New Will Provisions for the 21st Century – Your Digital Life from Facebook to Domain Names

Today I have a guest post by Katy Basi on digital assets and how they need to be considered and reflected in your will. This is the second post in a three part series by Katy. Previously, I posted Katy’s blog on New Will Provisions for the 21st Century –RESPs which dealt with RESP issues that one must consider when drafting a will. Katy’s final installment on Reproductive Materials will be posted sometime in the fall.

So without further ado, here is Katy’s very interesting post that considers everything from your Facebook page to any domain names you own. My only question is, does Katy think any guy has even seen the Princess Bride?

New Will Provisions for the 21st Century – Your Digital Life

By Katy Basi

The treatment of “digital assets” upon death is a hot topic. First it’s important to define what we mean by the term – basically anything remotely relating to a computer may be pulled into this category. One very interesting paper on the topic divided digital assets into five categories: devices and data, e-mail, on-line accounts, financial accounts and on-line businesses. (If you’re interested, check out this paper by Kristina Sherry titled “What Happens to Our Facebook Accounts When we Die?: Probate Versus Policy and the Fate of Social-Media Assets Postmortem”).  

Since I draft wills and help executors administer estates, my main concern is with the difficulties that digital assets cause for executors and whether or not I can add provisions to a will to smooth out these issues before they occur – preventative planning, so to speak. As of the time of writing, there is no legislation in Canada addressing digital assets, but some forward-thinking US states have implemented new laws.

At a minimum, I recommend that your will and power of attorney for property have provisions clarifying that your executor/attorney for property has the legal authority to deal with your digital life. For example, wills drafted by yours truly contain the following provision:

My executor shall be given access to, and may take control of, conduct, continue and/or terminate any and all of my digital assets, including domain names, devices, data, on-line accounts, whether financial or otherwise, on-line businesses, unpublished photographs, manuscripts, and intellectual property of any kind whatsoever stored digitally, property within any video game or virtual world, and any of my accounts on any social networking website, microblogging or short message service website (e.g. Twitter), or email service website.

My hope is that this clause may help executors in their dealings with various on-line service providers. However, many of the providers take the position that they had a contractual relationship with the deceased, and therefore the terms of the contract govern (which are generally available in the form of policies). 

For example, Facebook’s policy is to memorialize a person’s timeline once they have been notified of the death. Only immediate family members and the executor can require Facebook to remove the account of the deceased. Twitter has a similar policy. If you come across the profile of a deceased person on LinkedIn, you can fill out an online form informing LinkedIn of the death and they will “be in contact with you”. Google’s “Inactive Account Manager” was introduced in the US in April.

Depending on the option you select, this feature sends information about your Google accounts to your designated person if your account has been inactive for a certain period of time, or it may just delete your account. (I can’t find this feature on my Canadian Google account yet…which could just be an indication of my general lack of tech ability).

In addition, you’ll see that the digital assets clause gives authority to the executor to take control of all “devices”, i.e. computers, tablets, smartphones, etc. There are cases where a beneficiary refuses to surrender the deceased’s computer to the executor, claiming that it is a personal effect to which the beneficiary is entitled under the will. The executor mainly wants the computer to access passwords saved on cookies, and ends up in an unnecessary squabble with the beneficiary.

Some digital assets really are assets, i.e. they have monetary value in and of themselves. Examples are popular domain names, transferable gaming credits, a Paypal account with a credit balance, points from programs that survive death if the right steps are taken (e.g. Aeroplan), right up to an online business (e.g. Ebay). If you want these assets to go to the person inheriting the residue of your estate, then a specific provision in your will may not be required. However, if you want your gaming credits to go to your nephew Jordan, because he is the only person in the family remotely likely to enjoy them, your will better say so!

Additional will provisions may also be required if you own digital assets that require maintenance in order to keep them alive and healthy after your death, for example a domain name. If your executor fails to pay the expenses associated with keeping your domain name active, the domain name will lapse, and may be acquired by someone else.

Many people are happy to have their domain names die with them – katybasi.com can certainly wither away when I’m gone, unless there’s another Katy Basi out there willing to pay my estate for it (I’m not holding my breath…) However, if I wrote a book called “Prepare to Die”, and I registered preparetodie.com, I may want to create a fund in my will from which all expenses relating to the domain name and corresponding website would be paid after my death. I’m certain that my book

would be a bestseller, triggering an avalanche of royalties that would be paid to my estate for years to come – so I would want my executor to be instructed to keep the domain name alive even when I’m not, and to be given the means to do so. (Yes, my book title is a reference to the movie “Princess Bride”, for the Mandy Patinkin fans – you know you’re out there!) 

Given the fact that our digital lives seem to change hourly, with accounts and services added or dropped constantly and passwords theoretically changed on a regular basis, your will cannot list all of your digital assets. It would, however, be helpful for your executor to know where to find a list, tangible or ethereal, of your digital assets and the passwords to access them. There are many online services that can help, e.g. Legacy Locker, Estate++.

Finally, you may want to consider whether you have any digital assets that you do not want anyone to know about after your death (I’ll let your imagination take over here). In that case, you may want to find a service like Google’s that will simply cause them to disappear.

I make no guarantees about how long this particular blog post will stay up-to-date. Perhaps five minutes given the rapid pace of change in this area. Enjoy the process!

Katy Basi is a barrister and solicitor with her own practice, focusing on wills, trusts, estate planning, estate administration and income tax law. Katy practiced income tax law for many years with a large Toronto law firm, and therefore considers the income tax and probate tax implications of her clients' decisions. Please feel free to contact her directly at (905) 237-9299, or by email at katy@katybasi.com. More articles by Katy can be found at her website, katybasi.com.

The above blog post is for general information purposes only and does not constitute legal or other professional advice or an opinion of any kind. Readers are advised to seek specific legal advice regarding any specific legal issues.

Why Spend Your Energy Being Frugal? Just Tax Plan!

This past February, I had some fun with a top ten list (look below the sports agent's fees post) on why you should vote for me in a blogging contest (thanks to all of you who helped vote me into the second round of the contest!). In this list I took some shots at frugal blogs and got some emails from furious Frugalites asking me what I had against frugality and frugal blogs? I responded to a couple of emails saying that I don't have anything against frugal bloggers or frugal blogs in particular: my issue is that I think people are far too focused on cost savings,
as opposed to increasing income and/or minimizing income taxes.

As per this tongue and cheek blog I wrote titled “Old and Not Thrifty”, I admit I am not thrifty, although my wife counterbalances my lack of frugality with her ability to get a great deal. Notwithstanding my personal spending habits, any long-time reader of The BBC will know I often write about how important it is to budget and spend within your means and I reiterate this now – always be cognizant of what you are spending. However, in my opinion, if you budget well and are frugal, I think you reach a point of diminishing returns. So you save $12 on a cheaper toaster, or $1.29 on a box of cereal. Yes, those are savings, but they are immaterial in my mind once you have already proven to be a disciplined spender. Why not put all that energy into producing more income or saving taxes?

Before you start sending me hate mail, this post is not intended for those whose financial situations are such that frugality is a necessity, but for those of moderate or greater income who seem to get a little carried away with their frugal efforts when they could be making a bigger change in another manner.

I can already hear the cries of “Mark don’t give me the you should earn more lecture. I am stressed out as it is with my current job and life.” So, I won’t tell you to consider turning a hobby or an expertise into a side business or to spend some energy creating a case for a raise from your current employer or to spend your energy looking for a better job opportunity. Nope, I am going to give you some lazy tips from my past blog posts to save you significant money in taxes so you won’t have to worry about saving money on the daily fresh fish special (if you call a fish floating with one gill above the water, fresh).

I have reviewed my past blog posts to unearth three effective if not fairly effortless ways to increase your cash-flow:

1. Capital Loss Planning

I have written several times about capital loss planning (see the third paragraph from the bottom of the post, “Creating Capital Losses – Transferring Losses to a Spouse Who Has Gains) where you have a capital gain and your spouse has an unrealized capital loss. If your situation meets the criteria in my post and you have, say, a $10,000 loss and your spouse has a gain greater than $10,000, you could potentially save almost $2,500 by undertaking this form of tax planning. That is a lot of cheap rolls of toilet paper. The only caveat for this tip is that you should probably get some professional advice to ensure you do not get tripped up by the technical rules with superficial losses.

2. Form T2200

How about spending your energy asking or prodding your company to provide you with a T2200 Form that allows you to claim your employment expenses. Many employees are shy about requesting these forms and many employers are reluctant to issue these forms (because of the administrative hassle). If you incur expenses such as automobile costs, telephone or home office costs and are not reimbursed or only partially

reimbursed, ask or convince your employer to issue this form so you can deduct any of your employment related expenses on your 2013 personal income tax return. Depending upon the amount of employment expenses you have been personally absorbing, you may save enough for a vacation, which to me is a lot more exciting than saving some money on steaks that expire that day.

3. Income Splitting with Your Spouse

Income splitting can be as simple as spending the higher income spouse’s money on living costs and using the lower income spouse’s salary to invest, so any investment income is earned by the lower tax rate spouse. Alternatively, income splitting can be as sophisticated as utilizing a family trust or a prescribed loan, the rate is currently only 1%.

I have just briefly touched on a few simple opportunities to save money through tax planning. My point? Frugality takes a lot of time and effort, whereas many tax planning strategies require only a few hours of consideration. Even if you require an hour of time from an accountant to review your plan, the tax savings can be substantial.

Hot off the Press - 2012 TFSA Penalty Statements are Arriving at a Mailbox Near You

The CRA has started issuing penalty statements for excess TFSA contributions made during 2012. Canadians who have over-contributed to their TFSA are subject to a penalty of 1% per month on the excess contribution.

The covering letter, detailed excess amount calculations, TFSA transaction summary for 2012 and the RC243-P-E(13)X forms can total seven or more pages and are chock full of calculations and numbers. In many cases, the format of the penalty calculation is causing the recipients of the forms confusion and anxiety. The reason for this stress is as follows:

If someone over-contributed say $5,000 for all of 2012, you would think the CRA would multiply $5,000 x 12 (the number of months of over-contribution) x 1% a month penalty to come to the $600 penalty. However, the CRA statements run a cumulative contribution total such that the final over-contribution number at the bottom of the page is $60,000. Even though the CRA then just multiplies the $60,000 grand total by 1% to come to the correct $600 total, people are freaked out that they somehow over-contributed by $60,000.

Excess TFSA contributions and the related penalties have been thoroughly discussed by many newspaper journalists and bloggers over the past few years. I also covered this topic in my blog post “Canadians Continue to Break TFSA Rules” but I took a slightly different tack in that I postulated that if institutions offering TFSAs were required to ask the two questions below, most over-contributions would be prevented. 

Those questions were: 

1. Have you confirmed your yearly TFSA contribution room with your income tax assessment or with the CRA through your online account or any other means?

2. Does your contribution include an amount designed to replace funds withdrawn during the current calendar year? If so, do you understand that those funds cannot be replaced until next year unless you have other contribution room or you will be subject to penalties for over-contribution?

For the do it yourself (“DIY”) investor, you may have to ask and answer both these questions yourself if you have self-directed online accounts. However, what if you use an investment advisor or make your TFSA contribution at your local bank?

For the non-DIY investor, these may be loaded questions. For example, last year, a client over-contributed to their TFSA because their investment advisor suggested they catch-up on their TFSA contributions. The advisor thought or understood that their client had not made a TFSA contribution as of December, 2012 (some people felt the TFSA contribution limits were too small initially to worry about and only started catching up last year or currently), but a contribution had been made in 2009, the first year for TFSAs. I would hazard a guess that when the client went to the bank in 2009, their teller told them about this great new tax-free program and they setup an account with the bank they forgot about.

The issue that arises is whose fault is the over-contribution. The client or the advisor? Most advisors would probably suggest it is the client’s responsibility; and as with RRSPs, the client should know their limit, go online or check with their accountant to determine their available TFSA contribution room. The client, on the other hand, thinks their advisor should have been clearer about what they needed to do to confirm their TFSA limit.

Personally, in these types of cases, I think the over-contribution is both parties’ fault. Some people do not convey the proper information to their advisors, but their advisors, especially those with less sophisticated clients, need to ask “Have you confirmed your yearly TFSA contribution room to your income tax assessment or with the CRA through your online account?” and if not, can you please confirm such with your accountant. More importantly, even if the advisors think they did nothing wrong, they have inadvertently upset a client because of the penalty fees.

Whether you self-direct your TFSA or have an investment advisor manage the account, you need to be vigilant about confirming your TFSA balance with the CRA. Advisors need to realize something as innocuous as a TFSA contribution can sour a relationship with a client and they need to be diligent in ensuring their clients do not over-contribute and face penalties.

BNN TV Interview & Garbage Lids are Gold

Last week I was interviewed by Kim Parlee, Vice-President of TD Wealth Management and the host of Money Talk on BNN. The topic was Stress Testing your Spouse's Financial Readiness if you were to Die Suddenly. Even with tons of make-up, I still seem to have a face made for blogging. Nonetheless, I really enjoyed the interview and Kim was very welcoming. My only regret is that the time allotted to a boring accountant discussing a morbid topic was somewhat restricted.

Consequently, I did not get to fully discuss two important parts of any financial stress test for spouses. The first, stress testing your insurance policies (you need to have a one or two page listing of every policy you have, the policy number, type of insurance, amount of insurance and broker contact number). I also only got to briefly discuss the key component of stress testing, the preparation of an all-inclusive checklist.

If you have not read my original blog post on stress testing your death or my second all-encompassing stress test for both your current finances and your death, I urge you to do so. If you have read these posts, please follow up – it is one of the most selfless things you can do for your spouse or significant other.

Garbage Can Lids, aka Gold on my Street

 

On a totally unrelated topic, a few months ago when I came home from work, I got out of my car to take in the blue and green bins and the garbage cans. I noticed that one of my garbage can lids was missing. I uttered one or two expletives when I could not find the lid, but did not give it much thought as I figured it blew away. I was however; not very happy when I found out my local Canadian Tire did not sell lids separately.

I was none too pleased when I came home last month and realized a second garbage can lid was missing. This time several expletives came forth from my mouth as I came to the conclusion that my lids were being stolen. Who the heck steals garbage can lids from their neighbours?

Two weeks later on garbage day, I intended to scan the neighbourhood to see if someone had a similar lid on their garbage (my lid had no street number on it, but it did have a broken handle on one side, which made it distinguishable). To my surprise, only 10% or so of the garbage cans appeared to have lids. Either everyone’s lids were being stolen, or people were smart enough not to use their lid on garbage day and to only use their lids to keep their garbage covered during the week. What a surprising revelation; garbage can lids were like gold in my neighbourhood.

My garbage lid saga continued, when two weeks ago I came out to get the morning newspaper and was stunned to spot a lid of the same make as my two lost lids at the end of my driveway. The lid thief must have felt guilty or found their original lid and returned mine. Total garbage lid craziness.

I promptly took the lid into my house and spray-painted my house number on it in fluorescent orange, to hopefully prevent someone from taking it again in the future.


The moral of this blog post? The next time you need to barter for goods, use your garbage can lid – as on my street, one man’s trash lid, is another man’s treasure.

Transferring Property Among Family Members - A Potential Income Tax Nightmare

In today’s blog post, I will discuss the income tax implications relating to the transfer of property among family members. These transfers often create significant income tax issues and can be either errors of commission or errors of omission. Over my 25 years as an accountant, I have been referred some unbelievably messed up situations involving intra-family transfers of property. Most of these referrals come about because someone has read an article and decides they are now probate experts or real estate lawyers have decided they are also tax lawyers. 

Transfers of Property - Why They Are Undertaken

Many individuals transfer capital properties (real estate and common shares, being the most common) in and amongst their families like hot cakes. Some of the reasons for undertaking these transfers include: (1) the transferor has creditor issues and believes that if certain properties are transferred, the properties will become creditor protected (2) the transferor wishes to reduce probate fees on his or her death and (3) the transferor wishes to either gift the property, transfer beneficial title or income split with lower-income family members.

I will not discuss the first reason today because it is legal in nature. But be aware, Section 160(1) of the Income Tax Act can make you legally responsible for the transferor's income tax liability and there may be fraudulent conveyance issues amongst other matters.

Transfers of Property - Income Tax Implications

When a property is transferred without consideration (i.e. as gift or to just transfer property into another person's name), the transferor is generally deemed to have sold the property for proceeds equal to its fair market value (“FMV”). If the property has increased in value since the time the transferor first acquired the property, a capital gain will be realized and there will be taxes to be paid even though ownership of the property has stayed within the family. For example, if mom owns a rental property worth $500,000 which she purchased for $100,000 and she transfers it to her daughter, mom is deemed to have a $400,000 capital gain, even though she did not receive any money.

There is one common exception to the deemed disposition rule. The Income Tax Act permits transfers between spouses to take place at the transferor’s adjusted cost base instead of at the FMV of the capital property.

This difference is best illustrated by an example: Mary owns shares of Bell Canada which she purchased 5 years ago at $50. The FMV of the shares today is $75. If Mary transferred the shares of Bell Canada to her brother, Bob, she would realize a capital gain of $25. If instead Mary transferred the shares of Bell Canada to her husband, Doug, the shares would be transferred at Mary’s adjusted cost base of $50 and no capital gain would be realized. It must be noted that if Doug sells the shares in the future, Mary would be required to report the capital gain realized at that time (i.e. the proceeds Doug receives from selling the shares less Mary’s original cost of $50) and Mary would be required to report any dividends received by Doug on those shares from the date of transfer.

As noted in the example above, when transfers are made to spouses or children who are minors (under the age of 18), the income attribution rules can apply and any income generated by the transferred properties is attributed back to the transferor (the exception being there is no attribution on capital gains earned by a minor). The application of this rule is reflected in that Mary must report the capital gain and any dividends received by Doug. If the transferred property is sold, there is often attribution even on the substituted property.

We have discussed where property is transferred to a non-arm’s length person that the vendor is deemed to have sold the property at its FMV. However, what happens when the non-arm’s length person has paid no consideration or consideration less than the FMV? The answer is that in all cases other than gifts, bequests and inheritances, the transferees cost is the amount they actually paid for the property and there is no adjustment to FMV, a very punitive result.

In English, what these last two sentences are saying is that if you legally gift something, the cost base and proceeds of disposition are the FMV. But if say your brother pays you $5,000 for shares worth $50,000, you will be deemed to sell the shares for $50,000, but your brothers cost will now only be $5,000; whereas if you gifted the shares, his cost base would be $50,000. A strange result considering he actually paid you. This generally results in “double taxation” when the property is ultimately sold by the transferee (your brother in this case), as you were deemed to sell at $50,000 and your brothers gain is measured from only $5,000 and not the FMV of $50,000.

Transfers of a Principal Residence - The Ultimate Potential Tax Nightmare

I have seen several cases where a parent decides to change the ownership of his or her principal residence such that it is to be held jointly by the parent and one or more of their children. In the case of a parent changing ownership of say half of their principal residence to one of their children, the parent is deemed to have disposed of ½ of the property. This initial transfer is tax-free, since it is the parent’s principal residence. However, a transfer into joint ownership can often create an unforeseen tax problem when the property is eventually sold. Subsequent to the change in ownership, the child will own ½ the principal residence. When the property is eventually sold, the gain realized by the parent on his or her half of the property is exempt from tax since it qualifies for the principal residence exemption; however, since the child now owns half of the property, the child is subject to tax on any capital gain realized on their half of the property (i.e. 50% of the difference between the sale price and the FMV at the time the parent transferred the property to the child, assuming the child has a principal residence of their own).

An example of the above is discussed in this Toronto Star story that outlines a $700,000 tax mistake made by one parent in gifting their principal residence to their children.

 

 

 

Transfers for Probate Purposes

As noted in the first paragraph, many troublesome family transfers are done to avoid probate tax. Since I wrote on this topic previously and this post is somewhat overlapping, I will just provide you the link to that blog post titled Probate Fee Planning - Income Tax, Estate and Legal Issues to consider.

Many people are far too cavalier when transferring property among family members. It should be clear by now that extreme care should be taken before undertaking any transfer of real estate, shares or investments to a family member. I strongly urge you to consult with your accountant or to engage an accountant when contemplating a family transfer or you may be penny wise but $700,000 tax foolish.

Finding a Business Partner

Choosing a business partner is similar to selecting a spouse. You want to get to know the person over time and ensure your values and aspirations are in sync. 
In a best case scenario, the potential business partners work together or have worked together in an employment situation, or in some kind of supplier/vendor relationship. However, even these situations do not always reveal a future business partner’s hidden weaknesses. In less ideal situations, business partners are thrown together as a result of a funding arrangement to take advantage of a business for sale or some other small window of opportunity the marketplace provides.

As an accountant, I have observed many mismatched partners with respect to both skill and personality. These relationships are usually doomed. Today I will discuss some of the issues you need to consider when selecting a business partner.

Complementary Skill Sets

Most businesses will require three skill sets: financial, product/services and sales/marketing. Sometimes you can succeed without the financial skill set if you lean on your accountant, but ultimately, most businesses need a strong numbers person to keep track, plan, forecast and analyze the numbers. In a product-oriented business, you need someone to build the product or run the production side. Sometimes that skill set also includes a financial skill set, but not often. Lastly, you need someone who can sell the product. Often that is an attribute financial and production people don’t have. The reality is that when you are starting a business, at most, you will typically only have two of these skill sets. Thus, one person will have to fill the gap and you may require some professional assistance for the financial or sales side.

In a small business, it is vitally important that partners have complementary skills. If you duplicate skill sets, you may be dooming your business venture from the beginning. Two production or financial guys will often have a very difficult time generating business for a new company.

Roles Within the Business

Defining roles within the company is very much related to ensuring complementary skill sets. Defined roles create clear boundaries and hopefully prevent one partner from sticking his or her nose in the other’s area of responsibility. Defining roles at the beginning of a business partnership essentially ensures you are responsible for your area of expertise.

How Well Do You Know Your Partner?

Whether you have worked with your future partner(s) before or not, it is very important to undertake a background check. I have seen several business partnerships break-up, and when the dust settles it comes to light that one of the partners had similar issues elsewhere. Try to speak to people in your industry who have had contact with your potential partner.

Does Your Partner Have Connections?

Look for a partner that has a strong network or connections within your industry. If your partner has a strong network, he/she may open doors for your new business very quickly. However, it has been my experience that when people tell you they are bringing customers with them, the customers do not necessarily follow immediately. Be wary when a partner promises customers will follow them. It may not be their fault, but clients often want to wait to ensure a new business is stable before changing suppliers, consultants etc. 

Shared Vision and Values

It is vitally important that business partners share the same initial vision and values. When there is not unanimous consent on the initial business vision, the business can fragment and become dysfunctional quickly. That is not to say partners will ultimately continue to have the same vision and agree on everything, but at the outset; there must be consensus. In addition, business partners should have similar core values.

Skin in the Game

There may be cases where you have a silent partner or an angel investor, but in the typical business situation where two or three people join forces, it is important that equal value be contributed to the business either in

the form of cash or technology. Furthermore, it is important that all partners have a minimum level of financial resources available to ensure decisions are always made in the best interest of the business and not because one party is short of money.

Shareholder Agreements and Decision Making

Many new businesses cut costs by skipping the drafting of a shareholders’ agreement; this is risky. If you forgo an initial shareholder agreement for monetary concerns, you must agree with your partner that as soon as the business is on stable footing, you will engage a lawyer to draft a shareholders' agreement.Some key terms you want to consider in a shareholder agreement are noted in this online template agreement.

There are a multitude of other issues to consider when choosing a business partner. However, if you undertake due diligence and cover off most of the issues above with your potential partner(s), you have a much better chance of succeeding together.

Should You Discuss Your Salary with Friends, Co-Workers or Family?

I have written several blogs on various money taboos; from discussing your will with your family to planning for inheritances. I enjoy writing or discussing these sacred topics because I like to challenge some of our financial conventional wisdom's. Frankly, I find some people just so uptight on these topics that I enjoy watching their reactions and/or reading their comments on my blog.

A major taboo is discussing your salary with friends, co-workers and family. Although I am personally fairly open to discussing many sacred money topics, I think discussing your salary is generally not a prudent action. However, are there any situations in which a discreet discussion of salary may be advantageous to one or both parties?
  

Friends

Personally, I see few if any circumstances that would ever merit discussing your salary with your friends. The one possible exception may be where your friend is in the same or similar profession. I will discuss that exception in detail below. Otherwise, I see only risk in discussing this topic with friends. Some may lack discretion and inform others of your salary, while others may be jealous or harbor resentment. 

Co-Workers

In the case of co-workers and friends in similar professions, I can see at least 2 reasons why someone would divulge their salary. The first reason being to ensure equality of salary. Many people want to know they are being paid equally, especially in industries where there may not be gender equality. The issue becomes what you do with that information? Do you run to your employer and tell them Don down the hall told you he is making $2,000 more? You put Don at risk with your employer (which is why Don may be hesitant to discuss the issue in the first place), and if you confront your employer you risk your own job, whether your employer is legally entitled to dismiss you or not.

On the other hand, if an employee is discreet, they can use their knowledge of wage inequality in salary discussions to know how far they could try and push for a salary increase, assuming they feel

confident they are a valued employee. Both the above situations involve risk to the employee and their co-worker which is why I would suggest many co-workers do not discuss their salaries (Although, I may have employer bias; as I would not be pleased if someone told me during a salary review that they deserve to be paid as much as Mary or Sam).

Another reason for discussing your salary amongst friends and co-workers in the same profession would be if you or they are job shopping. If you know Jane makes $70,000 working for an engineering firm and your engineering firm only pays you $60,000, you may wish to consider applying for a job at Jane’s firm if all other employment variables are equal. Alternatively, this information may be helpful in pushing for a raise at your current firm, as knowing what other firms are paying and what your firm really needs to pay to compete would be valuable knowledge.

Family

I would think that most people share their salary with their spouse. However, I know there are spouses who try and keep that information private or provide partial disclosure. In some cases they think the information is private, in others they feel their spouse will spend more money if they know what they earn, and finally, many spouses are not forthright so their spouse will be in the dark should there ever be a marital breakdown.

I see no reason to provide such information to siblings, unless it would be useful information for their own careers. Even the most well intentioned sibling could say something by accident and we all know about sibling rivalry and jealousy.

How about younger children? I found a couple of articles on this topic, specifically this New York Times Article titled “Daddy Are We Rich? and Other Tough Questions”. The author, Ron Lieber, discusses ways to handle the question without providing specific income in various situations. The article puts forth an elegant solution by Gary Shor, a financial planner, where he suggests parents turn the question upside down by detailing the expenses they incur to live their current lifestyle. This provides their children with a sense of how much salary would be needed to afford those expenses and what kind of professions could provide such income for their children in the future.

For full disclosure, the reason I wrote this blog is that I recall as a university student considering following in my father’s footsteps. He was a baseball player (a left handed pitcher who was asked to try out for a Cleveland Indian farm team when younger) and I asked him how much do major league pitchers make? 

Just joking about asking him how much pitchers make, but he was asked to try out for a minor league team and believe it or not, in the late 50’s accountants made more than baseball players. Then there was my grandmother who forbade him from trying out for the Indians, so in the end my father decided against baseball and he became an accountant. I have digressed as I often do, however, I do remember having a frank discussion with him about what he made as an accountant that I found very enlightening in making my career choice. In retrospect, I would have preferred it if he had framed our discussion based on what accountants make per hour they work (given the hours I have worked over my career), instead of on a gross annual basis.

Anyways, as I stated at the outset, I would generally dissuade anyone from disclosing their salary, other than where that information provides them or someone they trust, with knowledge to leverage a greater future salary. And in those rare cases when you do disclose your salary, always understand you are taking a huge risk with that information being leaked – intentionally or unintentionally.