following criteria:
Relief of poverty
Advancement of education
Advancement of religion
Other purposes beneficial to the community
The last category is pretty vague, so many charities you may know fall under this mandate. That said, notice anything missing on that list? I’ve always been shocked that the prevention of poverty is not a charitable activity in Canada – only its relief. In other words, it’s charitable to help someone who is poor, but not to take steps to prevent someone from being poor in the first place. I hope someday the government will address this, but for the time being, it is enshrined in law.
Things to think about when giving
Of all the ways to give, the most regulated area of giving is to qualified charities. There are much long-established legal and ethical rules in place to protect the public’s interest, the charity’s interest, and that of the donor. Society has come a long, long way since these rules were created.
I suspect in time that other giving methods will come under the same scrutiny. For the moment, however, crowd funded charitable options (like GoFundMe) remain subject to little oversight under our 90-year-old charitable laws, which never could have anticipated the Internet, donations by credit card or the ability for a for-profit foreign organization like GoFundMe to become a major factor in giving in our country.
I hope parliament will amend our charitable giving rules to more closely reflect todays society, ensuring that everyone is held to the highest standard. In the meantime, look for professional advice on the best way to give and think carefully about how you give. Until our charitable giving legislation catches up, trust is the only factor that we can rely on to ensure our gifts go where intended and we’re able to leave a lasting legacy.
And, in the meantime, hug your loved ones, and please take the time to thank our police, fire, and ambulance workers who saved so many lives by being vigilant and cautious on that terrible night.
Sunday July 20, 1969, at 20:17 Universal Time, humanity reached the moon for the first time. It was a monumental achievement, and no doubt, many of you reading have this moment burned into your memories. Alas, I was born five years later, but like you, that moment remains one of the most amazing memories of my youth and drives much of my passion for space and astronomy today. Even though it had happened 10 years earlier, I remember, at the age of five, watching it replay on my parents’ black-and-white television and thinking of my own future in space.
This arguably greatest feat in human history was born out of the tensions of the cold war. The USSR had launched Sputnik 1 in 1957, and the United States didn’t want to be perceived as “weaker” or less technologically advanced than Russia. Soon after, the Mercury and Apollo missions launched prior to the historic Moon landing of Apollo 11.
The road was not smooth
Space is not, and never will be, safe for humans. Apollo 1’s crew was killed prior to launch due to a fire in the command module and Apollo 13 encountered issues in flight, barely returning home. More recently, two space shuttle missions ended in tragically as well. Similarly, disaster has struck USSR efforts, including a fire very similar to that of Apollo 1 and a depressurization of the cabin in Soyuz 11. Despite this, those involved in the space program – astronauts, engineers, mathematicians and scientists of all stripes accept the risks keeping a keen eye on the goal. Without accepting risk, humanity would be unable to progress.
So many incredible things in our lives today stemmed from space race:
- Memory foam was used to protect astronauts from G-Forces at launch.
- Key ingredients in baby formula were developed as a spinoff of an algae-based recycling agent for long-term space travel.
- Lightweight emergency blankets were developed as an attempt to coat spacecraft with an insulating layer.
- Modern food safety standards arose from efforts to ensure food going into space had no contaminants
- Complementary metal-oxide semiconductor (CMOS) sensors, which power your smartphone and DSLR cameras, were developed to eliminate the need for fragile and heavy film cameras in space.
This is just a very small list of things that resulted from the efforts to leave our planet. Humanity persistently reaches for the stars, and, I hope, will set foot on Mars in our lifetimes. The space program illustrates the best of humanity – that it’s possible to achieve remarkable things with extreme effort and a willingness to acknowledge and face risk, but most of all, that great things can be accomplished if we just “dream big” a bit more often.
You can dream big too
If there’s one recurring theme I see repeatedly when working with clients on planning, is that most of us seriously underestimate the kind of impact we’re capable of when we give. We recently worked with one generous couple and showed them that they could donate at a rate five times higher each year then they already were. By implementing some smart planning strategies, they’re going to be saving more in tax, without having a large impact on their estate later.
If you’re a business owner and have a Holding Company, the newest rules give you a strong incentive to give. Doing so helps you apply the new passive income rules, as well as provides opportunities to get tax-free capital dividends out of your company by donating publicly listed securities in-kind to charity, in the amount of 100% of the Capital Gain on the donated security. In some cases, this can be a huge amount.
Finally, some of our best “dream big” successes have been using gifts of Life Insurance for charitable purposes. For example, one case we worked on this year will see a donor’s estate make a transformational gift to charity of $500,000 – at a net cost of $91,020. That $500,000 gift will save their estate just over $250,000 in tax, leaving their kids with 2.5 times more than the value they paid towards the insurance, and 5 times as much to charity. We’re all “over the moon” at how things have worked out.
Make it your mantra to do some smart planning this summer and make a “buzz” just like our astronauts did 50 years ago. It may take one small step, but man, what sights you will see in return!
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, and always take your spacesuit and associated life support systems with you when exiting the Earth’s atmosphere.
All images are courtesy of NASA’s Public Domain Archive.
We all meet remarkable people in our lives. One of the most remarkable I’ve ever met was my friend the sculptor Haydn Llewlyn Davies, the creator of “Algoma Blue”, the sculpture pictured above, which lies at the heart of this month’s newsletter.
As you may know if you’ve been a long-time reader, I’m quite fond of the arts. My wife Bridget and I met the first day of music school and my first career was as a professional classical saxophone player. I toured up and down the eastern seaboard of Canada and the U.S. performing as guest soloist with orchestras. It was a great gig in my twenties, but I learned quickly that the price of such a career was being away from my spouse and children far more than I was comfortable with. Hence, almost twenty years ago, I retrained as a Financial Planner.
Given my background, it might surprise you to know that in Kindergarten, I failed both music and art – the long-standing joke is that I’ve only managed to improve one of those two categories. (If you’re a client of ours, then you can probably attest to my horrible sketches that I use to explain financial concepts.) Fortunately, I quite enjoy photography which has let me maintain an artistic outlet. That said, the fine arts hold a special place in my heart thanks to a dear friend, for whom our youngest son is named, Haydn Llewellyn Davies.
Businessman, sculptor, and mentor
Fifteen years ago, I became great friends with Haydn, a wonderful Canadian sculptor. Haydn and I met through The Secrets of Radar Museum, where I was then president, and he was one of our veterans. He had been recruited into radar during the Second World War after finishing his degree at the Royal College of Art. After the war, he had a successful career in advertising, and retired early to return to his first love of art in his mid fifties. We bonded instantly, having shared a deeply similar background of crossing both the business and artistic worlds during our careers. (You can read his impressive obituary run by the CBC in 2008 by clicking here.)
One of my fondest memories was touring Haydn through the magnificent art collection at London Life’s head office where we stumbled across a painting by a dear friend of his. The painting was of Marilyn Bell, the first woman to cross Lake Ontario swimming. Haydn’s friend William Davies (no relation) had painted the picture and sold it to Prudential Insurance years before and had no idea where it had ended up – in fact, when London Life bought Prudential, it had come into their collection. Haydn was thrilled to be able to call Bill and let him know what had become of his work and that it was still on display.
Haydn was a remarkable man, quick of wit, and always with a huge smile. From him I learned much about business, art and finding your way in life with one foot in both fields. He was also the first person to introduce me to the fact that CRA has special rules in place for the donation of Culturally Sensitive Property, such as artwork to charities.
Donating art can have special tax benefits
When I first met Haydn 15 years ago , he was waiting to hear back on having one of his pieces of artwork, (known as Algoma Blue) designated by the Canadian Cultural Property Export Review Board (CCPERB). This designation allows artwork to be donated to a qualified charity recognized by CRA as being able to properly preserve and conserve culturally significant property, such as art. (CRA maintains a publicly accessible list of which Charities are currently eligible –not every charity is able to qualify for the extra tax waiver on culturally sensitive property!) More importantly, for the donor, it gives them a complete waiver of any capital gains tax on the gift – which normally would be owed to CRA at the time of disposition.
The piece had been installed at Queen’s Quay on Toronto’s Harbourfront for many years and was well known by many. To the best of my knowledge, at the time we met, the sculpture’s ownership had reverted to Haydn due to renovations at Harbourfront.
Once the designation of Algoma Blue as culturally sensitive property was received, Haydn was able to donate the piece to the Algoma Art Gallery and take advantage of the capital gains tax waiver. It was a great opportunity to have a key piece of Canadian art stay in Canada, and most importantly, be gifted to an organization that could properly preserve the sculpture, which had strong ties to the Sault Ste. Marie steel industry.
This waivers on in-kind gifts enjoyed by my friend Haydn apply to other gifts as well – the most important one being gifts of Publicly Traded Securities (PTS). While you may not own artwork, odds are high that your non-registered portfolio may include items that qualify as a PTS gift.
Any donation of artwork or Publicly Traded Securities require careful planning. In some cases, the Fair Market Value (FMV) of the artwork can be quite significant. While alive, you can only use charitable donations up to 75% of your current annual income or 100% in the year of death or prior year. (This restriction can be significant, since the Capital Gains tax exemption on in-kind gifts means the gain won’t flow into your income in the year of donation – a double edged sword!) Residual charitable tax credits can be carried forward for up to 5 years against future taxes – if you make a gift of significant value, it’s important to look at how you might be able to maximize the gift. Be sure to engage your tax, investment and legal advisors to get good advice so you can fully utilize the value of your gift.
A legacy beyond art
Beyond his legacy of artwork, Haydn also holds an important place in Canadian history. While in the hospital, one of his earliest and most famous works, Homage was destroyed by Lambton College. It became the subject of a lawsuit that hit headlines across Canada that was not settled until after his death. The suit brought forward important issues around the rights and obligations to preserve historic cultural property and caused donors around the country to look at gift agreements for future gifts of artwork that would ensure that publicly displayed works of art would not meet a similar fate.
For me, I will always treasure our many conversations, and I’m pleased to say that as my youngest son Haydn grows up, he shares the same mischievous smile and twinkle in his eyes.
As always, if you want more information on this or any other topic we discuss, please drop me a line at 226 884 5545 or email@example.com.
PS – if you own a Holding Company & Operating Company, you can have extra benefits by donating from your company thanks to the recent changes to passive income rules for private businesses. Click here for an illustration of how this works for Ontario-based corporations. (As always, please speak to your accountant to determine if the illustrated example applies to your situation, as corporate giving can be quite complex.)
This month’s newsletter shows us a wonderful example of how giving can strengthen the bonds of family even under challenging circumstances.
For many of us, we look forward to Victoria Day long weekend, so we can spend time bonding with family after the (very) long winter. This year, my family spent some quality time with a much-loved member of our chosen family, who I’m going to refer to as John, to respect his privacy. John was a roommate to both Bridget and I in university and has been a brother to us in every way but blood since our closest circle of friends met in the first few days of school 27 years ago. John is “Uncle John” to all our children and is dearly loved by everyone.
A month before Christmas, John was diagnosed with a life-threatening malignant cardiac tumour, and by Victoria Day, had undergone six rounds of chemo to damage and shrink the tumour prior to removal. By the time you read this newsletter, he’ll have undergone open-heart surgery to have the tumour removed. John “sailed” through chemo (as much as one can), so we’re all very hopeful he’ll be in the best possible shape to handle the surgery. Needless to say, we greatly enjoyed and cherished our quality time with him over the holidays.
Throughout this process, John has been both optimistic and practical, despite the very difficult odds he faces. His cancer is extremely rare, and the prognosis, frankly, is poor. Being a workaholic, John has spent much of the last seven months volunteering in-between chemo treatments and putting his affairs in order. Most importantly, he’s kept his dry sensor of humour and nicknamed the tumour “spud.”
John is one of many people facing challenging and life-limiting health situations that I have met, and his resilience and practicality remind me very much of a couple, Joe and Mary, I worked with last year who both found themselves in similar circumstances.
When life gives you lemons
Joe and Mary, a wonderful couple nearing retirement, were referred to us by a close friend who is one of our clients. Both Mary and Joe had been diagnosed with incurable cancers, and, like our friend John, were getting their affairs in order under very difficult circumstances. Extremely warm and generous people, their family, and their faith are two of the biggest anchors in their lives.
Working through their financial plan was one of the most emotional but highly rewarding moments of my entire professional career. Mary, Joe, and I had many deep and meaningful conversations about their personal legacy and values, and how we might reflect that in their planning.
Mary and Joe’s children are all in their early 20’s and have moved across the country. One of the key legacies we identified was that they wanted to ensure their kids would remain tight and connected long after their parents’ passing as they are today. Initially, they had thought about providing a testamentary trust within their will that would pay to bring the kids together once a year, to accomplish this goal. The challenge, however, was that this would keep the estate open for many years, be subject to a high level of cost taxation, and ultimately, would probably not be practical. We decided to instead use legacy and charity to tie the bonds of family together.
An abundance of giving
Knowing the importance of giving to the family, I connected Joe and Mary to Abundance Canada, a public foundation serving a wide mandate, but with roots as a faith-based organization. Abundance Canada’s strong faith-based expertise was a natural fit for Joe and Mary.
Abundance Canada, like many other community foundations, offers donor-advised giving plans, where the foundation handles charitable receipting, and then disburses funds to a variety of charities on the advice of their donor. In addition to accepting gifts immediately, they are structured to receive gifts from the donor’s estate, and then disburse to the donor’s chosen charities over time, (even over many years or decades) if the donor wishes. Most importantly, the original donor can appoint a successor advisor – which in this case, will be the children.
For Joe and Mary, this meant that we could do some smart tax planning now, as well as provide an opportunity for their children to get together yearly in the future. In the immediate term, Joe was able to make a large gift of stock in-kind with a significant capital gain through Abundance Canada to his church this past December. From a tax planning perspective, this allowed him to use the donation credit on his 2018 tax return, as he’ll have little taxable employment income in 2019 after starting his disability claim late last fall. Additionally, his in-kind gift meant that no capital gains tax was payable, and he still received a full tax receipt for the entirety of his donation. Abundance Canada then disbursed the funds to the church, replacing Jim’s monthly donation for the remainder of the year.
Over the next few years, Mary and Joe will gift through their fund at Abundance Canada and start to involve the children in the decision on which organizations are supported each year. Upon their passing, a significant amount of their estate will be donated to the fund to create a legacy well beyond their lifetime. Our hope is that this family tradition of giving will be another layer of glue on their strong family bond that will last long beyond Mom and Dad’s lifetimes. There will always be a warm, positive reason for the four siblings to come together each year to celebrate the family legacy.
I think it’s a beautiful, creative, positive and elegant solution to a challenging situation, and I’m proud to have been a part of it.
John, Joe and Mary have had unfortunate circumstances thrust upon them to make them think about their legacy at a much younger age than most people. I deeply admire all three for their courage, resilience and warmth; they inspire me daily. Sometimes the hardest of circumstances helps us to understand what’s most important to us. I think that all three of these amazing people should be inspiration to everyone to start thinking about what your legacy will be, today.
A tremendous thank you to Joe and Mary who have so generously allowed me to share their family’s story in order to help inspire others.
One of London’s landmark residences, The Elsie Perrin Williams estate is a stunning example of good intentions gone wrong. This month, we delve into its fascinating history and the lessons we can learn from its lengthy and dramatic history.
April is always a month of change and renewal, but this April took on a special significance for millions of people around the world, as fire engulfed one of the great landmarks of Europe, Notre Dame Cathedral. At almost 1000 years old, its legacy now extends vastly beyond its intended use as a place of worship. It has become, in many ways a symbol of Paris, the Middle Ages, and as a centre of arts, architecture and music. There are only a few dozen architectural monuments in human history to hold such high recognition – it stands amongst The Great Pyramids, the Great Wall and Stonehenge as one of the ancient monuments to stand the passage of time.
As Notre Dame burnt, I thought of one of our locally significant buildings, the Elsie Perrin Williams Estate. At a “young” 102 years old, Elsie’s Estate has a complex and fascinating history as a textbook example of an estate planning gone unexpectedly wrong.
The story behind the gift of the estate to the City of London, is of particular interest to me, as I have a long-time interest in History, having been founding President of The Secrets of Radar Museum, and a past board member of the London Heritage Council, as well as its predecessor, Landmarks London.
Elsie, and her estate.
Elsie Perrin Williams was the daughter of Daniel Perrin, who was a wealthy business owner here in London at the turn of the century who made his fortune selling biscuits and confectionaries. He passed away in 1908, and left his fortune in trust for his Wife and his Daughter Elsie. Elsie was married in 1905 (a few years prior to Daniel’s death) to Dr. Hadley Williams, who was a lecturer in the Medical school at Western. Her father gifted them the family summer retreat known as “Windermere” where Elsie spent her childhood summers. In 1917, Elsie and Hadley built the house which still stands today on the property, in the style of Spanish villas they had seen in Europe. The extensive grounds had a golf course, a cottage for the servants, and eventually, even consecrated ground where Hadley and Elsie lie to this day.
After Hadley’s death, Elsie became reclusive, and isolated. During this time, her main companion was her maid Harriet Corbett, with whom she became close friends in the years after the loss of Hadley. Hadley’s companionship so important to Elsie, and so she generously made arrangements at her death to look after Harriet in her will. Elsie passed away in June 1934 at the age of 58.
Just A few strings attached…
In her will, Elsie had decided to gift the house and property to the City of London for use as a public park and museum, but with a provision that Harriet would have the right to live in the house with a paid servant and a stipend until she wished to leave, or died. A significant amount of money was left in trust for the care of the property, as well as the care of Harriett. Harriet would live at Windermere until she died at age 84, in 1979, and ironically, spent more years living there than Elsie Perrin Williams had herself.
The reading of Elsie’s will was contentious: She had added a number of codicils shortly before her death to give more and more to Harriet, at the expense of her extended family, as well as the Ursuline order of Brescia, to whom she had previously promised estate gifts. Allegations of undue influence and capacity were made, and numerous court challenges progressed.
Eventually, the city decided it wanted access to some of the funds set in trust, and arranged in 1938 for the Ontario Government to pass an Act of Parliament to break the terms of Elsie’s will, and obtain $580,000 of the $1.3 million set aside for the care of the property. These funds were used to build part of Victoria Hospital, as well as the Old Central Library building on Queen’s Avenue. Another $100,000 was given to the Ursuline Sisters at the same time, leaving slightly less than half the funds available to maintain the estate. In todays dollars, the amounts redirected from her estate by the Ontario Government would be approximately $11.8 Million!
As a result, by the time of Harriet’s death, there was very little left in Elsie’s estate to pay for the upkeep of the house and grounds, and there were concerns that the property may fall into a state of disrepair, just as it was finally being turned over to the city.
Just after Harriet’s death, a group of concerned local citizens formed the Heritage London Foundation (HLF) to preserve the property, and others like it around the city, and took over management of Elsie’s estate in 1981…making the estate largely what it is today. Today, the Heritage London Foundation still manages the estate on behalf of the city, as well as Grosvenor Lodge. In 2017, then president of the foundation, Susan Bentley wrote a wonderful book called Elsie’s Estate that delves more fully into the fascinating background of the property and its past owners. Susan was kind enough to chat with me while I was prepping this article, and I wish to publicly acknowledge her tremendous effort put into the book, as well as the time she spent chatting with me in person.
Lessons for our own planning.
Elsie’s gift was generous on many levels, and it’s a shame that it ended up being a legacy with so much litigation and contention, and even interference by the Ontario Government. In 1938, I doubt that Elsie expected that Harriet would have survived to live to such an elderly age, and I would imagine she would have been mortified to see the political and family interference in her estate.
When doing your own planning, its important to work with your lawyer and other advisors to ensure your wishes will be followed, so that your estate won’t be challenged like Elsie’s was. In most situations that I have seen, it is also best to limit any terms and conditions to shorter time periods, so your estate doesn’t have a greater lifespan than you did.
So, next time you take a walk at the Elsie Perrin William’s state, visit Victoria hospital, or drive past the old Central Library – ask your self if its time to review your own estate plans.
Our hometown of London was a proud host of this year’s Juno awards, and let me tell you, it was one heck of a party! I wasn’t able to be there, but my friend Karmen was – right in the front row where she took this photo of host Sarah McLachlan. As a former professional musician and Music Professor, it brought back a lot of memories, and reminded me that not everything in our estate is money…
As I’m writing this newsletter, the City of London is coming down from a high from hosting the 2019 Juno awards. It’s pretty much all anyone can talk about around our office at Innovation Works. While I couldn’t attend the awards, music has been a major part of my life from a very young age. My wife Bridget and I actually met the first day of university at a mixer for Western University Music students. Years later, I completed a master’s degree at the University of Michigan, and then went on to go ABD (All but dissertation) towards a PhD in Music Psychology, and was teaching at both Western University and the University of Windsor.
Unfortunately, in the 90’s, the provincial government was not very friendly to arts, nor education, hence why I ended up becoming a Financial Planner. This career seemed like a better long-term prospect as local music gigs dried up and I had to spend more and more time touring. The price of being a musician was never seeing your family while touring endlessly to earn a living– something that was a non-negotiable for me.
What the Junos can teach us about estate planning
Relatively few musicians make a lot of money in Canada. By industry standards, 20 years ago I was making a fortune with a $40,000 income – but that was still vastly below the average working income in Canada. It takes years of hard work to become an “overnight” success and earn the big incomes some of the most famous artists command.
In recent years, the true value in the long term for musicians is in the intellectual property rights in their art, as well as the digital online platforms that they develop through the years. While we don’t think of these as “assets” in the monetary sense, those assets, and their control, can be significant in financial terms. It can be hard to put a value on these things, but increasingly for them, as well as you and I, our digital assets are an important consideration when planning an estate. Don’t believe me? Go back and read this newsletter that I wrote last year on the estate issues that both Prince and Aretha Franklin’s heirs are facing.
Digital Media, Social Media and estates
As we become a more digital society, it’s important that your will is updated to reflect the progress of technology. You might not have the same digital assets as the musicians performing at the Junos, but I can guarantee you that you have more than you may think.
Just over 15 years ago, Facebook did not exist. Today, statistically speaking, you probably have a significant portion of your life on Facebook. For many of us, it has become the gateway to friendships and communications. Ask yourself this: if you passed away – what happens to all that data? Who will be able to access your accounts? My wake-up call to the importance of this came late last year when a social media platform prompted me to wish my deceased friend a Happy Birthday to help celebrate his big day. To say it was jarring, would be a massive understatement.
Facebook and other sites are slowly starting to provide ways to control your information after you are gone, but the laws in Canada are moving slowly at no where near at the same pace. If you have redone a Will in the last 2 years, your lawyer probably has added a clause about digital assets. It’s time to dust off your Will and look to see if it gives your executor the power to control these after you are gone.
Other non-tangible assets (like music copyrights, art, etc.) are all important to contemplate as well. Some of these items are monetizable and might even have tax consequences after you pass away. As technology evolves, we’re going to have to be much more aware and creative with our estate planning to ensure our virtual assets are protected. It’s a smart thing to do – regardless if you won a Juno last month.
If you’ve already done this to your Will, go ahead and Sing a Happy Song, be a Snowbird on Echo Beach, and rise up to meet the Eyes of a Stranger. If not, even though It’s Complicated, call your lawyer, (or Call Me Maybe), so you can say There’s Nothing Holding Me Back, and your family Won’t Forget you when You’re gone and take care of it today.
Giving Publicly Traded Securities from a Private Corporation
Quiet Legacy was a proud sponsor this past year of the Pillar Community Innovation Awards. The collaboration award was won by the partnership that lead to London’s Safe Injection Clinic. Their story, and the deeply personal connection below led me to wonder what can be done by you and I in our investment planning to help fight this growing concern.
Image via CC2.0 license from Flickr by K-State Research
If you’ve spent any time in downtown London this summer, one of the most striking things you’ll notice is that our population of homeless folks has grown exponentially. In particular, the rise of the opioid epidemic has been heartbreaking and breathtaking to see.
I had a strong reminder of this a month ago. One of my former colleagues from almost 20 years ago, Pete (I have changed his name for privacy reasons), has struggled with mental health issues and drug addiction and ended up living on the streets for the last two years. Pete was a kind man, and in fact, had a university degree as a youth minister. His faith was a key part of his life. He had a former spouse and three children, whom he clearly loved dearly. I tell you all of this to illustrate a simple fact: addiction and mental health issues – and in a worst-case scenario a combination of the two – impact all parts of our society, and the repercussions are severe.
In our office, at least one of us would run into Pete every few weeks. His struggle was heartbreaking, but like many addicts, his mental health challenges would interfere with him getting proper support and treatment. The last time I saw him, he told me he was refusing to take his medication to prove to everyone that he did not have mental health issues. He was clearly in distress, and while I’m not a psychiatrist, I think I can safely say as someone who knew him for a long time that he obviously was in the midst of a severe mental-health crisis.
Shortly before Sarah, our Operations Director here at Quiet Legacy left on her maternity leave, she had commented that it had seemed odd that neither her nor I had run into Pete for a couple of months. I’d hoped at the time that he’d found his way back into a drug or mental health treatment program. Unfortunately, at the end of the summer I came across his obituary. Based on the wording , I inferred that my friend was yet another victim of the crisis in our city.
I wish I had a solution to what’s become an immense problem in our city. This one has weighed heavily on my conscience for the last few weeks. Could we have done more for him? Would it have helped?
Strangely, an answer may be found in the world of investments
Recently Dan Han, Vice President, Sales with NEI Investments came down to our office for a visit. NEI specializes in Socially Responsible Investment (SRI) Funds. Responsible Investment funds companies such as NEI have a specific mandate to not only focus on numerical returns like regular investment funds, to but also look at environmental, social and governance issues. As a result, SRI-oriented companies will screen and advocate for things like gender equity, environmental stewardship and many others. Each company takes a slightly different approach to this, but in the end, SRI companies are looking at more than just the bottom line as a measurement of success.
Dan and I, like his counterparts at other SRI companies have had several wide-ranging conversations over the years, but this one really hit home. In our conversation, Dan mentioned that NEI has become the first Canadian investment company to sign on with a group called Investors for Opioid Accountability (IOA). IOA’s members (a mix of SRI, faith-based, labour-based and government investors) control over 1.3 trillion in investible assets, and as a group, have undertaken an effort to advocate for greater responsibility from companies involved in the manufacturing and distribution of Opioids. Their collective hope is to see better controls in place to prevent the massive crisis plaguing our streets. Their efforts are one of many steps, and one of many innovations in the investment world that moves us away from traditional “return at any cost” investment strategies, to measuring multiple bottom lines.
Having investment companies hold Opioid producers and distributers to a higher standard will not bring back Pete – but it might, in its own way, bring change for the future to help others down the line. I’m certainly glad to see that my industry is acting for positive change. If I have the choice between a company which keeps this in mind or one that doesn’t, I’m going for the more socially responsible choice every time.
Ask yourself what’s important to you – and what your investment portfolio does to match your values
It has never been easier to incorporate your personal value system into your investment portfolio. Whether your interests are health-related, environmental, gender equity or others, it’s never been easier to ensure your investments are not compromising your values. There’s never been a better time to put what is important to you in your investments.