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, 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.