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. 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, October 18, 2021

Considerations in selecting an executor and accepting the executor appointment!

Last week, Rob Carrick the personal finance columnist for The Globe and Mail, in his Carrick on Money Newsletter (the newsletter is generally only available to Globe subscribers) asked David Edey a Certified Executor Advisor questions on his experience as an executor. These experiences and frustrations are detailed in Mr. Edey's book Executor Help: How to Settle an Estate Pick an Executor and Avoid Family Fights.

The book summary states “The grief, frustration, and stress of that experience were life-altering for David. He was determined to write this book in order to help others successfully navigate the difficult tasks of estate planning and executorship—so that their families could stay together”. 

I have not yet read the book, but as an accountant on numerous estates and a multi-time executor, I understand what drove David to author the book. Rob’s discussion of the topic in his newsletter provided me the impetus to offer a few comments of my own on the topic. So today, I discuss some considerations in selecting an executor and some of the less pleasant tasks that may be part and parcel of being appointed an executor.

Who Makes a Good Executor?


I have noted in blog posts over the years that a potential executor should have the following characteristics:

(1) Financial acumen and investing experience
(2) Be detailed oriented
(3) Handle stress well
(4) Be able to deal with people, including those acting irrationally (inheriting money does funny things to people)
(5) Be results driven

I have been involved with a couple of executors who did not have the above characteristics, especially the financial acumen and ability to handle stress. Those estates went off the rails and took years to settle. So carefully consider the above characteristics in selecting an executor.

Should you name your children as executors?

This is the $64,000 question. Assuming there are no “black sheep” in the family and all the siblings get along, you would think naming all your children would be a good idea. Sometimes the answer is yes, as they can share the burdensome and time-consuming duties as co-executors and utilize their individual strengths. Other times, being named co-executors can adversely affect your children’s relationship as the stress of settling the estate and distributing money creates discontent amongst the children.

So, should you select only one or two children who meet the above characteristics? Again, the answer can sometimes be yes, where the other children trust they are competent and even-handed. On other occasions, children may feel resentment that the parent did not name them as an executor and their siblings are favoured or given preferential treatment by their parents.

You may be saying to yourself, Mark has not answered whether I should name my children as executors, he has just given me a maybe yes and maybe no answer. But that is the reality. You need to look at your children with a cold realistic view and not your rose-colored glasses to decide if they have one of more of the characteristics to be an executor. You also need to speak to them and ask them if they feel they can work together (see discussion below). If you are not satisfied on all accounts, you may want to consider a professional corporate executor so that your children will only have to deal with an independent third party.

Do you think the executor would like to know they are being named?


Many years ago, I wrote a blog post titled "Speak to your Executor – Surprise only works for Birthday Parties, not death". You would be shocked at how many people are named an executor without prior notice. You always want to inform your executor they are being named and confirm they are comfortable with being named an executor. The last thing you want is to die and have your executor renounce their executorship. As noted above, where you have more than one executor, you want to ensure they are willing to work together, whether they are your children, friends, professional advisors, or any combination of the above.

Does an executor have to do all the work?

A well-run estate utilizes accountants for tax preparation and estate planning advice and a lawyer for estate and legal advice. You may also have to hire a specialist to prepare the passing of accounts (a summary for the court of the estate). While these costs can add up, the expression penny wise pound foolish has applied to many executors. The accountants and lawyers can also act as buffers for the family, as they act as independent advisors and can deflect some of the pressure put on the executor(s) by the beneficiaries. I have heard many an executor say, "it was the accountant's/lawyer's suggestion".

There is typically a significant amount of mundane work in settling an estate. Writing and dealing with financial institutions, games of hide and seek to find assets etc. An executor may consider asking for the assistance of their family members who are not executors to help with some of these administrative tasks; assuming they are willing and the other family members are fine with their assistance.

Sadly, I must inform you, even where you delegate and use professionals, you are likely in for a very time consuming task as an executor.

I want my Money!

In my experience, an executor will be asked to distribute money sooner than later by one or more of the beneficiaries. This is one of the most stressful aspects of being an executor, since in many cases you are unsure of what will be left of the estate following the sale of the estate's assets and the income taxes on the estate. 

It is important you do not make an interim or final distribution (see this blog post on obtaining a clearance certificate) of money until you consult with your accountants and lawyers. The last thing you ever want to have to do, is go back to the beneficiaries and tell them they were overpaid, and they must return money. This is very messy, and you could end up having personal liability for the estate. So always ensure you review any distributions with your professionals before distributing any money or assets to the beneficiaries.

An executor’s job is arduous, time consuming (it can take years to settle some estates), stressful and a messy estate can fracture family relationships. You therefore need to consider the selection of your executor(s) very carefully (especially when you will involve your children), ensure you advise them and confirm that they are willing to accept the appointment. If you are asked to become an executor, consider carefully whether you wish to accept the appointment; you may also want to consider buying David's book.

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.

Monday, October 4, 2021

The Implications of Receiving an Inheritance

There is a large wealth transfer occurring in Canada, with estimates as high as $750 billion dollars.

While I have written on issues and concepts related to inheritances (with a bit of a caustic tone, based on my actual experiences), I have written very little on receiving an inheritance. Thus, today, I will discuss the income tax implications of receiving an inheritance and some of the issues to consider upon receiving an inheritance.

If you are interested, the posts I referenced in the prior paragraph are:"Is it Morbid or Realistic to Plan for an Inheritance?", and “Taking it to the Grave or Leaving it all to your Kids?” and “Inheriting Money – Are you a Loving Child, a Waiter or a Hoverer”.

The Income Tax Implications of Receiving an Inheritance


In Canada, there are generally no direct income tax consequences to receiving an inheritance. I say generally because there are a couple very rare circumstances where you could pay tax. The first is where you are the beneficiary of a deceased’s RRSP/RRIF and the estate does not have enough money to pay the estate taxes. Surprisingly to most people, the CRA has the right to go after the beneficiary of a RRSP as the CRA considers the beneficiary jointly liable with the estate. The second rare situation is where a will makes a beneficiary liable for taxes arising on the transfer of assets from the deceased. However, both these exceptions are highly unusual and in almost all situations, there are no taxes due upon the receipt of an inheritance.

So, to be clear. If your inheritance is in cash, you receive those funds tax-free. If your inheritance is a capital property of some kind such as stocks or real estate, you again receive the capital property tax free.

However, in the case of capital property, you generally inherit the cost base of the property to the deceased, which is typically equal to the deemed proceeds of disposition for the deceased. Usually, this amount is the fair market value ("FMV") of the property right before the person's death.

So for example, if your mother passes away as the last surviving spouse (it is likely when your father passed away he left his estate to your mother – which is typically a tax-free spousal transfer at his passing) and she owned 100 shares of Bell Canada that originally cost $25 a share, but were worth $65 a share at her passing; her estate would file a final (terminal) income tax return reporting a deemed capital gain of $4,000 (FMV at death of $6,500-$2,500 original cost). This deemed capital gain is known as a deemed disposition on death and occurs despite the fact the Bell Canada shares were not sold, because your mother was the last surviving spouse. Your mother’s deemed disposition FMV of $6,500 becomes your new cost base of the inherited shares. So, if you sell the Bell Canada shares in the future, the gain would be equal to your sales proceeds less $6,500.

If you wish to learn more about how your estate is taxed on death if you are the last surviving spouse, see this blog post I wrote a few years ago, The Two Certainties in Life: Death and Taxes - Impact on Your Personal Income Tax Return

Dealing With an Inheritance


Receiving a large inheritance can be overwhelming, especially if you are not financially sophisticated. I wrote a detailed blog on this topic in 2011 if you wish to read it Dealing with Financial Windfalls & how to stave off the Money Leeches

However, today I will give you the Coles notes version.

Practically, it is almost impossible for a large inheritance to go unnoticed. A family member or friend will advise someone of the passing of your parent /sibling/relative etc. and somehow someway it is likely an investment person will be amongst those to find out and you will get a call. If you avoid the above, a large deposit at the bank will likely trigger someone at the bank to speak to you. It is almost unavoidable.

If you already have an investment advisor/manager you work with and trust, selecting an advisor is a non-issue. But if you have not really worked with an investment advisor/manager or their practice is built around smaller net worth clients and your inheritance is substantial, you will want to review your situation. The best advice is often to “park” the money in a GIC for a couple months until you have regained both your emotional and financial equilibrium and have had time to speak to family and friends to get a couple good referrals and absorb your new situation.

The “parking” of the inheritance would also apply to any decision to give money away (as you may receive subtle or less than subtle hints about gifting part of your inheritance to various family members) as well as holding off investing part of your inheritance.

Putting the money in a GIC or similar investment also provides you a built-in excuse to not be able to make any decisions in the near-term, since if anyone has the audacity to ask, you answer, “my money is locked in for 3 or 6 months and I cannot touch it”.

Inheritances typically come on the heels of emotional distress and in many cases, significant changes in your financial situation. The good news is that in almost all circumstances the cash or capital property inherited is tax-paid money and you have no additional tax concerns. However, the “new-found” wealth can be stressful from both an investing and gifting perspective and you need to ensure you have a clear mind before making any decisions on both fronts.

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.

Monday, September 20, 2021

The Basics and Uses of Term and Permanent Life Insurance

I am back after a summer of R&R, which proved more golf does not mean you will play better golf. 😊 I hope everyone had a good summer and had a chance to decompress from the stress of the last year and a half.

With the ability to finally get together with friends and family (socially distanced) this summer, there was lots to catch-up on and discuss. I guess because of COVID contemplation, the topic of insurance surprisingly came up a couple times during these get togethers and I noted some confusion on the topic.

So, I thought today, I would post on the basics and uses of insurance and discuss the two main types of insurance: term insurance and permanent insurance.

Term Insurance

In its most basic form, term insurance covers you if you die during the term of the insurance; but there is no cash value, guarantee or payment if you die once your term insurance has lapsed. Term insurance is often limited to a certain age (75-85) and becomes very expensive as you age (for example, my term insurance increased substantially when it renewed at the end of the 10-year term when I turned 60 years old). Thus, many term policies are either cancelled as your need for term insurance diminishes (see discussion below) or people allow them to lapse due to the age/premium cost constraints. It should be noted there are variations on term insurance and certain polices allow you to convert the term policy to permanent insurance.

On an overly simplistic level, term insurance can be compared to renting versus buying a home. When you pay rent on your apartment, condominium, or home, you have a place to live, but the rent paid does not build any equity and the monthly rent paid is cash forgone. The same holds with term insurance. If you are healthy throughout the term of the policy, you do not build any cash value/equity and the monthly insurance cost paid is forgone (although obviously, if you die while owing term insurance, your estate is paid the insurance).

As term insurance is temporary and has no cash value, it is the most cost-effective type of insurance available and is generally used to insure a specific need or a couple needs, such as one or two of the following:

1. Income replacement – term insurance can be used as a "replacement" of income for the deceased person. This is particularly important where one spouse/partner is the breadwinner, but is still often, a very good idea even when both spouses work. The objective of the term insurance in this situation is to allow your family to live in the manner they are accustomed to even if you or your spouse/partner passes away.


2. Financial security for dependents – this is really just a subset of #1, but term insurance ensures your spouse/partner is taken care of the rest of their life, and your dependents are financially covered until they are ready to join the workforce.

3. Debt and Mortgage protection - insurance can be used to pay off debt, typically the mortgage on your home when you pass away so that your family is relived of the debt burden.

4. Funding of University - many parents want to ensure their children are educated and use insurance to backstop that goal in case they were to pass away.

Permanent Insurance


The two main types of permanent insurance (although there are several variations and permutations) are:

1. Whole Life

2. Universal Life (“UL”)

These policies provide insurance coverage for life, so your estate is guaranteed an insurance payout of some quantum. I provide some brief comments on whole and UL insurance below:

Whole Life


With a whole life policy, the risk is typically shared between you and the insurance company. The insurance payments are generally fixed, have a cash surrender value (that can be borrowed against during the life of the policy or withdrawn if the policy is surrendered) but the premiums growth of the cash and death benefit can be affected by a calculation called the dividend scale. If the dividend scale drops too low, there will be less cash value and potentially require further premium payments by the policyholder to ensure the policy does not lapse. So, when looking at a whole life policy, you should ensure your advisor provides different dividend scale scenarios in their proposals, so you have an expected scenario and a worse case scenario to compare.

Universal Life


The premiums for a UL policy are typically more flexible and generally do not provide a significant cash surrender value and the risk of the policy typically falls to the insurance company. There is an insurance component and a tax sheltered “savings” component.

There are various opinions on whether whole life or UL are better choices, but really, they are dependent upon your personal risk and insurance needs. In all honesty, both whole life and UL are complex to understand. I plan in the future, to have a guest post to discuss in greater detail the differences, advantages and disadvantages of whole life and UL.

Where to use Permanent Insurance


Whether you purchase whole or UL, permanent insurance usually makes sense for the following situations: It should be noted that because insurance proceeds are credited to the capital dividend account (see this prior blog post on the capital dividend account) permanent insurance if very often used by corporations, which can make the policies tax effective.

Uses of Permanent Insurance


As noted previously, unlike term insurance which typically covers temporary needs, permanent insurance if often used for longer term needs, such as the following:

1. Estate planning – Upon death, your estate will be allocated in some combination to the CRA in taxes, your family or charity. Permanent insurance can be used to provide the liquidity for paying your estate tax liability (typically in a much more tax effective manner than self-funding), estate equalization with your family or even estate growth/maximization by leaving a larger estate to your family from the insurance pay-out.

2. Business or partnership agreements – Permanent insurance can be a very tax effective way to buy out a deceased partner or shareholder under the terms of a partnership or shareholder agreement. As noted above, permanent insurance if very often utilized where corporations are involved because of the capital dividend account.

3. Passive Income rules- Permanent insurance can shelter income tax free within a policy, which effectively reduces taxable passive income for a corporation and therefore can potentially reduce the small business claw back for corporations.

4. Charitable – You can name a charity as beneficiary of a policy or make a bequest of the death benefit from a permanent policy to a charity of your choice and your estate will receive a charitable tax credit upon your death. You can also purchase or transfer a policy (this may result in a taxable deemed disposition, so speak to your accountant first) to a charity and you would receive a tax credit on the yearly premium payments.

5. Alternative for Fixed Income – I have seen some sophisticated investors use a permanent insurance policy to replace the fixed income component of their portfolio, as even when you factor in the cost of insurance, the return of a permanent policy may exceed the return from fixed income investments.

When you use the word insurance most people wince and only focus on the premium costs. But as discussed above, insurance can protect you short-term or be used to assist with longer term business and estate planning needs. In addition, with permanent insurance, the after- tax returns of an insurance policy versus alternative investments are often higher even after accounting for paying the insurance premiums.

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.

Monday, June 28, 2021

Gone golfing for the summer—Plus sign up for newsletter

This summer, as usual, I will take a break from the blog and spend some time golfing and enjoying the good weather—I hope with family and friends. I will likely post a couple Best of The Blunt Bean Counter posts during this time.

I will also use my time this summer for some life contemplation, including where and how the blog fits into the picture as I wind down to my retirement.

I wish my readers a great summer and ensure you take some time off; you deserve it after the last 16 months or so.

With my summer break approaching, it’s a great time to sign up for BDO’s newsletter. It goes out every two weeks and gives great business insights on a variety of timely and critical business topics. I often link to them in my posts.







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, June 14, 2021

Let me tell you! William Bengen knows how to define success

Today I bring back my old “Let me tell you!” series, where I delve into topics that are more philosophical than financial. In this blog post, I discuss the three life questions financial guru William Bengen asks himself each night before he goes to sleep.

Mr. Bengen is a bit of legend in financial circles. He created the ubiquitous 4% retirement rule: that people can withdraw 4% of their savings every year in retirement and still support themselves financially. I have written about this rule several times in my “How much do you need to retire” posts. The last time was in February.

But Mr. Bengen also has some interesting thoughts beyond finances. In February he joined the Rational Reminder Podcast to discuss retirement planning, and also shared his thoughts on success in general. (By the way, I was also interviewed for this podcast last year.)

Bengen defines success  


Podcast hosts Benjamin Felix and Cameron Passmore typically ask all guests the same last question: “How do you define success in your life?” I found Mr. Bengen’s answer fascinating.

“That's a wonderful question for everyone, I guess," he said. "Before I go to bed each night, I've done this for a number of years, I ask myself three questions.

"And the first question is, today, did I learn anything new, or did I create something? The second question is, did I do anything to help anybody, particularly people I love, but even if for a stranger, maybe helping an old lady across the street, or helping a child understand a math problem? And the last point is, have I given proper attention to this, the mystery and wonder of the world in the universe, and being alive and being able to experience all this? If I can answer yes to all those three questions during the day, I felt I've had a successful day.”

While the above quote has nothing to do with Mr. Bengen’s brilliant financial planning, it shows a truly insightful mind that looks at success as more than just fame and financial success. As I wrote two fairly popular blog posts on money and success in 2012 (see here and here), his comments intrigued me. Today I break down his thoughts.

"Did I learn anything new ... or did I create something?"


Wow, did this answer strike a chord. In 2018 I wrote a post making the case that if you are not learning, you are forgetting. My father-in-law has espoused this mantra all his life, and his children and grandchildren live by it. A hunger for learning has so many positive aspects. It keeps your mind active, allows you to pass knowledge down to your family and friends, helps you in your day-to-day business interactions and opens your mind to concepts and thoughts you may have previously dismissed. I do not want to dismiss the second part of Mr. Bengen’s question - “did I create something” - but that would be a more limited question in most cases.

"Did I do anything to help anybody today?"


While Mr. Bengen initially spoke about helping family, he expanded that to helping anyone. As I think most of us tend to help our family as a given, I will veer off into the topic of helping anyone.

While helping an old person across the street or holding a door open is quick and simple (is it me, or is holding the door open a lost courtesy? I do this all the time but constantly have doors slammed in my face when walking behind other people), I personally appreciate those who give time to causes.

Time is precious and to give to others is incredibly special. I have a good volunteering track record compared to the average person: being a Big Brother, granting wishes under the Make-A-Wish Foundation framework, and sitting on a couple charity boards. But when I see how much more others do, I am often humbled. Coming out of COVID, I suggest you consider giving of yourself whenever and wherever.

One can also help financially. One can argue this is an easy way out, but I disagree. Organizations need volunteers, but they also need money. I recently wrote a post explaining why donating marketable securities provides an altruistic benefit and a tax benefit.

"Have I given proper attention to this, the mystery and wonder of the world in the universe?"


I really like this last question. We are often startled by nature and the general wonders of the world; however, I would suggest this happens far too little. My only comment here is that COVID took many of us to negative places, mentally and physically (offset by some heroic front line and other efforts by special people). It would probably do us some good as we start moving back to a “new normal” to appreciate some of the mystery and wonders of the world, to recharge our positive selves.

My concern with any of my “Let me tell you!” posts is they become preachy. But I hope today’s post on Mr. Bengen’s nighttime routine provides you some helpful thoughts for reflection.

Note on new email system


For those of you who are subscribers and received this post via email, you may have noticed a small difference in the email notification. I have changed to follow.it as my email provider, part of my ongoing efforts to use the most up-to-date technology. If you would like to subscribe to the blog, enter your email in the box at the top right corner of this page.

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, May 31, 2021

“My Kids Will Never Fight Over My Estate”

In December 2019, I reviewed the book “Bobby Gets Bubkes: Navigating the Sibling Estate Fight.” In that book, estate lawyer Charles Ticker attempts to explain how to avoid, or at least limit, sibling estate fights when drafting your will. In the comments section to that post, Michael James, who writes the excellent finance blog Michael James on Money, made the following remark:
Sounds like an interesting book. Sadly, I'm guessing most people incorrectly think that their own kids would never squabble in these ways, so they think they don't need to follow the book's advice.
Michael’s “guess” is very perceptive. Based on my experiences over 35 years as an accountant, many parents look at their children and their sibling relationships with rose-coloured glasses or, in some cases, with blinders. As a consequence, they ignore clear warning signals that their children have significant sibling rivalry issues and don’t work well together. In some cases, you can almost predict a sibling estate fight.

Let me be clear. I am not saying every estate has a sibling fight. Many families settle and distribute the estate in accordance with the will and their parent’s wishes with little acrimony. However, this is far from the case in many estates, as human nature can turn ugly when there is money and sentimental items at stake, especially where sibling issues have reared their heads during the parents’ lifetimes.

Today, I am going to list factors in no particular order that can cause siblings to squabble over an estate.

Why siblings squabble over an estate


  • Greed – Very simply, money causes some people to lose their minds and perspective. This can destroy sibling relationships.
  • Grabbers – I have seen this many times. One child “grabs,” or takes, items before the will is considered, or even ignores the wishes of the will, which starts a spiral of hurt and mistrust among the siblings.
  • Sentimental items – Children often fight over these items. In many cases, this issue can be avoided if the parent simply provides a specific item-by-item allocation in their wills of sentimental items such as jewelry. Parents can also cause huge sibling issues when they promise or tell a child they will receive a certain item and then do not specifically allocate that item to the child in their will—or worse yet, allocate the item to another child. Parents: always make your will consistent with what you have told your children, or communicate the change to them.
  • Grandchildren – There is no right or wrong answer here, but parents really need to think through how to allocate their estate when one of their children does not have children of their own or each family has a different number of grandchildren. Is the estate split equally by family? And if giving money directly to grandchildren—does each grandchild receive the same amount, or is the allocation equal by family and a grandchild with no siblings receives more than a grandchild with siblings?
  • Business assets – When parents leave a business to one sibling and equalize other siblings in cash or investments of equal value, one would think they have accomplished peak fairness. Yet some businesses explode after the parents die, making the child that took over the business very wealthy. Alternatively, the business may stumble or even fail, leaving that child in far worse financial situation than their siblings. Either way, the disparity in financial position creates acrimony. And it’s just one specific nuance of conflict in family business succession.
  • Asset in one child’s name – Parents often put assets in a child’s name for probate or tax planning purposes. But as the saying goes, ownership is nine-tenths of the law. Some siblings may depart from the parents’ assumption that they will act just as trustees of that asset for their siblings. They make think of themselves as the actual owner of the asset.
  • No parents, no buffers - One comment from Charles’ book I found truly relevant was “that once the parental referees are out of the picture, the gloves come off.” I have seen this so often. Parents really do act as buffers and referees for their children. Without a referee, disagreements can break out.
  • Spouses and in-laws – Spouses and in-laws in the ear of one child stoking their belief that the parents divided assets unfairly have caused many a sibling fight.

Parents: Have that discussion


Many of the above issues are human nature, which can’t be avoided entirely. But parents need to consider all the above possibilities when drafting a will. Readers of my blog will know that I am a huge proponent of discussing your will to a full or partial extent with your family and explaining your intentions. I think this can sometimes avoid or minimize sibling estate issues.

It is sad that sibling estate fights are even a topic, but they do unfortunately often become an issue. Parents, my suggestion to you is consider these issues, get good estate planning advice, consider a family meeting, and take off your rose-coloured glasses when planning your estate.

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, May 17, 2021

The stunning story of a patient investor who made good

Investment managers and professionals swear by two mantras. The one that gets the most buzz is to understand your risk tolerance. But it’s the other that I want to discuss today: have patience and conviction with your investments. This holds true whether you have hired an investment manager or investment advisor to manage your investments, or are a do-it-yourself investor.

I recently encountered a stunning example of the value of patience in investing. I was preparing a client’s tax return (note: the client has given me permission to discuss this example, without using their name). In preparing her return, I flagged that she may need a T1135 Foreign Income Verification form, which reports foreign holdings. My client had about 2500 shares of Apple stock, and I was unsure whether the shares has an adjusted cost base of more than C$100,000—the threshold to require that form.

The client said no, the original cost was far below the $100,000 threshold. It was just that she had held her Apple shares for around 14 years and not sold them. The client also provided me a summary of her stock purchase history. She had purchased 100 shares of Apple stock in 2008 for around C$16,000 and basically held onto them. She had only sold off a small portion once: in 2012, to help fund a house purchase.

The summary provided was startling. The 2,500 Apple shares that she owns had a fair market value of $375,000 (as of mid-April). Yet all she did was buy the original 100 shares 13 years ago for $16,000 and wait. Time and stock splits, and Apple’s overall strong performance, took care of the rest. What a textbook case of a patient investor (especially so given Apple’s stock price has been all over the place).

As someone who in shredding my tax returns a couple years ago realized how many flyers I had taken, how many disruptive stocks I had purchased looking for the big winner, I felt really ridiculous. I felt even worse when I realized that my first blog post on The Blunt Bean Counter in Sept 2010 was called Why Didn't You Buy Apple for $25?

In that post I discussed famed money manager Peter Lynch, who among many other suggestions noted that by just paying attention to what is going on around you and having some basic common awareness, both the novice and the sophisticated investor can find growth stocks in their day-to-day lives. I then commented in the 2010 post: “think of how much money any of us could have made paying attention to the iPod fad. Kids were suddenly walking around with white wires hanging out of their ears attached to these newfangled ‘Walkmans.’ In retrospect, how could we have missed this and not bought Apple?”

Why I did not buy Apple after writing that blog post is beyond me—and my clients’ timeline is fairly similar to that initial post.

Apple is just an example. You could have purchased most any Canadian bank in 2008 and had spectacular gains if you held the stock. Maybe not as large as Apple, but still substantial with significant less volatility.

So the moral of the story: Patience and conviction in your investing are especially important. That does not mean once you buy a stock you hold it for life; you still must review whether your original reasoning and thesis for purchasing the stock is still valid and whether the company is still growing. But good companies tend to stay good companies, and flipping from one to another or looking for the next disruptor is not necessarily the best strategy. Take it from me.

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