Our Monthly Newsletters

Being a Hero: A Gift with Significance

A gift with Significance.

If you have ever been involved in founding a charity, or “worked on the inside”, you gain a new perspective on the vital importance of donating to help support operational funding.  My thoughts have again turned to this topic as last month I had the honour of attending the funeral of Julia Wagg, who, with her wife Holly, founded The Ten Oaks Project(http://www.tenoaksproject.org/) in Ottawa over a decade ago.  Julia died of leukemia just a few days before her 37th birthday.

Her memorial service was extremely moving, as she had touched so many people with her brief but significant time with us  (It was also perhaps the first memorial service in history to involve the camp song “Baby Shark”, for which Julia was famous for leading at Ten Oaks!)

For me, however, one of the most moving moments involved her “parting charitable gift” to The Ten Oaks Project, The Wagg Family Legacy fund.  Julia and Holly have created a fund to specifically provide long term stability and operational funding to the organization they founded, and asked friends, family and colleagues to commit to monthly donations in Julia’s memory to the fund to provide a lasting legacy that will ensure organization stability.

Their gift isn’t “sexy”, but it is ever so significant.  The “why” behind this gift is the topic of this month’s newsletter.

Where your money goes when you donate.

When I work with clients on charitable gifts from their estate, one of the most common questions I get is around how effectively charities spend their money, and how much of the gift ends up going to administration costs.  It’s a natural question for people to ask – after all, they worked hard for the money they are giving away, but there is a lot of background needed to properly answer the question.

Most people are surprised to learn that, in my experience, the vast majority of charitable organizations actually have too low administration and salary costs relative to the work they are doing.  In particular, small to medium sized organizations are often understaffed, and perform an incredible amount of work relative to dollars raised and spent.

The reasons for these are complex, but one of the root causes in my experience, is that funders and donors are often reluctant to fund the day-to-day operations of a charity.  Its more “sexy” to donate and fund projects or specific causes (ie, research, etc.) than it is to fund the more basic things like keeping the lights on, and paying staff.

As someone who has helped found a charity, I can’t begin to tell you the frustration of trying to find creative ways to run operations in an organization when finding operational funding to do so is very, very difficult.

The net result is that organizations do not have the long-term stability necessary to execute on their mission effectively.  Because funding is not stable into the future, many charity staff members work on short term contracts of less than two years, and have relatively low job security.  As a result, the industry as a whole, understandably sees a lot of turnover.

In my experience, charity employees work for about 70% of the salary of an equivalent for-profit position, and in most cases, have limited or poor benefits.  Yet these very same people, driven by their passion for the mission and mandate of their organization, often work longer hours and harder than their for-profit equivalents.    Job stress can be very, very high, as organizational resources are very limited.  In many cases, 1 full time charity worker does the job or 2 or 3 people in the private sector.

Don’t ever doubt that if any part of your donation goes to administration that the money isn’t being well spent – charities, of all organizations, know how to stretch a dollar to the limit.

Be a Julia.

To me, Julia’s final gift speaks to the heart of creating a Quiet Legacy.  There are lots of people who want their name in lights, but not nearly enough people who want their gift to keep the lights on.  The true heroes, in my opinion, are the people who help an organization thrive for the long term.  Julia was certainly that kind of hero.

PS – Julia’s final note on linked-in has some remarkable thoughts as she approached the last weeks of her life, and on living your life with significance, and is well worth reading.  You can find it at  https://www.linkedin.com/pulse/i-am-going-die-julia-wagg-chrl


This newsletter contains general information only and is intended for informational and educational purposes.  While information contained in this newsletter is believed to be reliable and accurate at the time of printing, we do not guarantee, represent or warrant that the information contained in this newsletter is accurate, complete, reliable, verified or error-free. This newsletter should not be taken or relied upon as providing legal, accounting or tax advice.  You should obtain your own personal and independent professional advice, from your lawyer and/or accountant, to take into account your particular circumstances.

Choosing your executor & leaving a gift to your favourite Charity the right way.

This month’s newsletter comes to you courtesy of my dear friend Colleen DeJager, who is about to retire as Director of Planned & Memorial Giving for London Health Sciences Foundation, where she has been working for the last 12 years.

Prior to this, Colleen started her career as a professional Trust Officer, and worked for a few of the larger trust companies in Canada.  This dual background has given Colleen some unique insights into both managing estates where charitable gifts are involved, and being on the receiving end as a Charity.  I’ve had the honor to present with Colleen a number of times at conferences and training sessions over the years, and very much value her perspective on the intersection of Estates and Charities.

Colleen is retiring shortly, but she’ll still remain active, doing some part-time consulting work for charities on their planned giving programs over the next few years.  She is also a faculty member for the Canadian Association of Gift Planners (CAGP), helping to train fundraisers across Canada in the art and science of planned giving.

Colleen was kind enough to sit down with me in my office a few weeks ago and graciously allowed me to interview her to share her insights as she moves into retirement.  Her answers below are based on both her personal and professional experience, and are not necessarily the view of any of her past employers.

Congratulations on your retirement Colleen!  Now that you have been on both sides of the charitable giving equation, (both as a Trust Officer administering estates and as a charity representative), what are the key things you would like to let our readers know from your experience?

Colleen: I think the key thing I would suggest is that you need to talk to the charity if you are planning to support them through a bequest or other future planned gift.  There are all kinds of examples of where people have only talked to their planner or advisor and have failed to explore the charity enough to ensure their gift will actually work within the charity’s agenda or mandate, to understand that the legal name of the charity is accurate and even to confirm the organization’s charitable registration number which can be very helpful in ensuring the gift goes to the right organization.

Secondly, it is very important to make sure the language in a will or gift is very clear. I have seen situations where charities have been able to quietly agree amongst themselves to settle confusing bequest terms in wills in order to avoid having to approach the court for a formal decision.  Usually this is where bequest wording has not been clear or the charity has been misnamed significantly enough to create confusion as to the Testator’s true wishes.  Most often however, court input is required.  In a few cases, the will wording almost implied that there were two charities, when everyone involved was certain the donor intended to make a gift to only one organization.  As a result, a legal process was required to determine which charity the donor might have meant, creating additional cost to the charities and the estate in both time and money. I have seen costs going into the tens of thousands of dollars where the residue of an estate is unclear due to poor or incomplete will drafting, and the matter has had to be brought before the courts for a decision.

How often have you seen problems where charitable bequests have required court intervention?

Colleen:  The percentage of estates that involve litigation is relatively small.  Where you can potentially run into trouble is where the testator did not adequately provide for their spouses, children and/or other dependents and there laws in place to protect against this.  In such cases, legal direction is required through the courts in order to ensure all interests are protected, which costs time and money to the detriment of all involved.   Sometimes it is simply a typo in the will that causes enough confusion as to the testator’s wishes that asking a judge to decide is justified.  So litigation isn’t always a negative thing – sometimes it can be positive where it clarifies the unclear.  It’s just costly, both in time and money, so it’s important your will is drafted as clearly as possible at all times.  Importantly, using the “will kits” that are commercially available online or in stores in order to save the few hundred dollars it costs for a properly drafted and legally valid will,  can cause a great deal of trouble for your executor and beneficiaries after you are gone, often negating your intentions completely.  As with drafting a proper will, if a will does end up in court it is important to hire a solicitor or litigator who specializes in estate law.

In your opinion, how should people work with their financial, legal and tax advisors to set up a gift from their estate to minimize problems?

Colleen:  Make sure the advisor you are working with is willing to take the time to sit down with you and understand what it is that you want to accomplish with your philanthropy, and then work with you to achieve that goal.  Often, advisors who are philanthropic themselves will invest extra time to ensure they understand the depth of what the client/donor actually wants to achieve and then ensure that happens.  Advisors who possess this philosophy will enrich their relationships with their clients tenfold.

What do you suggest when it comes to picking an executor for your estate?

Colleen:  When choosing your executor you want to make sure that they are willing to do it.  Make sure they are up for the job – it’s not an easy job.  A lot of people think it is an honour to be named an executor, but in reality it is a big, big job that comes with a lot of legal obligations and responsibility.   The fiduciary responsibility of an executor is one of the highest legal expectations in our land and as such, is taken very seriously by the courts.  Executors can’t make mistakes, and there are significant and costly ramifications both personally, and to the estate, for not doing the job properly.

Ideally, you want to appoint an executor who is young enough to outlive you, and you should have at least one backup executor named in the will in case your first choice is unable or unwilling to act after you have passed away.

If you don’t have any family or friends who would be up to the task, you can also appoint a lawyer but again, make sure you name an estate specialist.  Non-specialized lawyers may not have the necessary experience and expertise to work in this tricky area.  Personally, I’m a big fan of corporate executors like trust companies who handle estates on a daily basis.  Their staff are highly-trained specialists and trust companies will always be around, as opposed to individuals who can die, move away, or retire.

Thank you Colleen for sharing your personal insights with us.  Enjoy your retirement!

Colleen:  You are most welcome – it has been my pleasure!



It’s an ugly word, and one all too associated at times with financial and estate fraud.  While it is not something that I see professionally on a regular basis, from time to time it does raise its head.

Brace yourselves; this is going to be a bit longer than normal, but it’s important you read it all the way through!

In the last few weeks, Fraud has hit the news headlines a number of times:

•    A Toronto real-estate Lawyer was sentenced to 3.5 years over a $2,000,000 fraud involving deposit made on condominium sales.  (Toronto Star, Feb 23rd)

•    A fraud-detection agent (!!)  in Ajax was charged with using phoney credit cards and other schemes to steal from businesses (London Free Press, Feb 17th)

•    In Waterloo, an individual claiming to sell Makeup over social media is being hunted by police for taking payment but not delivering the goods (CBC, Mar 3rd)

•    Manulife Financial admitted that they had been fined $1.2 Million by FINTRAC, Canada’s anti-money laundering operation over for failing to report 1174 Suspicious transactions, as is required by law.  According to the Toronto Star, many of these transaction related to a Winnipeg-based felon selling counterfeit medication to Americans over the internet. (Toronto Star, Feb 27th)

•    A Kitchener-area convicted financial advisor (who wrote a book, and claimed to be an expert on finance) ended her 4-year sentence late last year after taking $1.3 Million in client money and using it on cosmetic surgery, a Mercedes, and personal expenses (Beacon-Herald, Oct 24, 2013)

The last one in particular leaves a bad taste in my mouth, as I know several of the victims, and had met the fraudster herself.  What makes my blood boil even more though, is that the papers called her “a financial planner”.  Not only did she fail to hold a financial planning designation, to say she violated nearly every regulatory & ethical code applicable to financial planners would be a massive understatement.

In my own practice, over the years, I’ve had some strange and interesting cases arise such as:

•    A drug-addicted child attempting to forge a parent’s signature on a redemption form.

•    Someone claiming to be leaving the country quickly, needing us to “speed up the process” and get him a “Certified Cheque by tomorrow” to a third party under highly unusual circumstances.

•    Someone attempting to get information on their ex-spouse’s accounts.

In all cases, we have policies and procedures in place to prevent anyone from gaining information who is not entitled.  That said, it only takes one moment of letting your guard down before an opportunist can step in and do some serious damage.

Constant vigilance is key.

While fraud remains relatively rare, I cannot overstate the importance of taking steps to ensure that you and your family are not victims of fraud:

1)    Request your credit check annually from TransUnion and Equifax each year.

On their websites, you can annually request your credit report.  They will try to upsell you, however, to instant access for a fee, but by law they must provide a free copy each year via mail.

As soon as you get it, take a look for any unusual items or activity, and report it right away

2)    Never, ever take anything for granted that is said by a financial security or investment representative .

For mutual fund investment representatives, you can verify their registration.  Anyone registered to sell mutual funds in the province of Ontario has to be registered with the Ontario Securities Commission (OSC).  You can go to http://www.osc.gov.on.ca/en/Dealers_registrant-search_index.htm and put in their name and their firm’s dealer name and see what they are registered to offer.  (In my case, you can put my mutual fund dealer “Quadrus Investment Services Ltd.” , and “Fraser, Ryan” to find my record.)

Note that some advisors, like myself, may have an incorporated practice – you will need their dealer’s name, rather than their incorporated name to do the search.

On the insurance side of the equation, you can search someone up with FSCO – the Financial services Commission of Ontario at http://www5.fsco.gov.on.ca/alias2a/agents.aspx .  You can put in the advisor’s last name, as well as their city.  Note that the city may be based on the advisors place of residence, not necessarily the advisor’s office location.  If you don’t see them at first, try searching by last name with no city chosen.

3)     If your financial institution (or the CRA) sends you an email saying you have been compromised. Do not click on any links – ever!

99.9% of the time, these emails are schemes designed to get you to give a scam artist your username and password.  Call your institution (at the number you look up, not the one in the email!), and ask to speak to the fraud department to confirm if the email is legitimate.  Often if you look closely, some of the finer details will give away that the communication is not legitimate.

4)    If you receive a phone call wanting you to confirm your identity, Don’t!

Ask for a case number, then hang up, and call the institution based on the fraud number on their website.

5)    Maintain anti-virus and anti-malware software on your computer at all times.

 Software exists which can pick up your keystrokes as you log onto websites with your username and password.

6)    Make a point of calling the financial institutions your advisor has you with, and getting web-access to your accounts where available.

It’s pretty hard for someone to fake a website AND a call centre.

7)    Try to deal with well-known reputable companies, and avoid “suspiciously good” product offerings.

Read the fine print.  One type of investment is being marketed and advertises “8% Fixed returns”.   People read that as 8% guaranteed return – which it is not.  The fact that a “good” GIC rate is around 2% right now should be used as a guideline – if it offers a return significantly higher, it comes with significantly more risk.  A company advertising these products was recently put on a “name and shame” list by FSCO, as they are not actually licensed to sell the advertised product.

8)    Don’t complain about higher fees that come with better regulated products.

Mutual funds may charge higher fees than other alternatives, however, consumer protections around Mutual Funds are, in my opinion, stronger than just about any other investment offering in Canada.  While your returns aren’t guaranteed, the regulators do a very good job ensuring certain levels of protection if anything goes wrong with your advisor or dealer.

Scared yet?

I don’t mean to scare you – there are way more quality people in the financial industry than there are scam artists and fraudsters.  Fraud is a ridiculously small percentage of the overall number of transactions that go on each day – but to the person caught by it, it can be devastating.  Be vigilant, ask lots of questions and do your homework.


Lessons Learned from my Mom’s Passing – 1 year Later

As you might remember from my post last June, the sending of this newsletter marks the one year anniversary of my mother’s passing after a prolonged journey with breast cancer. A few months after her death, I wrote on the many little things we learned as a family during that time in regards to the ’day to day‘ aspects of estate planning. It remains the most popular, and commented-upon, article I have ever written. (You can find a link to it here.)

At the one year mark, and in honor of Valentine’s Day, I wanted to share with you a few other items, some small, some large from our experience.

1)  Your tax situation can be worse as a single rather than a couple

As my dad is discovering, from a tax perspective, a couple is often treated more favourably than a single in many ways. RRIF/RRSP rollovers to spouse mean that in the year following, you can end up with GIS or OAS claw backs, as you no longer have income splitting opportunities, and your minimum RRIF withdrawal is now based on the combined assets of you and your spouse’s accounts.

Needless to say, January 2017 brought a big surprise in how much he has to pull from his RRIF, and the impact it will have on his taxes.

2) Give yourself time before making big decisions

I think it’s safe to say that my dad, my sister, and I have been learning that, while one adjusts, the grieving process can take far longer to work through than you might anticipate. Certainly, you find it impairs your judgment at unexpected times. Generally, it’s not wise to make big financial decisions for a year or so.

3) Time to go see the lawyer about wills

Your lawyer generally should have written your will in such a way as to anticipate one spouse predeceasing the other. That said, my entire family now finds ourselves in a situation where we should all be revising our wills and Powers of Attorney (POA). Some of the reasons are practical (Mom was named as one of my backup POAs), but others are more subtle.

Having witnessed the last three years of Mom’s decline, it’s fair to say that we have all formed new opinions on what we would or wouldn’t want if we find ourselves in a similar situation to mom in the future. The directions I would give in my POA today are really different from those from a few years ago.

On a more practical front, my  father’s will  & POAs and my own reference my mother in a number of spots that are no longer relevant. It’s probably best to remove those references to prevent any unanticipated lack of clarity going forward.

4) Charitable giving changes with the death of a loved one

I think it’s fair to say that some folks in my family who traditionally haven’t donated to charity a lot in their lifetime have begun to donate significant amounts for the first time. (A fact of which I am immensely proud, given my profession and specialty in charitable planning!)

Even though Bridget, my wife, and myself have been quite charitable over the years, we’ve now included St. Joseph’s Hospice in our giving. Mom spent her last two months at Hospice, and there is no way for my family to repay the immense debt we owe the wonderful folks who work there.

5) Segregated Funds and insurance transfers can make some things much easier – but care and consideration is needed

For non-registered money, segregated funds and life insurance provided for quick and easy transfer of assets, outside the will – sometimes in a matter of days. This can be important both for transfers to family, and increasingly, for charitable gifts at death, thanks to recent CRA rule changes. Settling an estate with other non-registered investments can take significantly longer due to probate and other aspects settling of the estate. It is important however to ensure that you coordinate your will and your beneficiaries on these products to ensure everything gets to where you want it to go.

In Mom’s case, everything went smoothly, but recently we worked with a new client and discovered that their lawyer and their stockbroker had not given coordinated instructions in the will and beneficiary designation of the segregated fund, and it would have lead to a major problem in disbursing the estate. Fortunately, when they transferred the assets to us we were able to correct this for them long before it became a problem.

6) Gifts of set amounts to beneficiaries can be eroded by inflation fairly quickly

One of the things that was super important to Mom was travel – so much so, she actually had a clause in her will that left money to my sister and me expressly for that purpose. When she last did her will, about eight years ago, she set aside a small amount that seemed reasonable. In that time period, however, both my sister and I had children, and the cost of travel increased substantially.

My mother was very concerned in her last days that the amount she stated would not be enough, and fixated on this and made Dad promise her daily that he would gift some extra funds to us to ensure we could take the whole family on a trip. While neither my sister, nor myself were too concerned, it truly became a major concern to mom, as she saw this as a legacy for her kids and grandkids, and related to one of her true passions in life.

I often suggest to clients that you talk to your lawyer about percentages and shares in your will rather than fixed amounts. As a financial planner, my concern is that you may not have enough funds in your estate at the end to meet set dollar figures, and that can impact cash flow for your survivors. In this case though, it turns out that the set amount was eroded by inflation, and the estate had more than enough to cover the true cost.

By the time mom wanted to make changes, however, her mental capacity was in serious question and she was not able to revise her will legally. Dad had no issues honouring her wish using his own funds to make up the difference, but it is easy to see where under different circumstances, a similar issue could end up with a will being contested by a beneficiary.

This is a tricky legal area – there are significant legal ramifications to naming flat-amount gifts versus a share or residual interest, and you should always have this conversation with your estate lawyer. A good estate lawyer can draft your will to address your concerns and ensure your wishes are followed in most circumstances.

One year later

I think it’s fair to say that we are moving on as a family, but the best analogy I can give is that we feel like a person who has lost a limb – we adapt, but we certainly aren’t all that we used to be without mom’s presence. Like all life events, what we have learned has enriched our lives tremendously, and what we have lost we will continue to miss forever.

I’m happy also to report that my Dad’s health has improved tremendously – as some of you know, it’s been a long hard road for him both as mom’s caregiver, as well as dealing with his own health issues.  As I write this, he’s about to board a plane to Cuba, to spend time in a place that was special to both him and mom, filled with many dear friends. It seems a fitting way for him to draw this long year to a close.

All the best,

The most Financial Planning fun I’ve ever had.

The most Financial Planning fun I’ve ever had.

In early December, I probably had the most fun I’ve ever had working with a client. Joan (or so we will call her to protect the innocent) is in her late 50s, recently retired and a chronic saver.

Joan had realized that her chronic savings habits had placed her in a bit of a pickle – between her and her husband, Ted, she had nearly $700,000 tucked away in RRSPs and LIRAs. As Joan and Ted have a very modest lifestyle, they were quite comfortable living on Ted’s pension and a bit of casual work that both of them did in retirement.

When we looked at the tax situation on their estate, it quickly became clear that the government would end up taking nearly 50 per cent of the $700,000 in RRSPs if we did nothing. The tax bill on her estate if she went today would be around $300,000, and based on our projection, likely grow to $500,000 by her mid-70s!

Needless to say, Joan was rather aghast at the situation, especially because she’s currently paying very little in tax. Her income will be quite small (around $25,000 a year) until her OAS and CPP kick in at 65 and then jumps significantly as she will be forced to start taking from her RRSPs at age 72.

Fortunately, Joan is very, very interested in charity.

We realized that Joan can pull money from her RRSP today at a tax rate of about 20 per cent, which is way better than the 53.5 per cent maximum rate she and Ted would be paying on most of their RRSPs and Capital Gains in Ontario via their estate. This is also much lower than her tax rate will be in her 60s and 70s when she starts collecting on other pensions and RRIFs.

Here is our plan:

Step 1: Drain the RRSP, give money to charity.

Joan is going to pull $12,000 a year from her RRSP for 10 years and donate that amount to charity.  That donation entitles her to a roughly 40 per cent tax break here in Ontario, which lets her pull out approximately another $10,000 a year from her RRSP – essentially tax-free due to the charitable tax credit – and turn around and re-invest it in her and Ted’s TFSAs. At the end of 10 years that’s going to be about $125,000 in her TFSA, assuming she gets a 4 per cent return on her money.

By the time she’s started collecting CPP and OAS at 65, she’ll have drained her RRSP by $220,000 and have a net $125,000 in her pocket, leaving her virtually in the same financial position after 10 years as leaving the money in the RRSP.

Step 2: Multiply the effect – big time!

The really exciting part of this strategy is how we are going to handle the donation to the charity. Rather than just giving cash, we are setting up an insurance policy which will be owned by the charity, and paid for by Joan’s generous $12,000 annual gift. This policy will pay out $400,000 to the charity on the death of Joan and Ted. We are turning their $120,000 into $400,000 – multiplying their gift by more than 300 per cent by using the insurance.

Net result:

After 10 years, Joan has the same amount of money in hand to her estate, has reduced her unneeded income in her 70s, and has managed to make a $400,000 gift to her favourite charity.

That’s a $400,000 transformation gift made to charity at basically a net cost to her estate of nothing.

I’m pretty sure that both Joan and I skipped all the way home with big smiles on our faces that day.

The information provided is based on current tax legislation and interpretations for Canadian residents and is accurate to the best of our knowledge as of the date of publication. Future changes to tax legislation and interpretations may affect this information. This information is general in nature, and is not intended to be legal or tax advice. For specific situations, you should consult the appropriate legal, accounting or tax advisor.

Lest We Forget – November 2016

November 2016 newsletter

Lest we forget – simplifying your estate

As many of you know, I was one of the co-founders of The Secrets of Radar Museum, located here in London, behind Parkwood Hospital. During WWII, over 6000 Canadians from all walks of life were drawn into the Radar training program, which was more secret than efforts to develop the atomic bomb. Our vets were trained here, and in the UK, and couldn’t talk about what they did until 1991. If you’ve never heard of the museum, I would encourage you to visit.

I have made many wonderful friends from my time at the museum, including my friend Haydn Lewellyn Davis, who was an art student recruited into radar. He and I became great friends, having a shared business and arts background – so much so, that a year after he passed away, Bridget and I named our youngest son in his honor. Haydn served in the UK for most of the war, and amongst other things, drew a poster for the war bond effort (the original now hangs in the Victoria & Albert Museum in London England). You can read about his and other vet’s stories at the museum.

More info can be found at www.secretsofradar.com.

As memory fades

When we started Secrets of Radar, many of our vets were in their late seventies, and the few who remain today are in their mid nineties. Like all of us, our vets found that as we age, our cognitive abilities begin to fade. For some, it’s a normal process, and for others, the process can be accelerated at a very young age due to health issues such as Alzheimer disease or dementia.

There are a number of things to think about in estate planning as we age, but one of the most overlooked is the impact of cognitive changes on long-term estate plans. I think there are a number of key questions we all need to ask ourselves, and I wish financial and estate planners would spend more time talking with people about some of these difficult topics on a more regular basis.

Here’s a list of key items from my experience:

  • How complex is your investment portfolio? Are you and your spouse equally comfortable staying on top of it?

I have worked with a number of clients over the years who self-managed some very impressive portfolios during their working and early retirement years. However, in most cases, the portfolio is being managed by one spouse. The other spouse may not be comfortable, or capable, of managing a portfolio of that complexity.

Put some thought into how and when it would be appropriate to simplify your investment structure, and how to ensure both spouses are involved (or, if you’re single, that your power of attorney would be capable and willing to manage something of that complexity).

Ask yourself this: Can you see yourself managing a portfolio as complex as the one you have today in 10 years? Could your spouse? If the answer is no, then start the process of simplifying things today. Once you begin to draw down on income, tiny mistakes can have major long-term consequences on your income and net worth.

  • You can’t change your will and/or power of attorney documents if you’re no longer legally capable.

This is one of the trickiest and most difficult things to handle. If you’re no longer legally capable, no one else can alter your will or powers of attorney documents. Your power of attorney has no legal authority to make changes to your estate. If there is one single argument that should encourage you to review and refresh these documents every few years, this is it. One of the most difficult discussions I’ve ever had with a family was explaining that dad’s estate was locked in stone, even though the situation had changed dramatically, and there was absolutely nothing we could do about it.

That said, capability is an “in the moment” test – I’ve seen situations where making a will or beneficiary change in the morning would have been fine, but by mid-afternoon the person in question could no longer show they understood the consequences of their actions. This can be distressing and challenging for a family who may not understand why a lawyer or advisor might not be willing to have a document signed at that point in time. Please remember that as professionals we have a responsibility to the client – we cannot allow changes to their accounts if we sense that the client is not cognitively capable of understanding the consequences of those changes.

  • Regardless of age, we can all be cognitively impaired by health and life events.

As most of you know, my mother went into hospice around Christmas of last year, and passed away in February. The day she went into hospice, I made a major blunder on what was, for me, a very simple piece of paperwork. Fortunately, a few days later we realized what I had done and we were able to correct the situation quickly, and without incident. It was, however, a major eye-opener for me, as this wasn’t something I would consider difficult.  I did not expect, at the age of 41, to be facing cognitive impairment in my own work, but there it was, staring me in the face.   Life happens, and it usually happens at the worst of times.

For the next two months, as my mom’s situation progressed, I asked a trusted colleague to double check all of my work – even if it seemed very simple. While I didn’t make any other errors in that time period, it was an exceptionally stressful time and my colleague’s assistance and oversight was an excellent way to ensure that I wasn’t going to miss something while I was not functioning at my best. It never hurts to have an extra set of eyes looking at your finances – whether you’re 91 or 41.

The Great Pumpkin & Planning for Special Needs

The Great Pumpkin & Planning for Special Needs

The Great Pumpkin & Planning for Special Needs

My son is absolutely obsessed with Charles Schultz’s Peanuts comics. He can tell you what date Sally first appeared in the comics, how Lucy was a baby at one point, and discuss when the Peanuts gang first appeared in a cancelled pre-cursor comic called “Li’l Folks.” Needless to say, now that October is upon us, discussion in our home inevitably turns to the Great Pumpkin.

Like many other Canadian children, he struggles with mental health issues, and his obsessive-compulsive factual knowledge of Peanuts is one of many results. We wouldn’t change him for the world though. He sees everything differently than most people do, which can be just as much a blessing as it can be a curse. We like to say the positives balance out the negatives, and both can be extreme.

Like many other Canadian parents, we’re concerned about what the future holds for our son. After lots of hard work and therapy, we think he’ll lead a very exciting and productive life, but we have to stop and think about our estate plans – particularly what we can do if things turn out differently for him.  

Planning for family members with special needs

When it comes to estate planning, I cannot overstate the importance of making sure each of your professional advisors understand any and all special needs that are specific to your family. I recently met with a client whose lawyer had written a will incorporating what’s known as a Henson Trust . It was brilliant work. A Henson trust is a special trust designed to ensure adult children who receive the Ontario Disability Support Pension don’t over inherit to the point where their benefits and access to programs and services are taken away. It’s a tricky aspect of estate planning, but also a very important one.

Unfortunately in this case, the client’s investment advisor wasn’t aware of the child’s special needs and had structured the family’s investment portfolio in such a way that would transfer most of the family’s assets directly to the child and bypass the will. This meant the disabled adult child would inherit too much money directly and be immediately removed from crucial support programs. Obviously this wasn’t a good scenario, especially given the fact that all the complex tricky work had been handled and the family thought everything was in order.

Integrated planning is critical. Make sure your financial security advisor, lawyer, accountant and others are fully aware of your specific family situation and receive regular updates when anything changes.

Ensuring adequate support for your dependents is crucial

In the case of disabled children in Ontario, your estate has a legal obligation to support anyone who is financially dependent on you. A court has the power to override any beneficiary designation on insurance policies, RRIF/RRSP assets, and your will if you fail to adequately provide for them. This can wreak havoc on tax planning if, for example, a charitable bequest is overridden, and the estate is required to pay significantly higher taxes.

We often see this scenario unfold in other situations as well, when it comes to alimony payments or failing to update a will after recognizing common-law status with a new partner, for example. This has also occurred when somebody who was providing support to elderly parents with limited resources dies.

Be sure to review your estate plans and ensure you make all your professional advisors aware of the planning updates that impact your financial situation.

Have a great Halloween season – and may the Great Pumpkin smile kindly on your estate.

The information provided is based on current tax legislation and interpretations for Canadian residents and is accurate to the best of our knowledge as of the date of publication. Future changes to tax legislation and interpretations may affect this information. This information is general in nature, and is not intended to be legal or tax advice. For specific situations, you should consult the appropriate legal, accounting or tax advisor.


Image:  JD Hancock, flickr.com  CC2.0


September 2016

Making use of current tax rules on insurance while you can!

Earlier this spring, I referenced the 15 % interest rate Canadians used to get on GICs back in 1982.   With rates currently closer to 1.5 %, and people generally living longer than they did in 1982, the Canada Revenue Agency has re-written the rules, which take effect on Jan. 1, 2017 and change the game considerably. As of Jan. 1, 2017, the amount of money a new insurance policy can hold as tax advantaged over the long term is much less generous than it is today.

This change creates some interesting planning strategies and opportunities that we can begin to implement today:

Purchase a life insurance policy on your child or grandchild

Children are usually easily insured compared to adults, and policy ownership can also be passed to children from parents or grandparents with no tax consequences. This means you can set up and pay for a policy, and upon your passing, the child will inherit it. There’s no tax consequences to your estate, and the child would have a life-long asset that would likely provide more tax advantages over the long term than anything they could obtain as an adult and under the new tax rules. 

Ive have done this with my kids. I set up policies when they were born and will have them paid up by the time they turn 10 years old. Im also able to voluntarily contribute more money into their policies, which will grow on a taxadvantaged basis. When the kids are adults, I can hand the policies over without tax consequences on my end and theyll have a wonderful asset for their future, and the future of their children.

Use an annuity to buy yourself a pension

If you use non-registered money to purchase an annuity, youre effectively buying yourself a pension plan with an incredibly low rate of taxation. Should you wait until Jan. 1, 2017, prescribed annuities will still be tax effective but not nearly as much as they currently are in most situations. 

This can be useful if youre collecting a Guaranteed Income Supplement or if youre subject to Old Age Security claw back. Since much of the annuity is non-taxable, you can reduce your after-tax cash flow much better than you can with almost any other type of investment.

Some companies have recently offered cash-refund annuities. Many people dont realize annuities are insurance products. This means if you die the unspent portion of certain types of annuities can be returned to your estate or go directly to your beneficiary without being subject to probate fees, if appropriate.

Use an annuity to one-timefund a life insurance gift 

Taxation on some non-registered life annuities will increase in January 2017. If youre a senior, the difference in taxable income may be substantial. You can use the insurance proceeds as a charitable gift, offset your estate’s income-tax bill directly or just pass funds down to your beneficiaries. This can be a great “set it and forget it” way to transfer wealth.

The information provided is based on current tax legislation and interpretations for Canadian residents and is accurate to the best of our knowledge as of the date of publication. Future changes to tax legislation and interpretations may affect this information. This information is general in nature, and is not intended to be legal or tax advice. For specific situations, you should consult the appropriate legal, accounting or tax advisor.

Lessons Learned from my Mom’s last days.

Lessons Learned from my Mom’s last days.

April 2016 charity and estate newsletter

As some of you know, my mom has spent the last few years fighting breast cancer, and she passed away in mid February. I’ve been off for a few weeks (and I do apologize for the lack of a newsletter in this time period!), helping my father, whose own health has been shaky at best.  We often talk about estate planning in textbook terms – but nothing can prepare you for it like life.

A few estate-settlement and end-of-life things my family has learned:

  1. Make sure everyone knows where important government documents are stored and make sure more than one key person can access them.In my mother’s last few months at home, we suspect the cancer may have spread to her brain, leading to some odd behaviour.In particular, she felt the need to move her wedding certificate, driver’s license and other key documents to some very odd places. We needed the wedding certificate to transfer her CPP and pension plan assets to Dad. As it turned out, she had moved it to a drawer in the basement (along with underwear, socks and some kitchenware). We spent hours looking for it, only to find it by accident.

    We still can’t find mom’s wedding ring. She took it off just before going to hospice. While in the bigger scheme of the estate these seem like small issues, they can be very distressing for a family dealing with the emotional distress of losing a loved one.

    **Updated note:  We finally found her ring about 8 months after I wrote this article!

  1. Online-only banking can be problematic when it comes to transferring accounts. Mom had a portion of her assets with an online-only bank. After a month, $60 in registered mail and a lot of time on hold, we were finally able to transfer her accounts. Brick-and-mortar financial institutions can almost always settle these transfers in a matter of hours and with minimal hassle.
  2. Don’t assume that your power of attorney (POA) and executor documents are easily shared between bank branches. We dealt with an institution that is usually very good at handling these issues.  Despite this, when we had to access the accounts from the branch near the hospice, they were unable to find the POA details on their system.  It’s always best to have a paper copy when you need something done urgently.
  3. Don’t wait too long to set up POA access if a family member is ill. Before we had the original POAs in hand, mom tried to get information on her credit card accounts over the phone.  Unfortunately, due to the medications and other effects of her disease, she wasn’t able to answer the security questions and she hung up in frustration.  This resulted in some late payments on her accounts because we had no way of knowing what the balances were.
  4. Save and print a list of important email contacts. Mom kept in touch with many of her friends around the world via email. When she moved into hospice, we brought a laptop; however, her desktop computer had the email contacts stored on it. As a result, we couldn’t easily put her in touch with her friends unless they emailed her first.
  5. Be prepared for some strange requests. In her last few weeks, mom kept insisting she needed large quantities of cash on hand. The hospice (and our family) was very uncomfortable having a patient keep cash in the facility. Trust officer friends of mine confirmed this is a surprisingly common end-of-life situation which they often encounter. Finding ways to deny such requests for cash, while maintaining dignity for all involved was far trickier than we imagined – but very important to protect mom, and to protect the hospice staff from any risk of liability.
  6. Review your beneficiary designations on a regular basis. We found one account which did not have a properly designated beneficiary four months before mom died.  Fortunately, she still had the capacity to sign a beneficiary change form, as a POA cannot alter beneficiary designations.

At the end of the day, our family owes an immense debt of gratitude to the wonderful people at St. Joseph Hospice here in London, without whom I cannot imagine how we would have survived the last few months. We’re also grateful for the planning work we did in the last few years to minimize the difficulty of settling mom’s estate when the time finally came. Despite the challenges above, we managed to settle 99.9 per cent of her estate within a month. I’m extremely grateful for the wisdom gained from the many fine professionals in law, accounting, financial planning, banking and trusts that I’ve worked with over the years.