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 a National Accounting Firm in Toronto. This blog is meant for everyone, but in particular for high net worth individuals and owners of private corporations. The views and opinions expressed in this blog are written solely in my personal capacity and cannot be attributed to the accounting firm with which I am affiliated. My posts are blunt, opinionated and even have a twist of humor/sarcasm. You've been warned. Please note the blog posts are time sensitive and subject to changes in legislation or law.

Monday, April 23, 2012

You put it off Long Enough- Time for your Annual Financial Check-up

Hopefully, most readers of this blog go to their doctor for an annual check-up; although unfortunately for many guys, annual seems to mean once every five to ten years. However, I digress from the topic at hand.

Another check-up many people tend to avoid like the plague is their financial check-up. Below I provide a simple checklist of financial items, that is intended to make your financial check-up relatively painless.
  1. Is your will up-to-date
  2. Do you have a second will if you have shares in a private corporation? (a second will in certain provinces may reduce probate taxes) 
  3. Does your will integrate into your income tax and estate planning, or are they in conflict?
  4. If you have re-married and have a second family, does your will address the potential complications?
  5. Are your executors still the correct people to administer your will? Have you informed them/asked them about this appointment? 
  6. Do you have an up-to-date power of attorney for health? 
  7. Do you have an up-to-date power of attorney for finances? 
  8. Where is your safety deposit key, and does anyone else know where it is? 
  9. Have you prepared an information checklist for your executor(s)/spouse?  
  10. Do you have a net worth statement? You should prepare an updated statement every December 31st for comparative purposes (so get cracking on December 31, 2011, which I assume was not done).
  11. Do you have a financial plan? If not, consider engaging an advisor to prepare one. If you have a plan, it should be updated every few years or at least reviewed for any significant life changes or changes in assumptions. 
  12. If you are over fifty, you should at minimum determine your expected yearly cash requirements in retirement and compare that with your expected income inflows.
  13. Can you accelerate the repayment of your debt? 
  14. Can you convert any non-deductible debt into deductible debt?
  15. Can you consolidate any credit card debt?
  16. If you are single or widowed, or god forbid you and your spouse died in a car crash tomorrow, do you have enough liquid assets and insurance to cover your anticipated income tax liability? 
  17. Who is/are the beneficiary(ies) of your RRSP and insurance policies? Are they the correct people (ie: not your ex-spouse).
  18. Do you own US real estate or stocks? If so, have you considered your US estate exposure if the US estate tax rates return to the higher rates of prior years? 
  19. If you are a shareholder of a private Canadian company, have you undertaken planning to access the $750,000 Qualifying Small Business Corporation ("QSBC") exemption?
  20. If you have a corporation, have you considered a family trust to income split and possibly  multiply the QSBC exemption? 
  21. If you own a corporation, do you have a succession plan?
  22. Do you have life insurance? Is it sufficient given changes in your life such as the birth of a child or a recent marriage?
  23. Is your level of insurance too high given your life situation (ie: children are now in the work force)? 
  24. Do you have disability insurance at work or personally? 
  25. Do you have critical illness insurance or have you considered such?
  26. If you have excess investable assets, have you considered a Universal insurance policy? 
  27. How many different investment accounts do you have? Is it time to consolidate your accounts and/or investment advisors if you have more than one? 
  28. If you have children do you have an RESP? 
  29. Have you discussed with your high-school aged children your expectations of them in helping fund their education?
  30. Have you opened a TFSA?
  31. Have you considered how your citizenship may affect your income tax and pension situation? For example, if you are a US citizen, have you been filing US 1040 tax returns? For citizens of other countries who will receive a pension, have you researched the income tax treaty implications of receiving such pensions in Canada?
  32. Where you have an investment advisor, do you have any idea of your investment returns for the last year, five years or ten years? If not, how do you evaluate their performance?
  33. Does your current portfolio reflect your appropriate risk profile?
  34. If you or your spouse has capital losses, have you considered any planning to ensure they are utilized?
  35. Would the purchase of a flow-through share be beneficial from a tax perspective, assuming it fits your investment criteria?
  36. If you have charitable intentions, do you have a plan in place for achieving those goals?
  37. Have you set-up a filing system to ensure you capture all your income tax receipts?
  38. If you can deduct employment expenses, have you created an Excel file to track expenses?
  39. Do you have an emergency cash fund in case of sickness or job loss?
  40. Do you have a family budget?
The above list, although long in length, is far from exhaustive, but should provide a nice kick-start to your financial check-up. More importantly, unlike the doctor, this check-up does not require gloves.

If you want to review a blog post with less detail, but a broader perspective, check out this post by the Million Dollar Journey on giving Yourself a Financial Checkup

The blogs posted on The Blunt Bean Counter provide information of a general nature. These posts should not be considered specific advice; as each reader's personal financial situation is unique and fact specific. Please contact a professional advisor prior to implementing or acting upon any of the information contained in one of the blogs.

6 comments:

  1. Hi Mark:


    Well done. Great list. Most of this I've done already with the ones I haven't because they don't apply to me yet.

    Question: Forgotten lesson from my law class, but could you elaborate on the second will for probate purposes. Why wouldn't one will not suffice?

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    1. Hi Anon

      Multiple wills are a fairly recent phenomenon, so you may not have been sleeping during that class.

      The following was copied from the Alpert Law Firm newsletter

      All assets that can be distributed only after obtaining probate are dealt with under a primary will. Assets that can be distributed without probate are covered in a secondary will. (If it is unclear whether or not an asset will require probate, it can be put into a separate will on its own so that it can be probated if necessary without affecting other assets.)

      Upon the testator's death, only the primary will needs to be submitted to the Court, and probate fees are calculated based only upon the value of the assets passing to the Estate Trustee under that will.

      The use of multiple wills as a strategy for estate planning in Ontario is possible partly because of section 32(3) of the Estates Act of Ontario and partly because of a 1998 landmark decision, Granovsky Estate v. Ontario, which essentially sanctioned the technique.

      Delete
  2. Isn't the only reason probate is required at all is for the protection/benefit of financial institutions? And that therefore the definition of "assets that can be distributed without probate" depends entirely on what customarily (should I say the whim since different institutions seemed to have different rules?) banks/brokerages are willing to do? In my very limited experience of being executor once it seemed the main/only issue for the financial institution was how much money was at stake - a small bank balance was given over without question but a big balance required the probated will. Other things like RRSP transfers to a spouse beneficiary also were not delayed by probate, I presume because the bank had its own signed form. Is there any law which requires assets to be submitted to probate? Suppose you die intestate with no will to be probated, do the assets have to be listed and probate tax levied before the administrator can be appointed?

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    1. Hi Cdn Investor

      Great questions, however, as a tax accountant and not an estate lawyer I do not feel qualified to answer, so I will provide answers below from those more qualified.

      It has been my experience, that institutions have become very stringent in repsect of requring an estate to be probated. On top of that, each institution has its own documentary requirements, driving executors around the bend.

      Charles Ticker who has writen a guest blog for me says this about probate on lawyershop.ca

      http://info.lawyershop.ca/estate/index.php/archives/2008/01/11/explaining-wills-and-probate/

      When Probate Is Required

      It isn’t always necessary to have a Will formally approved by the court. It really depends on the assets in question. In a joint tenancy, for instance, you typically would not need probate because it would automatically pass to the survivor. For certain real estate in Ontario, you do need probate or you won’t be able to deal with that real estate. For shares in private companies, you don’t really need probate. Where there are beneficiaries named in a Registered Retirement Savings Plan (RRSP) or a Registered Retirement Income Fund, you won’t need probate. Where beneficiaries are named in life insurance, you won’t need to do it.

      Some banks, depending on the amount of money at issue, may not require a formal probated Will. If the estate is less than $200,000 and everything is going to the spouse, they may not require probate. Because these rules are not legislated, they vary from bank to bank and even from branch to branch. For smaller estates, the banks may not require the Will to be formally probated, but if the value goes beyond their guidelines, they are going to need that Will probated or they are just not going to recognize it.

      Even if a bank doesn’t require probate, they still may want the executors to sign a personal indemnification in case it turns out there was a problem. If an executor is not comfortable with giving that personal indemnification or guarantee, he or she may want to pay for the probate fees and have the Will probated.

      As for intestate, in Ontario the gov of Ontario website says this:

      If the person dies without a will (intestate), the estate will be distributed according to the law (Administration of Estates.

      I could only find mention that probate may be more if you die without a will, so I assume it is applicable even if you die intestate, but I am not 100% sure

      Delete
  3. Ugh, this is a brutal list. I don't have half of this stuff. Guess I better get started.

    The problem with starting to sort out your finances is catching up on all the stuff you haven't been doing.

    That said, thanks for the comprehensive list.

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    1. James, copy the list to word or excel and delete the N/A parts that will make you feel better immediately. Than attack in pieces over the next few months and you will be on your way.

      Procrastination only leads to issues if any of the items noted in the list rear their ugly heads.

      Delete