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, March 30, 2015

Foreign Exchange Translation on Capital Gains and Dividends

One question that constantly arises during income tax season is; what exchange rate should be applied to foreign transactions? The Canada Revenue Agency ("CRA") has re-iterated/set forth their position in respect of the translation requirements for capital gains and dividends and I discuss their views below.

Capital Gains


During a roundtable discussion at the October 2014 Association de Planification Fiscale et Financière (APFF) conference, the CRA was asked the following question:

Principales Questions: What is the CRA's position with respect to the use of average foreign exchange rates for the conversion of amounts of income and capital gains?

Position Adoptée: An average rate may be acceptable for items of income, but not for capital gains.

Raisons: The definition of relevant spot rate in subsection 261(1) provides that a rate other than the rate quoted at noon by the Bank of Canada at the relevant date may be used, provided it is acceptable to the Minister.

The above comment reflects that the CRA typically accepts the use of an average yearly rate for income items (dividends etc.) but expects you to use the Bank of Canada noon rate or other acceptable exchange rate in effect at the time of purchase and sale for any capital transaction.

While I would suggest that most accountants strive for reporting capital gains in this manner, many financial institutions and investment managers do not provide such information when they provide capital gain/loss summaries and thus, such reporting can be problematic. See this blog post by Justin Bender for an example of how financial institutions often report U.S. capital gains transactions.

I have also observed that when individual taxpayers prepare their own returns, very few report using the rate in effect at the time and most use an average exchange rate for the year for their capital gains reporting. Ignoring the ease of preparation, using an average rate can result in a significant under/over reporting of capital gains/losses where exchange rates fluctuate significantly.

I would thus suggest, you attempt to adhere to the CRA’s position of using the rate in effect at the date of transaction, especially for specific large transactions.

Dividends


As noted above, the CRA stated at the roundtable that an average rate may be acceptable for items of income. John Heinzl of The Globe and Mail addressed this issue in a recent Q&A column.

Here is the question and answer.

Q: I hold some U.S. stocks in a non-registered account and pay U.S. withholding tax of 15 per cent on the dividends. My tax slips provide the dividend and tax information in U.S. dollars. Given the currency fluctuations we’ve seen recently, how do I report these amounts on my Canadian income tax return?

A: Because U.S. dividends do not qualify for the Canadian dividend tax credit, in a non-registered account you would pay Canadian tax at your marginal rate on the full amount of the U.S. dividend – just as if it were interest income. To avoid double taxation, you may be able to claim the 15-per-cent U.S. tax withheld as a foreign tax credit on line 405 of your return.

For tax purposes, you’re required to convert foreign income and foreign tax withheld to Canadian dollars, using the Bank of Canada exchange rate in effect on the transaction date.

However, according to the Canada Revenue Agency, if there were “multiple payments at different times during the year,” it is acceptable to use the average annual exchange rate. This simplifies the process of converting U.S. dividends and tax withheld to Canadian dollars.

You can find a list of average annual exchange rates on the Bank of Canada website.

Between the foreign exchange compliance and the T1135 Foreign Reporting requirements (see next week's blog post), it is enough to make one want to keep all their investments in Canada to avoid the complications of tax reporting :)

Note: I have disabled the comment and question feature on the blog. Unfortunately, I just do not have the time to answer questions during income tax season. I will enable comments in May. Thank you for your understanding.

Money Sense - Retire Rich 2015 Giveaway


On April 8th in Oakville, Money Sense is presenting “Retire Rich 2015” a four hour evening of wealth-building insights and practical advice, in which you’ll learn the proven tactics and strategies that can help any Canadian establish a low-cost retirement plan for a rich and rewarding retirement.

The presenters include Bruce Sellery, Duncan Hood, Preet Banerjee and Dan Bortolotti, four of Canada’s leading retirement-planning experts.

Money Sense has provided me 6 tickets to giveaway to my readers. If you are interested, please send me an email to bluntbeancounter@gmail.com by April 3rd and I will select three winners (2 tickets each).

If you wish to learn about the event or register, here is the link.

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, March 23, 2015

The Trials and Tribulations of an Infant Business

A few weeks ago, you may have read my blog post on the new Ontario Retirement Pension Plan. The post discussed who would be considered an employee (required to join the plan) vs self-employed (excluded from the plan). One of my readers, we will call him Joe Business commented as follows:

"I'm not sure what makes me angrier. That I'm forced to incorporate to get contract jobs with Canadian banks (otherwise I'm not considered) or:
  • that I've been over-saving since I was 19 years old and will have more than enough saved for retirement when I turn 62
  • that I'm losing $3,420 to the government for a program I do not want or need
  • that my self-employed one-employee corporation is not exempted (though others are), clearly pushing me to pay myself dividends only (which puts me at risk of being labelled a PSB which I'd rather avoid).
I will refrain from submitting any comments until I can do so politely."

Joe voiced many of the various frustrations small business owners’ face, so I half-jokingly suggested to him; "maybe you can write me a guest blog on the travails of a one person corporation; you are off to a good start :)".

Surprisingly, Joe took me up on this offer and below he writes about the trials and tribulations of an infant business. As someone who deals with small business owners on a day to day basis, I found his post candid and representative of what I often hear.

I hope you enjoy his post. However, first the obligatory caveat. Joe's views are his own and not necessarily representative of mine nor any firm I am affiliated with.

The Trials and Tribulations of an Infant Business 

by Joe Business


I believe every corporation’s birth story deserves to be told. Every company started as someone’s baby with the most honourable goal of creating something pure, something new, or possibly to avoid taxes/personal liability. So when Mark suggested I write a few words on my baby’s first steps, it was a father’s dream.

It all started with a Kickstarter campaign in February 2014. I had the optimistic goal of getting free money from strangers to create an innovative product. As any Kickstarter funds I received would be included as income at my highest personal tax rate, I decided to incorporate to access the small business deduction. Thirty minutes and $200 later, the corporate entity was born.

For the Kickstarter campaign, I needed a corporate (non-personal) chequing account to receive all those oodles of money these strangers were going to send me. I wanted to find the cheapest corporate account I could find, as I did not expect to have that many transactions, save the sweet glorious cash Kickstarter would deposit into the account (less the 15.5% in small business taxes). Despite some hesitancy, RBC account managers confirmed they offered a free eBusiness account though that was clearly not their preferred option. By the way, going with one of the big 5 banks makes it much easier to pay the CRA later on (though I didn't know this yet).

Within minutes my Kickstarter campaign had begun! And then it ended. Prematurely; because I was embarrassed no one but my wife had pledged after a month. You might even say it was a dismal failure.

Months later I still owned this worthless corporate legal entity, but as it happened, a recruiter found me on LinkedIn and offered me a contract position as a consultant. There was a clear preference to deal with a corporation rather than a sole proprietor and all invoicing had to go through a third party. Rather than pay a lawyer, I read the forty pages of legalese and determined it was mostly written to shield the client from any and all liability. I decided then that if I was going to go down this path, I had to believe the client found value in my services.

My wife wasn't happy with this new arrangement since I was giving up a perfectly adequate full time position. But with all my coworkers getting laid off, it did seem like an optimal time to jump ship. And so my foray into self-employment had begun!

I hired an accountant right away based on a localized Google search. I picked the second one I found because he had fewer online reviews than the first and I assumed I’d get more focused attention with him. This sounds unwise in hindsight. Despite my lack of due diligence, he easily saved me several headaches and avoided a 30% kiddie tax on dividends in our first meeting, so I guess I got lucky.

My new job started and to date has worked out. That part was easy.

But recently, the CRA has been auditing IT contractors calling them “Personal Service Businesses ("PSB")” or basically, incorporated employees. As I understand, where the CRA reassesses your business as a PSB, you are essentially allowed no deductions other than salary and as result, your ultimate tax rate can approach 59%.

I know of a family friend who fought and ultimately won against the CRA in a similar disagreement; but it had dragged out for almost 10 years in delays and appeals. Even winning can result in a severely weakened company.

I met other contractors in a similar boat but found that their accountants had never even mentioned the problems with the PSB designation.
At least three contractors only paid themselves dividends and no salary at all! Another contractor who knew of the PSB designation chose to pay himself only a salary and a large bonus if he hits his "sales" target. His repeated phrase to me was “it’s going to be really expensive when those guys get caught.”

I recently added a simple Health Spending Account (HSA) to my corporation, but even this came with headaches. The first HSA suggested by another contractor used their services and showed me an email where the administrator indicated that any money added to his HSA would never expire.

This appears to contravene the CRA who specifies some risk must be incurred to be a taxable benefit (I actually had to look through CRA archives to find out about this distinction). In this case, you might as well just pay yourself extra salary to cover the health benefits - regardless of whether it’s a valid health expense or not. Later the administrator corrected herself and said they do expire after 2 years. But by then I had gone with someone else.

The HSA I went with does something strange - any health benefits you submit must then be paid for directly by your company (plus a premium charge) and then it’s paid to your personal account (tax free). This also looks like it contravenes the CRA’s rules, except the HSA also includes a high deductible health care over $10,000 dollars. I’m not an expert but I guess this is the “risk of loss” that the health spending account requires to qualify for the CRA’s rules.

Recently, the Ontario government has introduced a new Ontario Retirement Pension Plan (ORPP) because the government does not feel the middle class can save enough on their own for retirement. This plan will guarantee retirement for the middle class at a cost of $1,720 for the employee each year, and another $1,720 you must match as an employer. For self-employed incorporated employees this will result in a $3,420 added tax on top of the $4,900 in CPP they already pay each year. Unlike other savings vehicles, the money is not accessible when the small business might need it and can't be used as loan collateral. I have no wish or need for this retirement plan. I've always saved greater than 15% of my salary since I was 19 and I have a pretty good idea what my expenses are. I've begged my MPP to allow people like me to opt out (or be exempt). At least he'll think twice before riding the Go Train again.

As I understand, I can simply pay myself dividends instead of salary to avoid this new ORPP - but that introduces a substantial risk of a 59% tax on that whole PSB label above. I'd also be forced to avoid the CPP as well.

My corporation turned one year old on February 6th. And like the little human infants who take their first steps, there are a few falls along the way. Hopefully it will grow and mature and become self-sustaining, old enough one day to leave the nest and be out on its own.

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.

Monday, March 16, 2015

Tax Planning for Low Oil Prices

The recent plunge in the price of oil has hurt many stock portfolios. Yet, as with most market corrections, some people see great opportunity going forward, while others see portfolio pain.


As an accountant I cannot provide investment advice and thus will not state my opinion on where I see the price of oil going. However, I can provide income tax planning advice, and today I give you two tax planning considerations in relation to the price of oil.

Tax-Loss Selling


The first tax planning consideration is whether or not you should sell some of your oil and oil related stocks to realize a capital loss. Any decision to sell should not be a tax loss tail wagging the dog decision, but based on a considered investment decision by you and/or your investment advisor. 

If you decide it is prudent to sell some or your oil stocks to realize a capital loss (whether today or later in the year), you can use that loss against any capital gains you realize in 2015, or carry the loss back up to three years. I have a very detailed discussion of how to use capital losses in my blog “Tax-Loss Selling”.

Flow-Through Limited Partnership


A second, less obvious consideration, is the use of a flow-through limited partnership (“flow-through”). I had not really put my mind to this alternative until a client recently told me that they felt that the price of oil was at a bottom, or near a bottom, and was there anything they could do if they were willing to wait up to two years for a rebound. Once they said two years, a light bulb went on in my brain, as most flow-throughs must be held approximately two years until they convert to publicly sale-able stocks.

Before I get into the details, I think a quick primer on flow-throughs would be useful.

What is a Flow-Through?


An oil and gas flow-through, in very simple terms, is a limited partnership that invests in shares issued in a variety of junior oil and gas companies. The essence of this type of investment is that the partnership vehicle provides for the various oil and gas exploration deductions to “flow-through” to individual investors.

In simple terms, if you pay $10,000 for a unit of an oil and gas flow-through that is exploration based (development based flow-throughs will have lower deductions allocated), you will receive approximately $10,000 in income tax deductions that can be utilized in your personal income tax return. Most of the deductions are in year one and the remaining in year two. Assuming you are in the highest marginal tax rate, you would save almost $5,000 in taxes making your out-of-pocket cost $5,000 after claiming the flow-through deductions.

Most limited partnerships are subsequently rolled on a tax-deferred basis into a mutual fund that can be sold on the market within two years. Carrying on with our example, let’s say that in two years the limited partnership is rolled into ABC Mutual Fund and you immediately sell your unit for $10,000. The cost base of the investment is reduced to zero because of the deductions noted above, so you would owe capital gains tax of approximately $2,500 at the highest marginal tax rate ($10,000 gain x 25%). Your after-tax return on your investment would be $2,500 ($10,000 proceeds on the sale of your mutual fund, less $2,5000 tax + $5,000 tax savings − $10,000 initial cost). Flow-throughs provide some downside protection for your investment risk, as you would break even in this case in two years if you could sell your shares/mutual fund units for approximately $6,700. If you have capital loss carryforwards you do not expect to use, the flow-through becomes even more attractive as the capital gain can be offset by your capital loss carryforwards.

Of course, you and/or your advisor may feel it more prudent to purchase oil stocks or oil ETFs in lieu of a flow-through. I am just providing a tax option, not an investment opinion.

Back to my client’s original question. Since they believe the price of oil is at, or near a low, and they are willing to hold their investment for at least two years, a flow-through can be very effective in two ways. First, they will receive the income tax deductions resulting in current tax savings. Second , if they are correct in their assessment on the current and future price of oil (again, this is their thought, not my opinion) and say the partnership value grows to $15,000 within two years and they sell when the flow-through is converted to a mutual fund; using the $10,000 original purchase price from above, they will realize an after-tax return of $6,250 on their $10,000 investment ($15,000 proceeds on the sale of  the fund, less $3,750 tax plus the tax savings of  $5,000, less $10,000 initial cost).

To re-iterate; I have just set forth a tax planning option if you and/or your advisor feel it is a good time to purchase oil stocks. This is first and foremost an investment decision and I provide no guidance on such.

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.

Monday, March 9, 2015

Capital Dividends - A Tax-Free Withdrawal from your Company

If you are a private corporate business owner, you may be sitting on a treasure trove of tax-free money. Yes, I said tax-free money. The source of these “free” funds is the Capital Dividend Account (“CDA”), which I discuss in greater detail below. Although a CDA account is most often found in holding/investment companies, the largest accounts are often generated in active companies who have sold all or part of their business.


Private business owners often discuss with their professional advisors whether they should take salary and/or dividends, which are both taxable to the owner when paid. However, surprisingly, the possibility of paying a tax-free dividend is often overlooked, which is possible if the dividend is paid from the Capital Dividend Account (“CDA”) of a private corporation to a Canadian resident individual.

The Capital Dividend Account


The CDA tracks certain amounts that are not taxable to the Company and may be distributed to shareholders with no personal tax. For example:

(i) if the company earns a capital gain which is 50% taxable, the half that is not taxable is added to the CDA.

(ii) if the company was paid a capital dividend from another company it invested in, that amount is not taxable and is added to the CDA.

(iii) if the company sells a particular eligible capital property (“ECP”) in the year, the portion of the gain that is not taxable is added to the CDA. Please note that the addition to the CDA occurs at the end of the year in which the sale of the ECP took place. As a result, the CDA cannot be paid out tax-free until the first moment of the following taxation year.

(iv) if the company receives proceeds from a life insurance policy which are considered to be non-taxable, this is added to the CDA.

(v) if the company incurs a capital loss, 50% of such amount that will not be deductible in the current or future years against capital gains and will reduce the CDA.

Filing and Declaring a Capital Dividend


The following are the filing procedures and considerations as to the timing of declaring a capital dividend:

i) For the dividend to be tax-free, the company needs to make an election on Form T2054 - Election for a Capital Dividend Under Subsection 83(2), which is due to be filed with the Canada Revenue Agency on or before the earlier of the day that the dividend is paid or becomes payable.

A certified copy of the Director(s) resolution authorizing the capital dividend and a detailed calculation of the CDA at the earlier of the date the capital dividend is paid or becomes payable must accompany the Form T2054.

If the Form T2054 and attachments are filed late, a penalty will arise.

ii) If the Canada Revenue Agency reviews the election and determines that the capital dividend paid (or declared) was too high, then a penalty, equal to 3/5 of the excess of dividend over the CDA balance available, will arise.

It is possible to avoid such penalty if an election is made to treat the excess portion as a taxable dividend at the time it is paid, and such election is filed within 90 days after the date of the notice of assessment in respect of the tax on the excess, noted above.

To avoid these negative consequences, it is important to properly calculate the CDA.

iii) The CDA is a cumulative account from the date of incorporation (assuming it has always been a private corporation). If the company has not previously filed a Form T2054, it will be necessary to review the historical capital gains and losses and corporate activities from the date of incorporation to the date of the dividend in order to determine the correct CDA balance.

iiii) The CDA is paid at a moment in time. If you have a CDA balance but incur a loss the next day, your CDA balance is reduced. Thus, in general, it is prudent to pay a CDA dividend when the account reaches a material amount (this amount is different to each person) so that you do not take the risk of a capital loss reducing the balance in the account. If you pay a capital dividend and then incur a capital loss, the account can go negative.

Further analysis may be required for any non-resident shareholders, since a payment from the CDA to a non-resident of Canada is subject to non-resident withholding tax and the dividend may be taxable in their country of residence.

Journal Entries


Some companies reflect capital dividends by adjusting journal entry (“AJE”), rather than paying the actual dividend. Where the dividend is paid by AJE, the shareholder loan is credited. This creates a tax-free loan owing from the company to the shareholder. The CRA has stated that an AJE on its own does not constitute payment of the funds and that a demand promissory note accepted by the recipient as absolute payment together with an indication of such an intention in the resolutions is at a minimum required to have the dividend considered paid and received.

Balance Determination


Where a company has had more than one accountant and/or has amalgamated with other corporations in the past, the determination of the CDA can be problematic. The CRA recently announced that as of April, 2015, a CDA balance request form will be available to hopefully alleviate this tracking issue.

Speak with your accountant to see if your private company has a CDA balance. If so, paying out a capital dividend should be considered as part of your Company’s overall remuneration strategy.

 
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.Please note the material is time sensitive and subject to changes in legislation or law.

Monday, March 2, 2015

An Estates Fairy Tale

Once upon a time, in a kingdom not so far away, there lived three brothers.

Liam was the eldest. Being a natural military strategist, he was eventually granted leadership of the kingdom.

Roger, the middle son, was a gifted artist.

Earl, the youngest, was a studious sort, and became a lawyer.

The brothers grew older, prospered, and started to consider their own mortality.

King Liam, a widower, had three daughters and was unsure how to plan for the future.

(a) Which of his daughters should inherit the kingdom?

(b) Who should run the kingdom if he lost his marbles?

(c) Who should take care of his physical needs during his old age?

King Liam devised elaborate tests of his daughters’ love, fidelity, intelligence and ability to manage people and finances. He kept his advisors busy changing his plans from one day to the next, until no one, including the king, was sure which end was up. King Liam’s habit of ripping up documents carefully drafted by his advisors, making handwritten changes to those documents, and hiding the documents in various folders, cabinets, freezers, holes in the ground and other “safe” locations did not help matters.

Roger, the artist, could not be bothered to address such mundane issues. His wife had left in a huff a few years back (something to do with a very pretty apprentice of Roger’s). Roger had two sons. One son moved to a far distant kingdom. Roger lived with his other son, who cooked and cleaned for
Roger, sold his art, and generally took care of the household. Roger was very grateful to his son and felt very close to him.

Earl, the lawyer, wanted to make sure that his wife and 15 year old daughter were provided for if anything were to happen to him. He drafted the following documents for himself and his wife:

(a) Wills providing for the spouse and their daughter, carefully drafted to minimize liability for the taxes that King Liam kept instituting;

(b) An agreement between Earl and his partner addressing what would happen to Earl’s legal practice upon his death;

(c) Documents indicating who would manage Earl’s legal practice and their other assets upon the mentally incapacity of Earl and/or his wife; and

(d) Documents indicating who would make personal care and health care decisions for them if they could not do so for themselves.

Earl made sure that all of the documents were properly signed and stored in a safe place.
He communicated the location of the documents to his wife and to all of the other parties who had been given responsibilities under the documents.

The kingdom was invaded by a neighbouring king a few years later. King Liam had not been paying attention to the protection of his realm, having been distracted by the manipulative challenges he enjoying setting for his daughters. King Liam was captured and killed. Roger and Earl were also seized and executed in order to forestall the possibility of either of them making a claim to the throne or mounting a counter-invasion.

King Liam’s daughters were distraught at having lost the rulership of the kingdom. At least King Liam had the foresight, before his death, to hide away mountains of coin and to personally acquire a number of estates. The daughters’ first order of business was to acquire these assets. They formed a search party and found countless documents purporting to be wills containing different distributions of these assets. Each daughter seized the version of the will most advantageous to her and tried to claim the assets. The holders of the assets refused to deal with any of the daughters, as they were not sure which document was the last, true and valid will of King Liam. The daughters became destitute and had to throw themselves on the mercy of the new king to resolve the matter. The new king agreed to safeguard King Liam’s assets pending his resolution of their dispute, but warned them that he had other priorities at that time. While the daughters eventually obtained a hearing with the new king, the result lead to a challenge by one of the daughters and a counter-hearing, which lead to a second counter-hearing, and so on and so forth. The daughters eventually gave up, no resolution was obtained and the new king continued to retain the assets. The daughters were penniless and hated each other. They did not live happily ever after.

Roger’s “away” son came back for the funeral and to collect “his half” of his father’s property.Roger’s wife also returned, stating that she was in fact entitled to at least part, or maybe all, of Roger’s estate, as they were still technically married upon Roger’s death. The son who had lived with Roger disagreed with both of them. The “home” son stated that, before his death, Roger had given the house and all of the art to him and that Roger had declared that he was “the only true family left to me now”. In addition, the home son claimed the remainder of Roger’s assets as compensation for his caregiving services over the years, indicating that Roger’s intent was for him to inherit everything. There were, of course, no documents available to prove or deny any of the family’s claims and the three of them fought over these issues for the remainder of their lives. Like King Liam’s daughters, they submitted petitions to the new king for help in resolving their dispute. Unfortunately, all of Rogers’s assets were depleted in the process of petitioning and counter-petitioning the king. Roger’s family did not live happily ever after.

Upon Earl’s death his will ensured that his wife inherited all of his assets. An agreement required his law practice to be purchased by his partner for a sum large enough to allow his wife to maintain her standard of living. His wife, however, was heartbroken by Earl’s death and died a year later. Earl had ensured that his wife’s will was as solidly drafted as his own. As a result of this planning, a family to whom they were very close took in Earl’s daughter and cared for her until adulthood. All of the property inherited by the daughter from Earl and his wife was carefully managed by his trusted advisor, who also educated the daughter in how to manage the property herself. When the daughter was old enough and wise enough, she took over the management of her inheritance. While Earl’s daughter was understandably upset about losing both of her parents at such a young age, she never had to worry about who would take care of her and whether she would have enough money to educate herself and become self-sufficient. She did live happily ever after, with a loving family and a fulfilling career as a financial advisor.

Are you most similar to Liam, Roger or Earl? (Did any literary minds out there catch the allusions to King Lear?) Which result would you choose for you and your family? For once, a lawyer is the hero of our fairy tale….and a good estates lawyer can help you be a hero to your family as well.

This fairy tale was written by Katy Basi a frequent contributor to this blog. 

Katy Basi is a barrister and solicitor with her own practice, focusing on wills, trusts, estates, and income tax law (including incorporations and corporate restructurings). 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@basilaw.com. More articles by Katy can be found at her website, basilaw.com.

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.