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, October 22, 2018

Should You Simplify Your Investment Holdings for Estate Purposes as You Age?

Clients often ask me if they should sell stocks, real estate etc. for tax purposes. I typically answer back, “your decision should be an investment decision, do not let the tax tail wag the dog". However, where the question is framed as “Mark, I am starting to get my estate in order and I think it is too complex, should I sell certain assets to reduce the complexity?", my answer is often couched with “it depends”.

Before I delve into this issue, let us first take a step back. This question/issue arises in two ways:

1. The client consciously decides they need to make their estate more manageable for their spouse and/or children. The reasoning behind this decision is often they had to deal with a messy estate left by their parents, sibling or friend. In other cases, they just know their family is not as sophisticated as they are, and they want simplicity.

2. During an estate or financial planning discussion I ask my client if they were hit by a car leaving the meeting (I am very popular among my clients for this line of questioning 😊) would their family know what assets they own and where there are? Or, I just point out a complexity that makes the client step-back and consider whether they need to simplify things for their estate.

Whether it is the client or a question I asked that brings forth this issue is irrelevant. The key take-away is that when you are undertaking estate planning, simplification of your estate should be considered when practical.

Simplification of an estate at its finest is when you clean up complexity with no foregone investment opportunity cost or tax cost. Unfortunately, simplification for many people often comes with at least some investment and/or tax cost and thus, may not be practical where the tax and/or investment cost is higher than the person is willing to absorb.

No Cost Simplification


The following are examples where you can simplify your estate for your family at no cost:

1. You have four investment brokers handling your affairs. To simplify your estate, you consolidate to one or two.

2. If you have multiple corporations, you may be able to amalgamate, dissolve or consolidate without any tax consequences.

3. You open a joint account with a child (your trust implicitly) with enough money to cover a few months expenses and your funeral expenses if you died.

Simplification With an Investment or Tax Cost


In contrast to the above, there are many examples of where a decision to simply will result in a tax cost or possibly foregoing an excellent investment opportunity. For example:

1. Let’s say you were born in a foreign country and have kept investments or business structures in place back home. However, your children do not speak your mother tongue or understand the business culture and customs of that country. I have seen clients liquidate those investments to simplify their estate for their spouses/children’s benefits and bring the money back to Canada.

2. Some people have shareholdings, partnerships or joint ventures with friends or business associates. In the case of say a partnership, both parties often have no desire to keep the partnership going if one partner were to die and the other’s children step in. Thus, as they age they either sell the business or real estate earlier than they envisioned, or when a property is sold, instead of re-investing together, they go their separate ways.

3. I have also seen situations where a parent has a holding company and to avoid the estate complications of the deemed disposition of that property and the other post-mortem tax issues, they distribute the cash or assets as a taxable dividend to themselves, such that the corporation has no assets left. The parent has thus pre-paid tax, possibly years earlier than required (the tax would typically not be due until the latest death of the deceased or their spouse, if they left the holding company shares to their spouse).

Having it Both Ways


Some clients try and kill two birds with one stone. They keep their structures in place, but purchase insurance to cover any estate liability so that the family is not scrambling to sell assets to satisfy the CRA and the family keeps the more complex structure. The only real advantage here is that the simplification of the estate becomes less time sensitive, but the complexity remains.

Simplification is Not Required


In some families, the spouse and/or children are sophisticated business people and can seamlessly step into the parent’s shoes. This allows the parent to keep a complex structure in place but does not guarantee the estate will not initially be messy for estate and/or tax purposes.

Others have teams of advisors whom they expect to step in and guide the surviving spouse and/or children, so the estate complications are greatly reduced.

It Depends


So, I come full circle back to my answer in the first paragraph. Does simplification of an estate make sense? My answer is still “it depends”. Where there is no cost to simplifying, there is no question simplification should be undertaken. Where there is a tax cost or estate complexity cost, it depends on various factors; from the complexity of your estate, to the potential returns that would be forgone by simplifying, to the tax liability that will be incurred, to the sophistication of your spouse and/or children.

The only definitive advice I can provide is: always consider how complex your estate is, and consider whether you can simplify it for your family.

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 15, 2018

Obtaining a Clearance Certificate for an Estate

I have written numerous times on this blog about estate issues. I was quite surprised when I realized I had not posted on the issue of obtaining a clearance certificate for an estate. So today, I remedy this omission and discuss when a clearance certificate is required and how you go about obtaining one.

What is the Purpose of a Clearance Certificate?


A clearance certificate provides the following for an executor(s):
  • Confirmation that an estate of a deceased person has paid all amounts of tax, interest and penalties it owed at the time the certificate was issued
  • Confirmation the legal representative can distribute assets without the risk of being personally responsible for the tax debts of the deceased and estate
Consequently, if as an executor(s) you decide to distribute the assets of the estate without obtaining a clearance certificate, the CRA can hold you personally liable for any unpaid tax debts of the estate.

Do You Have to Obtain a Clearance Certificate?


In a complicated or contentious estate, I would suggest this is not even a consideration. Obtain a certificate. However, where an executor is the sole beneficiary of an estate or the beneficiaries are siblings that get along, the answer is not as clear-cut. I have had estate lawyers suggest a clearance certificate should be obtained, since it is always better to be safe than sorry. On the other hand, I have had estate lawyers suggest that there is no point when there is no reason to feel there are any unpaid tax debts and there is no contention in the estate.

As an executor, you need to understand the estate may have tax exposure to past transactions you may not even be aware of, even if you are sure there are no current debts. For example, the deceased may have missed filing a form such as the T1135 Foreign Verification form for several years that is subject to penalty or claimed the qualifying small business corporation capital gains exemption in the past and it is subsequently audited and denied or transferred property to family that resulted in a deemed disposition and never reported the deemed disposition. These are just a few of many potential tax issues that could result in taxes owing if uncovered or if the CRA audits prior returns.

I suggest being safer than sorry is generally the most prudent route. However, I have seen several estates where the executor(s) decide to not request the certificate because they are the sole beneficiary or do not feel there are any unpaid tax debts.

When Do You Request a Clearance Certificate?


You should request a clearance certificate once you are ready to distribute the remaining funds/assets of the estate. The certificate should only be requested once you have paid all tax debts and filed all applicable personal and T3 (estate returns). The request cannot be filed until you have received notice of assessments for all returns filed, especially the last return filed.

How to Apply


This is what the CRA says is necessary to apply:

For an individual (T1) or trust (T3):
  • a completed Form TX19
  • a completed Form T1013, Authorizing or Cancelling a Representative, signed by all legal representatives, authorizing an accountant, notary or lawyer, or any other person, to act on your behalf. Also use the form if you want the CRA to send the clearance certificate to an address other than yours
  • a detailed list of the assets that the deceased owned on the date he or she died, including all assets he or she held jointly, and all registered retirement savings plans and registered retirement income funds (even if he or she named or designated a beneficiary) and their adjusted cost base and fair market value.
One of the following:
  • a complete and signed copy of the taxpayer’s will, including any amendments, renunciations, disclaimers and probate documents that apply. If the taxpayer died intestate (without a will), attach a copy of the document appointing an administrator (for example, the letters of administration or letters of verification issued by a provincial court)
  • a copy of the trust agreement or document for a living trust
Also include the following documents if they apply to your situation:
  • any other documents proving that you are the legal representative
  • a copy of the Schedule 3, Capital Gains (or Losses) from the final tax return of the deceased
  • a list of all assets transferred to a trust, including (for each asset): a description, the adjusted cost base, and the fair market value
  • a statement of how you propose to distribute any holdback or residual amount of property
  • the names address and social insurance numbers or account numbers of any beneficiaries of property other than cash
It has been my experience that the statement of how you propose to distribute can be problematic. What I have done in the past is advise the CRA who will report the income for the period from the filing of the last return and the issuance of the clearance certificate. For example, if two brothers are the beneficiaries and there is a $200,000 GIC earning 2% interest, I advise the CRA that each brother will report ½ of the interest on their personal tax returns.

Interim Distributions


If you have been an executor, you will know beneficiaries have an expectation of receiving their share of the estate promptly (a cynic would say: often before the deceased is buried). Thus, often, an executor will make an interim distribution because it appears there will be minimal tax debts or quite frankly as a way to appease the beneficiaries. If you are interested in reading more about this issue, I suggest reading this article on interim distributions by Lynne Butler, an estate lawyer and writer behind the excellent blog, Estate Law Canada.

The Finalization Process


Upon filing the clearance certificate, the CRA will send you an acknowledgement letter (they say within 30 days) of receiving your request for a clearance certificate.

The CRA says “that the assessment can take up to 120 days, assuming you provide all of the necessary documents. However, in certain situations, the CRA may need to do an audit before it issues the clearance certificate”. In my experience, the process often takes much longer, even where an audit is not undertaken.

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.

Tuesday, October 9, 2018

Sometimes You Just Have to Shake Your Head

Some people make financial decisions that just make you want to shake your head. Often these head shaking decisions are the result of not obtaining professional advice. Today, I am going to discuss a few situations were not obtaining the proper advice can lead to potential issues and/or detrimental consequences. I also discuss a non-financial situation that has caused my head to shake so hard I fear for my brain's safety.


Not Using Accountants and Lawyers


Look, I get it. accountants and lawyers can be expensive, but when you require them, you just need to accept they are a cost of personal or business life. Over the years, I have noted the following negative results that occurred because people refused to engage the proper professional advisor, which left me shaking my head:

Selling the Assets of a Business


Occasionally people figure they will split the difference and hire only a lawyer instead of an accountant when selling the assets of their business. The theory being the legal work must be done, and the lawyer must also be proficient at business and tax planning. The major consequence of doing this type of transaction without the advice of an accountant is that sometimes only the gross sales price of the assets is addressed in the agreement, but the allocation of the sale price is not dealt with. This leads to two issues:

1. The most tax efficient allocation of the purchase price is not negotiated for the vendor.

2. With no allocation, both sides just choose what is best for them. As a result, the CRA has two different allocations on the same transaction. Not a recipe to avoid an audit.

Transfer of Property to a Family Member


Over the years, I have discussed this issue multiple times. Many people transfer properties to their children for tax or probate purposes. Where you transfer your principle residence to a family member, the transfer can result in the loss of a part/all of your principal residence exemption on a future actual sale to an arms length party. Where you transfer land or a rental property to a family member, a deemed disposition on the transfer of the land or rental property may result. When I am engaged on a file that relates to cleaning up these type transfers, I shake my head and I think of the expression: penny wise and pound foolish - since these files typically result in the client owing significant taxes and incurring large professional fees, that could have been avoided with advice upfront.

As a reminder, where you transfer your principal residence to a child (say 50% ownership) who has their own principal residence or does not live in the house, you have effectively changed a tax-free principal residence into a 50% taxable asset (the value of the house at the time of transfer becomes the cost for the child, and any increase in that value becomes taxable to the child when the house is ultimately sold).

If you transfer land or a rental property to a child, the transfer will likely result in a deemed disposition to the parent at the fair market value (“FMV”) of the property and tax is due immediately on the difference between the original cost and the FMV at the time of transfer. In these circumstances the income tax liability and penalties (since the transfer often occurred many years ago) are so large I shake my head not only in disbelief but with profound sadness.

Note: Above I say likely because in certain circumstances a lawyer may, on purpose, separate legal ownership from beneficial ownership (the real value) before the transfer for probate planning purposes. If you are considering this, you must get tax as well as legal advice to ensure your specific situation does not result in a taxable event and both your accountant and lawyer agree the intended result is the actual result - i.e.: no taxable event and probate savings.

Not Paying for a Will


In this September, 2016 blog post I discussed that 62% of Canadians do not have a will. If that statistic is not enough to make your head shake, how about this situation: a few years ago, a lawyer I work with called me to discuss whether I was interested in taking on a client who had engaged him (I ultimately decided to pass on taking on this file for a few reasons). He told me that the client’s father did not want to incur the cost of hiring a lawyer and paying for a will even though he had various businesses and multiple real estate properties. The father passed away and the client was now dealing with the estate. However, the inaction of the father was only a minor head shaking compared to the second part of the story. The wife, who was left with a huge mess by her late husband, somehow also did not see fit to have her own will drafted. She then died without a will, leaving the estate in a tangled web, with the children tasked with sorting it out. Why a surviving spouse who had to deal with the aftermath of an estate left by their spouse who passed away without a will, would not immediately ensure they had their own will drafted, is beyond comprehension!

The Small Dog Park is for Large Dogs


I cannot conclude this post without a final non-financial head shaking situation. My wife and I have two dogs. We started taking our new puppy (she is about 17 lbs) to the dog park to play and socialize with other dogs. We entered the section for small dogs (the park is split into small and large dog sections) and encountered a man with a very large dog. I politely asked him if he could take his large dog to the section for large dogs. He told me his dog does not get along well with other dogs and therefore he must keep him apart from other large dogs. I said I appreciate that, but this is the small dog section. He said, too bad, he was not leaving. My wife and I looked at each other and simultaneously shook our heads. We walked away; which for me is a good thing, since I tend to talk back, but the combined size of the owner and dog were enough for me to keep my trap shut.

If that was not bad enough, a month later we went to the same park and encountered the same situation with a woman and her large dog. Again, I politely asked if she could take her large dog to the section for large dogs. Same response: no, my dog does not get along with other dogs. I suggested she should not bring her large dog to the dog park for small dogs if her dog has social difficulties. She got upset and said we were the third couple today telling her to leave and she was tired of being told what to do and was not leaving. My wife and I looked at each, shook our heads, and wondered if there is a correlation between dogs that don’t get along with other dogs and less than brilliant dog owners.

So, in conclusion. If you are undertaking a financial transaction, please obtain tax and legal advice and if your dog does not get along with other dogs, don’t bring them to a dog park.

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 24, 2018

CRA Adjustment and Information Requests and Tax Update

Today, I provide an update on what I am seeing between my clients and the Canada Revenue Agency (“CRA”) as far as T1 Adjustment Requests, personal and corporate information requests and administration issues. I also provide a reminder relating to Deferred Security (Stock) Option Benefit balances.

T1 Adjustment Requests


A T1 Adjustment Request is probably the most often filed tax form with the CRA. You or your accountant would use this form to report a late received tax slip, an amended tax slip, information that was inadvertently missed, or anything else that should have been reported or claimed as a deduction and was not on your return.

The CRA is often inundated with these forms and last week I was told there could be up to a 6-7-month turnaround on the reassessment of a T1 adjustment; so keep this in mind if you are waiting for a response on a previously filed T1 Adjustment Request or filing a request.

I was also informed by a CRA representative, that the CRA can only process one T1 adjustment per taxpayer at a time (I was not aware of this) and thus, if you have an adjustment in progress, wait until it is resolved before sending in the second adjustment.

Information Requests


These requests continue to arrive on a frequent basis for my clients:

Personal Tax Requests

For personal tax returns, the information request which is essentially a request to provide back-up documents to substantiate deductions and credits claimed on your 2017 tax return, continue, as in prior years, to be typically for the following deductions and credits:

Medical receipts – I have noted in prior blog posts, make your life easier: ask your pharmacy and medical practitioner to print out one yearly receipt. That way you won’t need to provide 20 or 50 individual receipts when you receive a request.

Donation receipts – Typically for larger donation claims.

Tuition Tax Credit – This request is typically for the children of taxpayers attending University, especially when outside Canada. These claims often indirectly also affect the parents, as their child may have transferred up to $5,000 in tuition credits to their parent.

Corporate Information Tax Requests

These requests seemingly arrive daily for my corporate clients. Surprisingly to me, the majority of these request still relate to professional fees (I noted this in a prior blog post). Clients are still getting requests to support their professional fee claims as far back as 2015.

I can only presume the CRA has had some success in the last two years reviewing such claims. I am not sure exactly what they are finding, but I would guess personal type expenses such as professional fees for matrimonial or family law advice, will preparation and/or corporate organizations (that often need to be amortized rather than deducted on a current basis) are the type of expenses they are looking at. But that is just my own conjecture.

If you receive a brown CRA envelope in the mail, there is probably a  good chance you will be asked to provide back-up documentation for one of the above type requests.

Deferred Security (Stock) Option Benefits


I have noticed over the last couple years that some new clients have reminders on their Notice of Assessment that they have deferred stock option balances (from where they deferred reporting the stock option benefit on stocks they owned between 2000-2010). I don't want to get into the details of this, since the history is fairly complex. I just want to remind you that if you previously elected to defer stock option benefits, ensure you keep track of the benefits deferred (you should be filing a Form T1212) and what stock they relate; since if you sell the stock, the benefits need to be reported.

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 17, 2018

Sacred Tax Cows

We are all aware that almost every level of government is strapped for funds and consequently, they often look at how they can raise additional monies through taxation. As funding needs become more desperate, a couple of my clients have asked me if they think any of the “sacred tax cows” will be sacrificed. Today I consider the political and tax risks a government would take if they attacked these “sacred tax cows”.

What tax cows am I talking about? I would suggest in Canada we have two “sacred tax cows” and one “tax cow” which is important but has been sacrificed in the past and will likely be in the future.

In my opinion, these tax cows are as follows:

The sacrificial tax cow:

1. The 50% tax inclusion rate for capital gains

The two sacred cows are:

1. The tax-free nature of your principal residence

2. No estate tax on death

The Capital Gains Rate


The capital gains rate prior to January 1, 1972 was nil. Aw, the good old days! From 1972 to 1988, the government only taxed 50% of any capital gains. For 1989 and 1990 the inclusion rate was changed to 2/3 of your capital gains. For the years 1990-1999, 3/4 of your capital gain was taxed. From 2000 onward, we have been at the current 50% inclusion rate (except for 8 months in 2000).

The above clearly reflects various governments do not see a 50% inclusion rate as a sacred tax cow. In fact, in 2017 I had a few clients sell stocks to lock in the 50% rate because there were rumours the Federal Liberals would increase the inclusion rate to 3/4. However, the inclusion rate was not changed.

I think no one would be surprised if the capital gains inclusion rate is increased in the future and I don’t think there is huge political risk in doing so, since most people paying capital gains have already been hit with higher personal and corporate taxes and are numb to various tax hits. In addition, a change in inclusion rates has been floated multiple times by different governments, so the shock component would not be high.

Tax-Free Sale of Your Principal Residence


Currently, when you sell your principal residence (“PR”) it is tax-free. Each family unit is only entitled to one PR exemption. In 2017, the Liberal government issued legislation that requires you to report the sale of your PR, even if it is exempt (see the second paragraph of this post). This measure was implemented to prevent some of the abuse in respect to the non-reporting related to PR (especially house flips) and situations where taxpayers thought the sale was exempt and in fact it was not exempt.

I would suggest the tax-free nature of a home is clearly a sacred cow to most Canadians and the political risk in making your home taxable would be immense. However, I can envision a government trying to move to a U.S model. In the U.S. the first $250,000 gain on the sale of a house is exempt from tax for U.S. citizens or $500,000 for spouses who are both U.S. citizens. The exemption mentioned is applicable when the following two conditions are met:

Ownership test: the taxpayer owned the property as his/her main home for a period aggregating at least two years out of the five years prior to its date of sale.

Use test: the property was used by the taxpayer as his/her main home for a period aggregating at least two years out of the five years prior to its date of sale.

These two tests can be met during different two- year periods. Also, for married couples filing joint returns, each spouse needs to meet the ownership and use tests individually in order to qualify for the $500,000 exemption jointly. The taxpayer would not be eligible for the exclusion if he or she excluded the gain from the sale of another home during the two-year period prior to the sale of his/her home.

Ignoring the technicalities of the U.S. rule, one ponders whether such a measure could possibly work in Canada if say the numbers increased to $500k and $1mill respectively, since that would likely eliminate the gains for most provinces other than maybe B.C and Ontario. Although, losing a significant number of voters in those two provinces would probably still not be smart politics. But if the exemptions moved to $1,000,000 and $2,000,000 the blow-back would likely be more muted. However, IMHO, I think in the end, a government would risk re-election if they put forth such legislation.

Estate Tax


The United States has levied estate tax for many years. The tax has been a political football with the exclusion amount from estate tax varying from $675,000 to $11,180,000. The tax was even repealed for one year in 2010, known as the year to die in the U.S. The estate tax has varied from 35% to 55%.

In most U.S. states, the annual personal income tax burden is substantially less than in most provinces. In addition, the U.S. has many more significant tax deductions such as mortgage interest; so, for U.S. taxpayers, they typically pay far less than Canadians in yearly tax but will typically pay substantially more on death. So the U.S. model is pay me less now and possible a whole bunch later.

In Canada, an estate tax would be pay me now and pay me later and the effective tax rate could end up being a ridiculous amount. For example, if you made a million dollars at the highest marginal rate in Canada you would have $460,000 left. Imagine a 40% estate tax on your $460,000 estate if you died. Your net estate would be only $276,000; so a total tax burden of 75% if the estate tax was 40%. Of course, this is simplistic and not necessarily realistic, but I use the example to demonstrate how massive the tax burden could be with a Canadian estate tax. In my opinion, I can see a government taking a huge political risk and imposing an estate tax with a large basic exemption; since they seem to feel, mid to high earning Canadians are a never ending source of tax dollars. 

In summary, I think we will see an increase in the capital gains inclusion rate at some point in the next five years. As for the two other sacred cows, I really hope no government is willing to eliminate the PR exemption or quantify the amount of the PR exemption and definitely not impose an estate tax. Let’s hope such taxes never see the light of day.

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 10, 2018

Comments and Questions on my Blog Posts

I hope everyone had a good summer. I got in a fair bit of golf (including a boy's trip to Muskoka Bay Golf Club and a quick golf trip with my wife to Turning Stone in Verona NY, just past Syracuse - there are 3 excellent golf courses at Turning Stone). Unfortunately, my golf was totally erratic and I think at this point I need to accept that is me as a golfer.
Muskoka Bay Club Golf Course

Over the eight years of this blog, I have received numerous messages of encouragement from readers and/or thanks for writing a particular blog or even how I really assisted them in their financial lives. I have often told my wife that without all this positive re-enforcement I would likely have stopped writing years ago.

This weekend I got a couple questions/comments that I want to clarify and respond to. The first question was on why I keep saying “speak to your accountant" when someone leaves a question on a blog post I wrote. The second which I felt was quite rude, I will discuss at the end of this post.

Speak to Your Accountant


Since this blog began in September 2011, I have religiously answered comments on my various blog posts. I have tried my best to steer people in the right direction or provide direct answers. However, I often provide general direction and say, “please speak to your accountant”. I thought this comment was somewhat self-evident in that it means; either this is a complicated subject and I cannot answer it on my blog, or that I may have an answer that is more of a grey area and it is best not to answer on the blog as I know people at the CRA read this through my analytics.

This weekend a reader emailed my Gmail account about a couple answers I provided on questions they had left on my blog. They asked why I kept telling them to “speak to your accountant” and did not provide them direct answers. I thought I would clarify why I often answer speak to your accountant.

1. To answer any tax question, you need a full set of facts that often take a half hour meeting to gather. Thus, rather than misdirect, any question that has measure of complexity I try to provide some general direction but always say speak to your accountant.

2. In addition to the comments I answer on the blog, I get several requests each week to answer personal or corporate questions on my Gmail account and I just do not have the time or honestly the inclination when I have clients who pay for this advice.

3. Tax answers are not always black and white. I say speak to your accountant because of the grey areas. How I would answer a reader versus a paying client may be different based on the grey areas. I need to know the exact facts, whether we have a supportable position and the clients risk reward profile.

4. As I note in my disclaimer to each blog post “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".

Non-Tax Blog Posts


I also had another reader say that I should stick to only posting tax posts and not write "silly" posts such as last weeks “Are Accountants Really Boring”. As you may have guessed I did not take kindly to that comment and if I was not a professional I would have had some not publishable words, but I stuck to the don’t read the blog if you do not like it.

In some ways I would have understood the comment if it was framed in a politer manner. But tax posts are technical and take forever to write and must be reviewed for technical completeness. In addition, if I did not have the variety of writing on financial, estate, wealth and or whatever I just feel like writing, I would never had made it past three years.

That’s it for my clarification/rant.

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 3, 2018

The Best of The Blunt Bean Counter - Are Accountants Really Boring?

This summer I am posting the "best of" The Blunt Bean Counter blog while I work on my golf game. Today, I am re-posting a June 2012 post titled "Are Accountants Really Boring". That is a rhetorical question, please don't provide the answer. My psyche could not take the expected responses :)

I enjoyed writing this post as it was whimsical with some "attempted" humour. I have taken the liberty to play around with the original a bit by adding a couple updates. I hope you find this slightly amusing.

Are Accountants Really Boring


The joke goes like this. "When does a person decide to become an accountant?" Drum roll please. The answer…"When they realize that they do not have the charisma to become an undertaker." Or how about this one? Question: "What does an accountant use for birth control?" Answer: "Their personality."

With a reputation like that, Flo Rida will not be penning any rap songs called Wild One’s featuring accountants. So, are we accountants that boring or do we take an unfair rap?

Unfortunately, in general, I think the rap is probably warranted, although perception may be reality. How would us CPA’s be viewed if there had been a TV show called LA Accountant, instead of LA Law? Did you know John Grisham got his undergraduate degree in accounting? What if his books had been about accounting firms instead of law firms? Accountants would then be looked upon as cool dudes/dudettes with a conservative bent.

In 2016, we finally got top billing with the release of the Ben Affleck's movie titled, "The Accountant". Prior to seeing the movie, I was so excited. A movie about accountants, starring a good looking well known actor; finally, the world was going to see how cool accountants could be. Boy was I surprised when I found out that Ben's role in the movie was that of a freelance accountant for dangerous criminal organizations who is a stone-cold killer. However, upon reflection, maybe his role will give accountants a bit of a bad boy image and cause anyone to think twice before criticizing their accountant :)

Is it nature, or nurture? I think probably a combination of both. Many accountants by nature are cautious and conservative. Years of training to refine these character traits amplify the situation in non-professional environments. It would probably help if our dress style did not include pens hanging from our dress shirts, pencils behind our ears, or if we occasionally loosened our ties both literally and figuratively. I always had this underlying desire at a cocktail party full of accountants to run about the room and loosen all their ties.

Personally, although I have pride in my profession and my job, I know the boring stereotype precedes me and I try not to advertise the fact that I am a CPA upon initially meeting people. You can only have so many people at parties walk away after you tell them you are an accountant before you get a complex.

Classic Bean Counter
Unlike many accountants, I don’t advertise my profession with a vanity licence plate with the initials MG CPA. Although I am considering getting one saying “The BBC” [The Blunt Bean Counter]), but I am concerned everyone will just think I am just a British public television expatriate.

When I am outed as an accountant, I say I am a wealth advisor who will maximize your net worth and minimize your taxes, to make my job sound sexier. Although my naturally boring nature often gives me away, many of my other characteristics are non-accountant like and I enjoy surprising people when they find out this blunt, sometimes arrogant, sometimes confrontational and very occasionally humorous person is an accountant. My happiest social outings are not when a good-looking girl stares at me, but when someone says, “Wow, I would never have thought you to be an accountant”.

So, are any of my kind not boring? I did a search of famous accountants and came up with this list. For those of you old enough to remember the Bob Newhart Show, Bob Newhart the namesake and star was a former accountant. Now I am not sure Bob helps our cause. He was funny, but in a boring deadpan style, certainly was not stylish and definitely was no Chris Rock. 

To my surprise I found a musician who started life as an accountant. You figure any musician would break the stereotype as they lead crazy drug induced lifestyles. I found out Kenny G, a great saxophone player, is our exception. However, although Kenny is a great musician, I typically hear his music in my dentist's office and as far as I know, he did not have a Playboy Playmate as a girlfriend like so many rock stars.

In 2018 our athletic image got a boost when Scott Foster, an accountant by day became the Chicago Black Hawks emergency goaltender for one night. This story is detailed in this article.

I was about to give up hope that I could find an accountant who was not boring when a beacon of light shone and led me to Paul Beeston. Finally, an accountant with attitude! Beeston, who was a CPA with Coopers and Lybrand, was also the President and CEO of the Toronto Blue Jays and later the President and COO of Major League Baseball. Paul is a cigar chomping, fun loving, non-sock wearing CPA. Yes, there is one out there.

There you have it, proof that there is an accountant out there who does not fit the stereotype. Anyways, if you ever meet me, I will be easy to spot. I am the outgoing accountant who will be looking down at your shoes instead of staring down at my own shoes :).

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, August 27, 2018

The Best of The Blunt Bean Counter - A Family Vacation - A Memory Worth Not Dying For

This summer I am posting the "best of" The Blunt Bean Counter blog while I work on my golf game. Today, I am re-posting a May 8, 2012 blog that I already re-posted in 2015 on the merits of a grandparent/parent taking their family on a vacation if they have the financial means.

The impetus to post this blog yet again, was a retirement webinar for small business owners I took part in earlier this month. During the webinar I discussed this topic, which reinforced to me, how valuable these trips can be for family bonding (taking the optimistic viewpoint, as opposed to the possibility that too much togetherness may not be good for some families).

A Family Vacation- A Memory Worth Not Dying For


I have written several times on the topic of whether parents (parent can be interchanged with grandparent wherever used in this post), who have the financial means, should provide partial gifts while they are alive, as opposed to just leaving an inheritance to their children or grandchildren.

I am a proponent of providing partial gifts while alive if you have the financial resources. My rationale is simple. Why not receive the pleasure of your gift either directly (such as a family vacation) or vicariously (by observing your children or grandchildren enjoy their gift such as a bike, car or even cottage).

The concept of a partial gift being used at least in part for a family vacation has substantial appeal to many parents. A family vacation is appealing because a parent can participate in the experience, the vacation more often than not, results in memories that last a lifetime for all the participants, and lastly, the parent has control over the gift.

I can attest personally to the benefits of a family vacation. Several years ago, my in-laws funded a Disney Cruise vacation for their children, their children's spouses and their grandchildren. This trip had a profound impact on the bonding of the grandchildren. In the case of my in-laws, the memories and enhancement of their grandchildren’s relationships was priceless and continues to this day.

Another very poignant and moving example of the gift of travel is the story of Les Brooks. Les, a Vietnam veteran, had unresolved issues relating to the war and as he states in this Princess Cruises travel blog.

One day during the course of a conversation, Les’ mother asked him if he could take a trip anywhere in the world, where would he go. After thinking about the question he surprised his mother by saying Vietnam. Unbeknownst to Les, she later booked him on a cruise to Vietnam. 

Sadly, his mother passed away before Les took the cruise and could not observe the impact this gift had on her son’s life; but I would surmise, she knew the impact it would have as she paid for the cruise. Les says this about the special gift his mother provided while alive; “I realized my mother’s gift had opened the door to many profound gifts. Through her kindness and intuition, she provided the way back to Vietnam and my healing. There, through the smiling acceptance and unspoken forgiveness of that little girl and the many other Vietnamese who welcomed me, I was able to put aside much of the guilt that had gnawed at me for so long."

While Les’ gift was not a family bonding vacation, it was a gift provided while his mother was alive, a trip that may never have occurred if Les inherited the money and spent it otherwise.

The concept of using a partial gift to fund a family vacation has become popular for both family bonding and financial reasons. As grandparent David Campbell says in a USA Today article (link expired), he is mostly motivated by a desire to make his children's lives a little easier. "It's getting to a point I'd like them to enjoy life," says Campbell, a regional sales manager. "And if they're going to enjoy it, they might as well enjoy it with me."

I have observed the family vacation phenomenon on several of my own vacations. Suddenly a horde of people arrive at the pool or restaurant (not necessarily a welcome site for other vacationers) with corny matching t-shirts, saying “Smith Family Vacation 2011” or some other similar sentiment. 

Although we all know that any large family gathering can veer off the rails, these trips often bridge the generation gap between offspring and grandparents and parents. I often hear people reference these types of family vacations when they have a family get-together or the topic arises over dinner with non-family members.

Personally, I would rather hear my grandchildren say or know they are saying "When I was young, my grandparents took me on the most amazing trip!", than, “I just inherited $25,000 from my grandparents, what should I buy with it?”

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, August 20, 2018

The Best of The Blunt Bean Counter - Is Your Estate Planning Horizontally Challenged?

This summer I am re-posting the "best of" The Blunt Bean Counter blog while I work on my golf game. Today, I am posting a February, 2017 blog on whether your estate planning is horizontally challenged. Essentially this means; have you considered your children's relationships and rivalries in your will, so that your will can be easily administered without creating dissension or in-fighting amongst your children.

Is Your Estate Planning Horizontally Challenged?

In November 2011, I wrote a blog titled “How your Family Dynamic can affect your Estate Planning”. In that post, I proposed that you must consider vertical and horizontal issues in respect of your estate planning.

Vertical issues are decisions made by parents that will affect their children and potentially the way in which their children view them after death. These decisions would include choices made in your will such as who is the executor and how you distribute your assets and issues outside your will, such as which child you will pass the reins to run the family business.

Horizontal issues relate to the interrelationship of your children, such as sibling rivalries and past jealousies and perceived parental favouritism. These issues may be exacerbated by vertical decisions made by parents and thus I suggested any parent who does not consider these horizontal relationships runs the risk of creating a divisive wedge amongst their children.

Since I wrote this post, I have seen these horizontal issues play out a couple of times where parents estate planning included unequal distributions in their wills. I won’t provide specifics, but you generally see unequal distributions for three main reasons:

1. One child essentially becomes the caregiver of a parent (or parents) while the other children are "no shows" and the parent in essence “rewards” that child.

2. One child’s financial position is weaker than the other children, so the parent assists them with a greater inheritance and/or help while alive.

3. One child was always the black sheep.

Everyone is entitled to deal with their estate as they wish and there is no law that says you have to leave your estate equally to all your children or even leave any of it to them, as opposed to say charity.

However, if you are like most people and you wish to keep your wealth and assets within the family, you need to understand that you can’t always have your cake and eat it too. By this I mean where your children have a good relationship, you cannot expect that you will not put a strain on this relationship if you provide unequal distributions. In most cases, human nature causes jealousy or envy of some kind and can ruin a good sibling relationship.

In cases where your children do not have a good relationship, some parents, as they are in failing health, request that the children try and improve their relationship; yet the parent adds to the strained relationship by favouring one child over the other in their will (not that equalizing is any guarantee you will change your children's relationship).

For most people, this is not an issue. But, if you have unequal distributions in your will or estate planning, you may have to decide what your greatest priority is: providing one child with more assets or keeping harmony among your children. Accomplishing both may not be possible. Regardless, there is no assurance that if you bite the bullet and equalize your estate, that some obscure or trivial issue will not cause friction amongst your children.

There is no right or wrong answer here and you may say, children be dammed, I am distributing my assets as I see fit. I am just pointing out that you must be realistic and if your prime objective is keeping peace among your children, consider both vertical and horizontal issues.

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, August 13, 2018

The Best of The Blunt Bean Counter - Is a Corporate Executor the Right Choice?

This summer I am re-posting the "best of" The Blunt Bean Counter blog while I work on my golf game. Today, I am posting an April, 2011 blog on why you may wish to use a corporate executor, where you do not have a family member or friend capable of the task or you feel conflicts could arise among your family if one or two children are selected as executors.

You Have Been Named an Executor Series

The first blog in my executor series, discussed the concerns the Globe and Mail had in respect of the estate tax system and in particular, some of the issues surrounding the Paul Penna estate. The problems associated with Mr. Penna’s estate, highlight the importance of considering a corporate executor in certain circumstances.

In my second blog, I discussed the duties and responsibilities of an executor. These responsibilities can often overwhelm the appointed executor(s); which again leads back to today’s guest blog on whether a corporate executor is the best choice for estates that will have unsophisticated executors?

Today, in my final installment of the series I have a guest blog by Heni Ashley. Heni is a lawyer with over 20 years experience in the estate and trust industry, who brings a unique perspective to this issue. I thank Heni for her contribution.

Is a Corporate Executor the Right Choice? (By Heni Ashley)

I have read Mark’s two prior blogs and the Penna estate article with great interest. The Penna estate, in my opinion, was just the type of situation where a corporate executor should have been considered.

What exactly is a corporate executor?  Corporate executor services in Canada are available through incorporated trust companies, which are typically subsidiaries of our national banks.

Had Mr. Penna appointed a corporate executor, his bequests would have been carried out and the estate’s finances would have been tracked diligently and accurately.

In my opinion, a corporate executor provides an estate with the following:

1)    Professionalism, knowledge, expertise.  Knowledge in the area of estate, trust and tax law is invaluable, as is expertise in asset gathering and valuation, property management, investing and accounting.

2)    Impartiality.  A corporate executor can manage conflicting interests (i.e. second marriages), difficult personalities and bring an objective, unemotional approach to the estate administration.

3)    Availability.  The corporate executor is always there.  There is no need to worry about an out of town executor, or an executor dying or becoming incapacitated or physically unable to carry out the task. 

4)     Ease of administration.  There is no worry about unduly burdening a family member, friend or associate as the job of an executor can be difficult (depending on the size of the estate and the personalities of the beneficiaries) and time-consuming (depending on the nature of the assets).

5)    Continuity/permanence. A corporate executor can provide the continuity needed for certain family situations such as an ill or incapacitated spouse or minor or disabled children where there is a need for long term trusts and financial care.

6)    Cost efficiency.  The personal executor can charge the same fee as a corporate executor.  Often a fee agreement can be negotiated with a corporate executor at the time that the will is drawn.  Also, a corporate executor often eliminates the need to hire additional outside experts, which results in a cost savings to the estate.

Notwithstanding the above, had the deceased in the Penna case given thought to using a corporate executor, there are a few reasons why he might have decided against it:

1)       Impartiality (which can sometimes be viewed as indifference to family):  Some people are concerned that a corporate executor will be indifferent to the needs of the beneficiaries. This objection, however, can be overcome by jointly appointing a corporate executor together with a personal executor who can shed some light on the personal circumstances of a deceased’s family.  The two executors can then act as a check and balance against each other.  Another way to deal with this is to leave a detailed memo together with the will, explaining to all executors the reasons for certain bequests and discretionary powers (i.e. to help a child get established in business, to see a particular charity get off the ground, to provide the best of care for a sick spouse, etc.)

2)      Knowledge: A testator (the person making a will) may have a knowledgeable professional relative, friend or colleague who is willing to act as an executor (although Mr. Penna thought he had such a person).

3)      Cost: While a personal executor can take the same fee as a corporate executor, in many cases he/she will not take the maximum fee because he/she feels it is excessive (the fee can be as high as 2.5% of the assets coming in and 2.5% of the assets going out as well as a fee on income earned by the estate and a care & management fee).

I would suggest it does not make sense to engage a corporate executor in the following circumstances:

1.     Where the estate is very small,
2.     Where there are only a few well defined beneficiaries,
3.     Where the gifts are all outright (i.e. no long term trusts to be administered), and
4.     Where the assets are all very straightforward (e.g. one or two bank accounts or brokerage accounts, no real estate).

In summary, each situation is as unique as the individual parties involved.  Some beneficiaries are never happy no matter what, whether it is with their bequest, with someone else’s bequest, with the choice of executor, the manner in which the estate is administered …  Often childhood jealousies surface to complicate matters – families can be difficult and the job of an executor is rarely an easy one!

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, July 30, 2018

The Best of The Blunt Bean Counter - Lifestyle Expansion - The Plague of Boomers, Millennials and Everyone in Between

This summer I am re-posting the "best of" The Blunt Bean Counter blog while I work on my golf game. Today, I am posting an April, 2017 blog on Lifestyle Expansion. This blog post discussed how so many of us continually expand our lifestyle to match our work raises, increased consulting income or income allocations. Although this post is not long in the tooth, I re-posted it because I think it is very relevant when you contemplate your yearly spending habits and plans for retirement.

Lifestyle Expansion - The Plague of Boomers, Millennials and Everyone in Between

Over the years, on more than one occasion, I have had to read the riot act to clients who make high six-figure incomes about their spending habits. The discussion is almost always in context of their retirement planning and how if they continue their current spending, they will either not have enough to retire on, or will have to sell their house and/or cottage very early in their retirement to fund their future needs.

This issue is not isolated to high-net worth people and those near retirement; it is the same problem for someone who makes $80-$120,000 as for someone who makes $600,000 and the same issue for millennials (although more in context of saving for a home than retirement). If you continually expand your lifestyle to fit your increasing income or current income level, the reality of your retirement or your future living situation, may be far different than you envision it. That being said, obviously if you make $600,000, you have more leeway to catch-up, even if it seems incomprehensible you even have such an issue in the first place. 

The term “lifestyle creep” is often used to reflect this worrisome spending issue. Investorpedia defines lifestyle creep as “a situation where people's lifestyle or standard of living improves as their discretionary income rises either through an increase in income or decrease in costs. As lifestyle creep occurs, and more money is spent on lifestyle, former luxuries are now considered necessities”.

If you are in your late 40's or early 50's, the insidious part of lifestyle creep is that your current earnings support whatever you wish to do and thus you carry on without a care in the world. It is only when I force someone to face the reality that once the gravy train (salary or business) stops, their income requirements are so massive, that their current and retirement assets will be insufficient to fund their needs (even if they significantly reduce their costs in retirement) that I get their attention. 

From a psychological aspect, some people find it very important to maintain a certain image or lifestyle and/or keep up with the Joneses. However, the Joneses may have way more money than you and it is only your current income that allows you to keep up. The reality is you may be swept aside by the Joneses in retirement, as they may only hang out with those "friends" who can spend with them and who have the capital to continue spending at excessive levels.

For some people, all they need is that sobering meeting and they immediately start getting their act in gear. For others, their spending habits are so entrenched and/or so financed; they need to engage a financial planner or money coach. Most discouragingly, some people just pull an Ostrich and put their head in the sand.

Lifestyle creep is not only an “older person” issue. I observe many millennial's spending their entire salaries on bottle service at restaurants, expensive vacations, cars and costly bachelor and bachelorette parties to exotic locales for their friends.

Fixes and Suggestions


So if you have that sobering moment and come to the realization your lifestyle has expanded to your salary or business income, what can you do? Here are a couple basic solutions:

Spending Review


The first step to tackle this issue is to undertake a detailed review of your spending. Track you’re spending for 2-3 months and add on your large one-time expenses not included in the tracking period. Then analyze the results of your spending review and note your excesses. If you are a reader of this blog, you know I am not frugal and have written many times that in my opinion, it is important to enjoy your life and “knock off” some of your Bucket List items while you can. However, there is a huge difference between enjoying your life and spending excessively. All of us can easily cut-back, especially those of us who spend like there is no tomorrow. The obvious areas are always: restaurants, travel, clothes, cars, nanny’s and cleaning ladies (not saying don’t hire them, you may just not need them as often as you currently pay them for), dog walkers etc. 

Auto Savings


Once you undertake your review and decide to reduce your expenses, force yourself to do so by having automatic transfers from your bank account into your retirement or investment accounts, or if you are in debt, increase your monthly repayments (I am astonished at how many people who make $500,000 to $1,000,000 are in debt).

Work Longer


As noted in my recent blog post The Victory Lap, working longer or part-time in retirement is not only healthier and keeps you physically and mentally sharp, but it is a way to save you from having to encroach on your retirement capital. For some of us, it may be the only way to fund our retirements.

Financial Planner or Money Coach


As mentioned above, engaging a blunt accountant, financial planner or money coach is a vital step for many “free spenders”, since it provides discipline and structure in getting their finances in better shape.

Other Articles


Here are a few links to articles on this topic for high earners close to retirement, entrepreneurs or millennial's.


Millennials - Are You Showing the Signs of Lifestyle Creep?

Fighting Lifestyle Creep and Saving Money as an Entrepreneur

Lifestyle creep is sinister, as you often do not realize it is an issue until it has already become part of your financial fabric. If you are starting to creep, stop it now. If you are already caught in the spending web, take the steps noted above to get your spending under control.

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.

Tuesday, July 24, 2018

How Business Owners Can Plan for Retirement - Webinar August 1st

If you are a small business owner, you may wish to join BDO Canada LLP for a webinar on August 1st at 12pm EST, on the special issues small business owners face when planning for retirement.

Jeff Noble, Director & GTA Practice Leader of BDO's Business Transition & Wealth Continuity team, will discuss issues such as business succession and enhancing the value of your business, in preparation for the sale and/or transition of your business as part of your retirement plan.

Tom Mathies, a Senior advisor with BDO's Wealth Advisory Services team will discuss some of the key issues you need to consider in preparing a financial plan and planning for your retirement.

Finally, yours truly will discuss some practical family and business issues related to retirement. 

If you wish to sign up for the webinar, here is the link
 
The webinar is premised on the "From Plan to Retirement: How Business Owners Manage Their Wealth, Lives and Legacies" report released by BDO late last year. You can download that report here.



Monday, July 23, 2018

The Best of The Blunt Bean Counter - Memory Overload, Alzheimer’s and Death in the Digital World

This summer I am re-posting the "best of" The Blunt Bean Counter blog while I work on my golf game. Today, I am posting a May, 2012 blog on Memory Overload, Alzheimer’s and Death in the Digital World. This blog post considered how to keep track of all the passwords we have and whether a digital solution was the best alternative. Not surprisingly, much of this post was dated, so I have updated several sections. Despite many new alternatives, we still have the same issue today as back in 2012, that being; how the heck to keep track of all our passwords.

Memory Overload, Alzheimer’s and Death in the Digital World

About a year and a half ago, my wife who is an avid reader, kept telling me about a book she was reading titled “Still Alice” by Lisa Genova (which is now a movie). Eventually I became so intrigued, I read the book. This bestselling novel tracks the tragic decline of a brilliant 50-year-old woman suffering from the early onset of Alzheimer’s, the impact on her family and the decisions she makes, once she accepts the reality of what is happening to her. If you have not read the book I suggest you read it. It is both disturbing and thought provoking.

After reading the book, I recommended it to a service provider of mine. This person read the book and one day we discussed it. Our discussion veered off onto how hard it is for a person with full capacity to remember all the electronic passwords we are required to set up in this day and age (assuming you do not use the same password for all your financial and social sites; which is frowned upon by most computer security experts). As our discussion progressed, we considered the nightmare it would be to deal with all the electronic banking, billing, etc. if god-forbid we developed Alzheimer’s as Alice did in the book.

The discussion took an unexpectedly darker turn, when the person told me that they had a huge issue recently when a family member had passed away un-expectedly at a fairly young age, and since that person was computer literate, much of their world was digital and no one had a clue as to the electronic passwords of the family member.

The above discussion revealed three different scenarios that can arise in this electronic and digital era:

(1) You have full capacity but just cannot remember all your passwords;
(2) Your capacity begins to diminish whether through Alzheimer’s or just old age;
(3) You or a family member passes away, and you or a family member as executors must deal with electronic and digital records for which you have no access and whose existence you may not even be aware of.

Personally, I have completed an information checklist so my wife is aware of the assets we have. I have also made sure she is aware of our more important financial passwords. As someone who is by no means a computer whiz, I surfed the web to see what others were recommending or suggesting in regards to these various digital issues, and came across a Forbes.com article titled Six Ways To Store Securely The Keys To Your Online Financial Life by Deborah L. Jacobs, who is a lawyer and journalist.

Some of Ms. Jacobs’s suggestions to secure your financial online life are as follows:

Use an electronic password manager


Ms. Jacobs noted there are a number of services that allow you to enter all your passwords into a single database and lock them up with a master electronic key. You (or your agent) only need to remember one password to access the list. Update: Here are a couple 2018 links for the best managers of 2018 from PC Mag.com and CNET.

Ms. Jacobs also suggests you can back up onto a USB flash drive, which becomes a mini encrypted vault with a password of its own. She notes the drawback is you must find someplace secure to store it.

Using either a USB flash drive or password service, addresses situation #1, where you have full mental capacity, but are just suffering from password overload.

Rely on a digital gatekeeper


Ms. Jacobs’s notes there are several new services, aimed at people who are doing estate planning, that charge a monthly or yearly fee to store the digital data that you enter, and release it according to your instructions.

In my initial post I had an article that referenced three new firms that had come onto the scene that help individuals protect and transfer their digital assets. All the initial links no longer work, which reflect either the lack of adoption or competition.

Here is a 2018 article on the options for a digital asset management software by Softwareadvice.com  (scroll down the page for the article).

Old School Solutions


Finally, Ms. Jacobs suggests two “old school” solutions: (1). Enter vital information in a loose-leaf or notebook and (2) use an old-fashioned lock box. 

I would suggest that both these solutions are probably used in some manner by many people, but are not exactly state of the art and have inherent security issues.

As I stated earlier, I am far from a computer security whiz. The intention of this blog post is to bring attention to the various electronic and digital issues noted above, and to make sure if you have not already addressed these issues in some manner, you consider doing such.

If you are currently using an electronic password manager and/or a digital gatekeeper that you are satisfied with, please post the names of these managers or gatekeepers and what you like and don't like about them in the comments section. Thanks.

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.