My name is Mark Goodfield. Welcome to The Blunt Bean Counter ™, a blog that shares my thoughts on income taxes, finance and the psychology of money. I am a Chartered Professional Accountant and a partner with BDO. This blog is meant for everyone, but in particular for high net worth individuals and owners of private corporations. My posts are blunt, opinionated and even have a twist of humour/sarcasm. You've been warned. Please note the blog posts are time sensitive and subject to changes in legislation or law.

Monday, March 11, 2019

Ecommerce Sales Tax in the U.S.: The Road to Wayfair

Taxation can be slow to change, but legislatures, courts and other government bodies eventually cause the tax laws to catch up. That’s what happened last year with a landmark U.S. court decision affectionately known as Wayfair. (The full title is South Dakota v. Wayfair, Inc.)­

This decision from the U.S. Supreme Court brought sales tax into the 21st century by finally ushering ecommerce into the sales tax tent. Now ecommerce companies — even Canadian companies — will need to think about collecting state sales tax. And while Wayfair was triggered by ecommerce, other Canadian companies will also feel the impact when doing business with the U.S.

Today Naomi Cutler, Senior Manager, U.S. State and Local Tax at BDO, zooms out to reflect on the events leading up to this key decision — and how Canadian business owners and leaders need to adapt.
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How U.S. state sales tax works


Most U.S. states impose sales tax on purchases of goods, and many also tax some services. For those states with a sales tax, the tax revenues often account for the largest income line item in the budget.

Businesses resident in the state are required to collect the tax. Over 25 years ago, the federal Supreme Court ruled that out-of-state businesses must have a physical presence in-state for sales tax collection laws to apply to them.

E-commerce


With the rise of e-commerce came deficits in state budgets. Most e-commerce retailers were not required to collect sales tax, so many transactions were going “un-taxed.” Bricks and mortar stores were also suffering from lost revenue, partially attributable to not being able to compete with the “sales tax discount” available to consumers who purchase online.

Congress drafted several “Marketplace Fairness Acts” in efforts to create sales tax parity between online retailers and their competitors with retail storefronts. None of these passed through both the House and Senate. Vocal states like New Hampshire, the Live Free or Die state, derided the idea that their local businesses should be stuck with the headache of collection of any state’s tax.

Meanwhile, Supreme Court Justice Kennedy made a comment in passing, suggesting that it was time to bring a new case to the Supreme Court to test prior rulings on physical presence.

Several states took up the challenge, and South Dakota was the first to make it to court. Its legislature drafted a law that looked to be unconstitutional: Per the law, an out-of-state business will need to collect state sales tax, once it has $100,000 of sales to South Dakota in a year, or had 200 transactions in a year. The company Wayfair and several other similar businesses did not abide by the new law. The state of South Dakota took them to district court, and eventually the case made its way to the Supreme Court.

The Wayfair ruling came back on June 21, 2018: The requirements set out by South Dakota seem reasonable. Physical presence was no longer required to make companies liable for sales tax. (Fittingly, Justice Kennedy wrote the judgement; it was one of his final decisions before retiring.)

The world after Wayfair


Since June 21, many states have enacted laws similar to South Dakota’s, and have begun to enforce those laws. The expectation is there will now be a level playing field between bricks and mortar and ecommerce.

Not just ecommerce


To be clear — the change in rules was targeted to recoup losses from ecommerce, but it reaches a lot further than that. Many Canadian B2B companies have in the past successfully sold into the U.S. market without sufficient presence in the U.S. to trigger sales tax collection responsibilities. These rules may change that. What has not changed is that sales tax is still only collectable from the end user and that often machinery and equipment sales are exempt. Sellers should collect and retain sufficient documentation to maintain rights to these exemptions.

The changes brought about by Wayfair are very complex. Please contact your professional advisors or seek advice from a U.S. state tax specialist to understand how this case impacts your business.

To learn more about managing your taxes when doing business in the U.S., read this new guide.

Naomi Cutler is Senior Manager, U.S. State and Local Tax, with BDO Canada LLP. She can be reached at ncutler@bdo.ca or by phone at 647.730.6762.


The content on this blog has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The blog cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Canada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information on this blog or for any decision based on it.

Please note the blog posts are time sensitive and subject to changes in legislation.

BDO Canada LLP, a Canadian limited liability partnership, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms.




Monday, February 25, 2019

Bridging the Financial Literacy Gap with your Spouse

We have all heard the expression about affairs of the heart: opposites attract. However, how do these opposites operate when managing a family’s financial affairs? Spouses and common-law partners sometimes come to the relationship with differing levels of financial literacy.

When meeting with couples to discuss their financial affairs, it has always amazed me how one spouse often takes control of that aspect of their lives and the other spouse, in many cases, abdicates that responsibility. Of course, in some families, the financial duties are shared and both spouses have an understanding of the family’s finances, but I would suggest this is the exception rather than the rule.

How do you as the “financial spouse” involve the other spouse in spite of their indifference or reticence? How can you help them overcome their comparative lack of financial literacy? Why would you even want to?

Why your spouse should raise their financial literacy


I will start with the why. Here are three reasons:

  • For the sake of your marriage — it is best to have consensus on financial decisions.
  • You may die first — your spouse needs to be aware of and understand family finances, or it could lead to severe financial consequences. At minimum it could create significant stress for them after you die.
  • Get a new view — it may be useful to have a different perspective on financial issues.

How to improve your spouse’s financial literacy


Here’s how you can involve your spouse in the family’s financial affairs:

  •  Plan, document and communicate
  •  Introduce your spouse to your advisors
  •  Review the budget together
  •  Ask your spouse to pay some bills
  • Share yearly investment reports
  •  Discuss daily financial events

Plan, document, and communicate


An estate organizer is a great tool to plan, document, and communicate with your spouse on key financial issues. It doesn’t help just your spouse — it assists your entire family and your executor on your death.

While this estate organizer is really a future document, you can use it to educate your spouse now. If you have not prepared this document, do so; if you have already prepared it, you should review it with your spouse. Walk through each section. It will provide clarity on your affairs to your spouse and they will at least have some familiarity with this document if your death precedes theirs.

Introduce your spouse to your advisors


Introducing your spouse to your advisors means involving them in meetings. Introductions to your advisors will help your spouse develop a comfort level with the advisors. This will go a long way if you pass away and are not around to continue the relationships. On a current basis, if your spouse attends these meetings, they will begin to gain at least a minimum understanding of your affairs.

Review the budget together


If you create a family budget, you should review it with your spouse. A non-financial spouse will often consider this a form of financial torture, so keep the review brief and hit on points that your spouse is responsible for or will affect them. Seeing that you spent x dollars on restaurants may crystallize your concern about eating out too much to your spouse. Along similar lines, reviewing your interest expense will highlight the need to reduce debt. Any number of issues can be discussed.

Your spouse may surprise you. Sometimes showing the raw numbers in black and white can trigger an interest in financial affairs that – after all – affect them just as much as they affect you.

Ask your spouse to pay some bills


It may help to have your spouse be responsible for paying certain bills. This teaches them how to pay bills, especially online. I am often shocked by how many spouses have no clue about banking and paying bills. By taking an active role in this crucial activity, they can see first-hand the budget issues your family may have. In addition, should you pass away, it is vital your spouse have basic banking and bill paying skills.

Share yearly investment reports


I have always stressed the importance of looking at your investments annually to review your returns, fees and asset allocation. While your spouse may not care about the minutia, they may be interested in your yearly returns.

Discuss daily financial events


When there is a significant financial event – Brexit, an interest rate hike, trade agreement negotiations, or even relevant tweets from U.S. President Donald Trump – you may wish to have discussions with your spouse, so they are aware and understand the potential impact on your day-to-day lives.

Finding the right financial conversation


There are many practical ways to get your spouse involved in the family’s financial affairs. Feel free to discuss them in the comments below.

While there are some people who do not really want their spouse to have too much knowledge of their financial affairs, let’s hope these spouses are few and far between. For everyone else, the benefits of improving your spouse’s financial literacy are significant. I would suggest that you consider implementing some or all of the steps I discuss above to improve your spouse’s financial literacy and your family’s financial and estate planning. Your marriage and finances with be all the better for it. 

The content on this blog has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The blog cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Canada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information on this blog or for any decision based on it.

Please note the blog posts are time sensitive and subject to changes in legislation.

BDO Canada LLP, a Canadian limited liability partnership, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms. 

Monday, February 11, 2019

Exploding 19 Common RRSP Myths

It’s that time of year again. We have just a few weeks left until the Registered Retirement Savings Plan (RRSP) deadline, and despite its almost 60 years in existence, there are still plenty of myths and misconceptions surrounding this popular retirement savings plan.

Today, Sarah Rahme, CFP, a wealth advisor with BDO Canada LLP, gets us ready for the 2019 RRSP deadline by demystifying 19 common RRSP myths.
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Myth #1: RRSPs are for everyone


The reality is that every Canadian needs to evaluate their own fit for an RRSP. We generally say that Canadians earning a lower income (under $50,000 yearly) should use a Tax Free Savings Account (TFSA) instead. Moderate earners have to weigh the pros and cons before deciding which option will work better for them in the long run. This typically entails weighing the tax savings you would gain today versus the tax cost when you withdraw your RRSP or Registered Retirement Income Fund (RRIF) in the future and how quickly you may need to access the funds in your TFSA.

Myth #2: RRSPs aren’t worth it, since you need to pay tax on withdrawals


Some of you may wonder: what is the point of sheltering tax now since you will be paying it back at some point? Needless to say, should your tax bracket be lower in retirement, you will benefit from significant tax savings and tax-free compounded returns.

But what if your tax rate ends up being higher during retirement? We believe depending upon your specific situation, you may still be ahead based on the long-term tax-free compounding effect.

Myth #3: RRSPs have one use — retirement


An RRSP can also be used for two other key purposes:
  • purchase your first property through the Home Buyer's Plan (HBP) (up to $25,000 to purchase your first home)
  • finance your or your spouse’s training or education with the Lifelong Learning Plan (LLP) ($10,000 per year up to $20,000 in total to finance your education at a qualifying institution).

Myth #4: I should pay off my mortgage and other debt first


Let’s distinguish between two types of debt: high-interest and low-interest. For high-interest debt – the best example is credit cards, which can carry rates of up to 29.99% – absolutely, paying off debt should take precedence. But when it comes to low-interest debt, such as a mortgage, be careful not to scrimp on retirement savings. As long as you can generate a return on your investments that is higher than your cost of borrowing, it may make more sense to invest rather than pay down that low-interest debt.

Myth #5: I cannot make a withdrawal from my RRSP until I retire


Technically, funds in an RRSP are available to the plan holder at any time, even if there is a withholding tax on the funds withdrawn. (The exception, of course, is withdrawals under the Home Buyer's Plan or Lifelong Learning Plan, which are tax-free.) That being said, unless you really need the money, try to withdraw RRSP money at a time when your tax bracket is the same or lower than it was at the time of the contribution. Be aware that the statutory tax withholding may be significantly less than the actual income tax you owe in April, so plan for this shortfall.

Myth #6: It doesn’t matter when I make my spousal RRSP contribution


This may be the case if you don’t intend to make a withdrawal from the plan in the next three years, but if you do, the contribution timing matters.

As a reminder, spousal RRSPs allow one spouse to contribute to the other’s RRSP. This can often be a sound tax strategy when one spouse earns significantly more money than the other. However, spousal RRSPs come with conditions. One big one is that funds withdrawn within three years are attributed as income to the contributor and taxed accordingly.

Withdrawal rules are based on calendar years, which means that if you make a contribution for 2019 by December 2019, you’ll be able to withdraw money attributed to the plan holder as soon as January 2022. If you make that same contribution sometime in the first 60 days of 2020, you’ll have to wait until January 2023 before withdrawals are taxed in the plan holder’s hands.

Myth #7: I’ll have more money to contribute when I’m older


This is not always the case. It’s true that your student loans will be paid off, and you’ll most likely generate more income. But you may also have new obligations, such as a mortgage or the financial responsibilities of child-rearing.

Myth #8: If I die, the proceeds of my RRSP are subject to taxation


Not always – there are two scenarios:
  • If the beneficiary of the deceased is a surviving spouse or common-law partner, the funds will roll over tax-free into their RRSP or RRIF.
  • If you have a child or grandchild who was dependent on you due to physical or mental infirmity, the funds will roll over tax-free into their RRSP or RRIF.

Myth #9: I don’t have enough money to start investing


Like with all investing, the secret formula is compounding. If you begin your investment journey, even with small sums, a long-term strategy will build those initial amounts into greater wealth.

Myth #10: I have to take my deduction in the year I contribute


Well, you can definitely claim your RRSP deduction every year – and benefit from the tax deduction immediately. But remember: If you think your tax bracket will be higher in subsequent years, you may want keep the deduction in your back pocket and maximize your tax savings.

Myth #11: I can only convert my RRSP to a RRIF when I turn 71


It is true that you must convert your holdings by the end of the year in which you turn 71. You can, however, convert a portion, or the entire amount, at any earlier age. In fact, it may make sense to withdraw $2,000 per year from your RRSP to utilize your pension tax credit to offset the taxes on the RRIF income once you turn 65.

Myth #12: Converting my RRSP to a RRIF is my only option when I turn 71


You also have two other options:
  • take out the account value as a lump sum cash payment. In this case, you’d need to pay tax on the whole payment.
  • buy a life annuity that would pay income at regular intervals for the rest of your life.

Myth #13: A Spousal RRSP doubles my contributing room


Your personal RRSP contribution limit doesn’t change just because you have two accounts at your disposal. You have a choice to use your own RRSP, your spousal RRSP or a combination of both, but only up to your personal RRSP limit.

Myth #14: I have to use cash to make my RRSP contribution


RRSP contribution rules offer you more ways to contribute than just cash. You can also use stocks and bonds and make what is known as a contribution-in-kind. However, if you transfer stocks or bonds with an unrealized gain, you will trigger a capital gain, and if the stocks or bonds are in a loss position, your capital loss will be denied.

Myth #15: I should borrow money to contribute


Sure, that’s an option. But it’s probably better to make contributions to your RRSP throughout the year. Many people do this via a regular payroll deduction. This both helps your long-term savings and decreases your debt obligations.

Myth #16: I should contribute a lump sum just before the Feb. 28 deadline


Many Canadians do follow that strategy, but it’s suboptimal. First of all, you lose out on a year of tax-free growth for your funds. Besides that, are you convinced you’ll have access to the necessary funds in the waning days of February?

Myth #17: I have to wait until I turn 18 to open an RRSP


This is a common source of confusion. In reality, an RRSP can be opened at any age. A TFSA, on the other hand, can only be opened by someone 18 years or older. That being said, typically it will not make income tax sense to contribute before you are earning substantial income.

Myth #18: I can hold any types of investments in my RRSP


The RRSP rules do restrict some investment vehicles, such as precious metals and land. Some other vehicles are permitted but can be problematic and complex. These include mortgages and shares of a private corporation. Speak with your financial advisor to learn more about holding these vehicles in your RRSP.

Myth #19: My employer sponsored pension plan does not affect my RRSP contributions


Registered pension plans and deferred profit-sharing plans affect your RRSP contribution limit in the same way. Your annual T4 information slip from your employer includes a pension adjustment amount which reduces your RRSP contribution room.

The general formula is as follows: Your RRSP deduction limit for a tax year starts with contribution room carried forward plus your current year’s contribution room, minus any Pension Adjustment or Past Service Pension Adjustment and plus any Pension Adjustment Reversal.

Sarah Rahme, CFP, is a wealth advisor with BDO Canada LLP and covers Eastern Canada. If you would like help structuring a customized comprehensive financial plan for you and your family, contact Sarah at SRahme@bdo.ca or 613 739-8221, ext. 4520. For other parts of Canada, contact Sarah and she will direct you to the BDO contact person in your region.

The content on this blog has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The blog cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Canada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information on this blog or for any decision based on it.

Please note the blog posts are time sensitive and subject to changes in legislation.

BDO Canada LLP, a Canadian limited liability partnership, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms. 




Monday, January 28, 2019

How to Use the BDO Estate Organizer

Two weeks ago, I posted the BDO estate organizer. In that post I emphasized the importance of writing your financial story and ensuring your financial information and wishes are documented.

Not to be morbid, but since Roma Luciw of The Globe and Mail has called me “morbid Mark,” I reiterate once again: if you do not communicate and document your financial affairs for your family or executors, you at best leave your family a messy estate at a time of distress and at worst cost your estate and family thousands of dollars.

Today I will walk you through completing the Organizer and some of the important issues that arise in completing the document.

Key Tips in Using the Organizer


Family Information (p.2)

The most important item in this section is citizenship. Many Canadian don’t realize this, but parts of your estate can trigger tax consequences if you are a citizen of another country. This typically applies to U.S. citizens, since the U.S. taxes based on citizenship; while most other countries tax based on residency.

Perhaps the biggest issue for U.S. citizens is home ownership. As discussed in this blog post, the U.S. has a $250,000 or $500,000 principal residence exemption, depending upon your marital and citizenship status. The fact that a tax-free home sale in Canada can result in taxes in the U.S. is often very shocking to Canadians filing U.S. tax returns.

Your U.S. citizenship can trigger many other tax consequences — such as U.S. estate tax —based on differing laws south of the border. And of course, U.S. tax compliance should begin well before estate planning makes an appearance in your life. If you are a U.S. citizen or green card holder, you should be filing U.S. tax returns. If you are not filing, you should seek U.S. tax advice.

If you are a citizen of another country, you may want to determine if citizenship in that country would have any income tax consequences upon your passing.

In addition, depending upon the politics of your home country and your children’s familiarity with that country, you may wish to sell your foreign assets as you age to simplify your estate.

Important Documents (p.5)

My Will 

If you do not have a will, it's time to have one drafted. As discussed in this blog post, 65% of Canadians do not even have a will and 12% of wills are outdated. Yes, your read that correctly: only 3 of 10 Canadians have an up-to-date will. 

If you already have a will, you should review it to determine if there have been any significant life events since you last updated it. In addition, you will want to ensure all your beneficiary designations (RRSP and TFSA, for example) agree to your will and are up to date. Many people have inadvertently left significant assets to ex-spouses by not updating their designations.

There have been substantial changes to the tax laws in the last few years, which can affect the tax treatment of trusts created by will and provisions for disabled children. If you have created trusts in your will or have a disabled child, you may want to contact your accountant or lawyer to see if these changes necessitate any change to your will.

Some provinces allow for dual wills, one for assets subject to probate and one for assets not subject to probate. If you live in Ontario and have two wills, a recent case (Milne Estate, 2018 ONSC 4174) may have nullified the benefit of your will that is not subject to probate. If your lawyer has not contacted you to discuss the impact this case has on your wills, contact them yourself immediately.

News Flash: the Milne decision was overturned last Thursday.

Powers of Attorney

You should have two powers of attorney (POAs), one for your financial affairs and one for your health care.

POA’s for health care have evolved over the last few years for such matters as heroic measures and even assisted-death provisions. You may want to consider updating this document depending upon your personal and religious views on these issues.

Financial Information (p.6)

As noted earlier, you will want to ensure that the beneficiary designations for pension plans and registered plans are in line with your will and your intentions. Often these designations are out of date.

After completing the Financial Information: Liabilities section of the organizer, review and ensure you have enough insurance (see discussion below) or liquid assets to pay off any of these liabilities should you pass away. You may also wish to assess whether this is a good time to have a financial or retirement plan prepared or updated.

Insurance Information (p.11)

After completing this section, sit back and consider these three things: 

1. Do you have any unnecessary insurance policies you purchased long ago and never cancelled?

2. Do you have enough insurance based on how much you spend annually, the debt you hold and significant funding expenses you still need to incur, such as tuition for your children? 

3. If you have significant funds in your corporation (especially if you will have excess funds in your corporation you will not need in retirement), have you considered purchasing a corporate-funded insurance policy?

Employment Information(p.13)

Some issues to consider is this section are:

Ensure that you detail any stock options, deferred stock units, deferred profit-sharing plans or any other of these more complex plans. Heirs often face confusion with these plans when someone passes away, so the more clarity you can provide (e.g., dates, units, tax cost basis, purchase price), the easier it will be for your family to deal with these plans.

Most employers are very good at assisting the family after the death of a loved one, but you will put your family in the best position possible by providing as many details as you can.

Income Details (p.14)

Some issues to consider in this section are: 

1. Are you taking advantage of all income splitting opportunities? You should review this with your accountant, especially given the implementation of the Tax on Split Income (TOSI) rules.

2. Consider if your investment returns are in line with your expectations and whether you even know what your returns are. See this blog post for a discussion of this topic and some useful links.

Real Estate (p.15)

Prepare a free-form schedule that should include the following at a minimum: 

1. A notation of the year you last claimed the principal residence exemption (PRE) on the sale of your home. This will allow your executor and estate to tax plan upon death or going forward in respect of future PRE claims if you have, say, a house and cottage. See this blog post for the new reporting rules on PRE claims.

2. If you elected in 1994 to crystalize $100,000 of capital gains on property you still hold, attach a copy of your 1994 form T664 to this document. The government allowed one final election to utilize your capital gains exemption before phasing out the exemption on real estate and marketable securities in 1994.

Note: Qualified small business corporations (QSBCs) continue to be eligible for the capital gains exemption — see this blog post for details.

Financial Advisors (p.16)

Ensure you have introduced your spouse or significant other to all your financial advisors. It is much easier for a surviving spouse to deal with the aftermath of a passing when they already have a level of comfort with the advisors they will have to deal with. 

Executors (p.17)

You should review your executor appointments to ensure they are the correct people for the job.

If you have not informed your executors they have been named, you should inform them. You may want to inform the executor that you have completed the organizer so that they will know it exists and where they can find it.

If you do not have someone you can name as an executor or there is possible family conflict, consider naming an institution as an executor. 

Digital Information (p.18)

If you have digital assets of value (e.g., cryptocurrency, websites), ensure you have obtained tax and legal advice and have considered them in your will. See this blog post on the topic from estate lawyer Katy Basi.

Katy also guest posted this excellent piece on a 21st century issue: how to deal with reproductive assets in your will.

Funeral Arrangements (p.19)

This is truly a morbid topic, but ensure someone is aware of any pre-paid or funeral wishes.

Final Comments


This estate organizer is one heck of a homework assignment. But it is one of the most selfless things you can do for your family, especially if you have significant assets or complex financial affairs.
The content on this blog has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The blog cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Canada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information on this blog or for any decision based on it.

Please note the blog posts are time sensitive and subject to changes in legislation.

BDO Canada LLP, a Canadian limited liability partnership, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms. 

Monday, January 14, 2019

This Simple Tool Can Help Organize Your Estate


I have written numerous times over the years urging you, my readers, to get your financial affairs in order, by stress testing your finances should you pass away suddenly. While clearly a morbid topic, the rationale for the discussion is this: if you do not get your affairs in order and you pass away suddenly, you leave your family a financial mess at a time of emotional distress, anxiety and confusion.

I have had many readers personally write to thank me for urging them to undertake this task, since it provided them with financial peace of mind. They told me that in many cases, this undertaking was the catalyst for them to sit down with their spouse or significant other, review their finances, and communicate and document what financial assets they have and where they can go to find them. In addition, other non-financial issues surrounding their passing were discussed, such as funeral arrangements.

In my professional practice, I have practiced what I preached and have urged my clients to write their financial story and organize their affairs. As clients, I was able to provide them a fillable estate organizer to make their task somewhat easier.

You can link to the estate organizer and download the document here.

If you have not already taken the time to write your financial story and organize your estate, you now have no reason to procrastinate — you have a simple, fillable document to make the task much simpler.

In my next post two weeks from today, I will walk you through the organizer and what you can accomplish in completing each section of the document.
The content on this blog has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The blog cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Canada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information on this blog or for any decision based on it.

Please note the blog posts are time sensitive and subject to changes in legislation.

BDO Canada LLP, a Canadian limited liability partnership, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms. 

Monday, January 7, 2019

Scratching the Eight-Year Itch — The Blunt Bean Counter Gets a Facelift

It’s been eight years for The Blunt Bean Counter. Sometimes I can’t believe it myself, but there you have it: we’re nearing a decade of blog posts (535 to be exact). It’s an opportunity to sit back, reflect and consider how the popularity of this blog exceeded my wildest expectations.

I’ve been fortunate to have an audience that keeps tuning in and has grown over the years. You are what makes the blog a success. Based on your comments and feedback, I try to include your interests and needs when deciding on topics and writing the posts. Your positive reinforcement has been an essential source of inspiration.

When I first took baby steps into the blogosphere, my career focused on tax, so the vast majority of my posts drilled down on tax topics. I loved — and still love — clarifying complicated topics, eschewing the technical jargon that we accountants hold dear. Or, as my wife keeps telling me, “write in plain English.”

Over the last few years, my interests have changed. My focus has shifted to wealth advisory, and helping Canadians get their financial affairs in order. Sure, tax will always inform the wealth advisory journey — and you’ve heard me go on about the perils of ignoring the tax piece. No financial plan is complete without tax considerations baked in at all stages of the process, from beginning to end, as long as the tax tail does not wag the dog. But it’s a matter of emphasis, and now my emphasis is certainly on the wealth and financial side of the equation.

My professional situation has also changed since I first began blogging. When I started the blog on essentially a dare from a social media consultant, I was the managing partner of Cunningham LLP, a seven-partner firm. Now I count myself as part of a great national firm, BDO Canada LLP. To reflect my status as a partner at the firm, I’ve decided to include the BDO logo in the top left-hand corner of the blog along with a bit of a re-design and freshening up of the blog.

Along similar lines, I’ve decided to open up The Blunt Bean Counter tent to more of my BDO colleagues. I will still be writing and editing, but I will now be including more posts from the professionals I work with, who also have important viewpoints and knowledge to contribute. I think the blog — and you — will benefit from their take on various topics. I joined a large firm in part because of the top-quality people I work with every day. Now you can gain the same benefits that I have been enjoying.

Here’s what won’t change: my commitment to bringing you clear, unvarnished financial insight on topics that make a difference to your bottom line, in your business or personal life. And I'll continue whether as writer or editor, to bring you this insight in the plain-spoken tone that gives The Blunt Bean Counter its name and part of its appeal.

Watch out for my next post, which will unveil something I call the “My Financial Story and Estate Organizer.” It’s a tracking form that can help you store important personal information — to help you organize your financial story and estate. Many of my clients and colleagues have found it extremely useful and tell me it has given them peace of mind. I hope it can help you summarize your financial affairs in one spot.
The content on this blog has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The blog cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Canada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information on this blog or for any decision based on it.

Please note the blog posts are time sensitive and subject to changes in legislation.

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Monday, December 17, 2018

Year-End Financial Clean-up

This is my last post for 2018 and I wish you and your family a Merry Christmas and/or Happy Holidays and a Happy New Year.

In prior years, my last post of the year would often be on undertaking a "financial clean-up" over the holiday season. I thought I would revisit this topic again this year, with some comparative assistance to review your portfolio's 2018 performance.

So, what is a financial cleanup? In the Blunt Bean Counter’s household, it entails the following in between eating and the 2019 IHF World Junior Championship.

Yearly Spending Summary


I use Quicken to reconcile my bank and track my spending during the year. If I am not too hazy on New Year’s Day, I print out a summary of my spending by category for the year. This exercise usually provides some eye opening and sometimes depressing data, and often is the catalyst for me to dip back into the spiked eggnog :)

But seriously, the information is invaluable. It provides the basis for yearly budgeting, income tax information (see below), and amongst other uses, provides a starting point for determining your cash requirements in retirement.

Portfolio Review


The holidays or early in the New Year is a great time to review your investment portfolio, annual rates of return (also 3,5 and 10 year returns if you have the information) asset allocation, and to re-balance to your desired allocation and risk tolerance. The $64,000 question is how your portfolio or advisor/investment manager did in comparison to appropriate benchmarks such as the S&P 500, TSX Composite, an International index and a Bond Index. This exercise is not necessarily easy (although some advisors and most investment managers provide benchmarks, they measure their returns against). I hope to write something in more detail on this topic next year.

PWL Capital on their resource page has market statistics and model portfolio's that you can use as guidelines or to create your own benchmarks which I find useful.

Rob Carrick of The Globe and Mail in an article (it is behind a firewall) last year, pointed me to this Suggestus site which offers a no cost comparison against thousands of portfolios'. This is a good test check, but since no two portfolios are exactly alike, you need to understand the limitations of this site as an exact bench-marker.

Tax Items


As noted above, I use my yearly Quicken report for tax purposes. I print out the details of donations and medical receipts (acts as checklist of the receipts I should have or will receive) and summaries of expenses that may be deductible for tax purposes such as auto expenses. If you use your home office for business or employment purposes (remember you need a T2200 from your employer), you should print out a summary of your home related expenses.

Where you claim auto expenses, you should get in the habit of checking your odometer reading on the first day of January each year. This allows you to quantify how many kilometres you drive in any given year, which is often helpful in determining the percentage of employment or business use of your car (since, if you are like most people, you probably do not keep the detailed daily mileage log the CRA requires).

Medical/Dental Insurance Claims


As I have a health insurance plan at work, I also start to assemble the receipts for my final insurance claim for the calendar year. I find if I don’t deal with this early in the year, I tend to get busy and forget about it.

To facilitate the claim, I ask certain health providers to issue yearly payment summaries. This ensures I have not missed any receipts and assists in claiming my medical expenses on my income tax return. You can do this for physiotherapy, massage, chiropractors, orthodontists, and even some drug stores provide yearly prescription summaries.

Year-end financial clean-ups are not much fun and somewhat time consuming. But they ensure you get all the money owing back to you from your insurer and ensure you pay the least amount of taxes to the CRA. In addition, a critical review of your portfolio and/or investment advisor could be the most important thing you do financially in 2019.

This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation. Please note the blog post is time sensitive and subject to changes in legislation or law.