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.

Are Accountants Really Boring?

This summer I am posting the "best of" The Blunt Bean Counter while I work on my golf game. Today, I will start with a June, 2012 post I considered somewhat humorous (at least for an accountant).

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 CA’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.

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 CA 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 CA. 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 always say I am a tax accountant or the managing partner 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. 

I was about to give up when a beacon of light shone and led me to Paul Beeston. Finally, an accountant with attitude! Beeston, who was a CA with Coopers and Lybrand, became 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 CA. 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. 

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

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 CA’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.

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 CA 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 CA. 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 always say I am a tax accountant or the managing partner 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. 

I was about to give up when a beacon of light shone and led me to Paul Beeston. Finally, an accountant with attitude! Beeston, who was a CA with Coopers and Lybrand, became 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 CA. Yes, there is one out there (Unfortunately I could not find a picture I could legally download of Paul).

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. J

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

Do you need a Professional Accountant to prepare your Personal Income Tax Return?

A while back, Robb Engen, who is a rising star in the financial blogging and writing world (the Echo half of Boomer and Echo and writer for the Toronto Star’s Moneyville) asked me when should someone engage an accountant?

Some of the considerations I forwarded to Robb are discussed in a recent Moneyville blog he wrote titled Why I'm using a tax accountant this year.

Today, I would like to expand on this topic and discuss when you should engage an accountant to prepare your personal income tax return. I would suggest that you always should engage an accountant if you have a corporation.

In general, unless you have self-employment income, commission income, rental income, or significant investment income, an accountant will be somewhat limited in the planning they can do for you.

I say this because, if you do not have these sources of income, an accountants experience, discretion and know-how are pretty much muted and you may as well purchase an income tax software program and file your income tax return yourself. That is not to say you may not want to engage an accountant on a one-off basis where required, it just means you are most likely paying for services you do not require if your personal return is simple.

Just so I don’t have a hundred accountants in an uproar, saying that I am steering away business from the profession (although some accountants are not keen to take on personal tax only clients anyways), I also suggested to Robb that you can look at an accountant as insurance. Like life insurance, or disability insurance, you don’t like paying it, but when you need it, you are glad you have it; although, at least we provide a yearly tax return with our yearly charge. 

I told Robb that there may be years when an accountant may not provide much in the way of income tax planning, but there will be a year somewhere along the line, when your accountant may provide advice that covers their fees for the next ten years and part of the reason for the tax savings may be your accountant’s familiarity with your personal situation.

I further suggested to Robb that another reason many people like having a relationship with an accountant, is because when they have a question or have a significant issue such as a new job offer, inheritance or they have lost their job, they can call someone they know who will accept their call and who understands their personal situation. 

The aforementioned situations are typically very stressful, and are often subject to severe time constraints in which a significant financial decision must be made. Without having an established accountant relationship, you may not be able to find someone who can assist you on a timely basis and/or is willing to drop current client work to assist someone with whom they have no prior relationship. That may sound harsh, but it is the reality for many established professionals, be they accountants or lawyers.

Finally, where you have a relationship with an accountant, they may provide unsolicited value-added advice in respect of such financial matters as wills, estate planning or how to deal financially with your children. For example, I recently had a corporate client come in to drop off their personal income tax information. They made some comment about one of their children that led me to ask if they had updated their will recently (which they had not). I then asked if they had upgraded their life insurance to account for the income tax they would incur if they passed away because of the increase in the value of an investment they had (they had not). I then asked them how that investment would be split with an arms-length partner if either of them died (we had discussed the issue before but they still had not officially addressed this in a legal agreement). All these issues are important and will hopefully be addressed in the near future by my client.

Now, ignoring the fact you are probably thinking I have a fixation with death, these are the kind of “add-ons” many accountants provide in the course of working with a client.  

In my opinion, if you have the types of income I note at the outset, I would suggest engaging an accountant is worth the cost. However, if you do not have these types of income, you have to weigh whether the less tangible benefits I note above are worth the cost of the accountants tax preparation fee.

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

Who is your Wealth Mangement Quarterback?

In Canada, and specifically Ontario, Chartered Accountants (“CA's”) have independence restrictions and other rules that prevent us from providing specific security advice and from buying and selling securities on behalf of our clients. 

However, in Ontario, we are allowed to earn a fee for providing what I will call quarterbacking advice, where we oversee a client’s team of advisors and ensure a comprehensive team plan is put in place and maintained for each client. As financial quarterback, we try to ensure the client’s investment advisor, lawyer, insurance agent, banker, business consultant and accountant have integrated their advice into one efficient, optimum, co-ordinated plan, taking into account the client’s investment, retirement, income tax and successions needs.

In providing that role within my firm, Cunningham LLP, I have seen clients with investment portfolios and financial plans that fail to consider their needs, miss out on crucial income tax savings and clearly lack a strategic vision. Lost opportunities are created when advisors operate in silos and the situation is made worse when advisors operate at cross purposes, and worse still when they are concerned only with their own fiefdom and fees. In this blog I would like to discuss why you may want to consider nominating one of your advisors as the responsible party for co-ordinating and quarterbacking your other advisors, or if you are up to it, tackling the quarterback job yourself.

There are many professionals who can quarterback your team. The two that seem most appropriate are a fee-for-service financial planner and your accountant. In my biased opinion, I would suggest that in many cases, a client’s accountant may be the best suited and most independent advisor because we often have the broadest vantage point of our client’s wealth and financial picture. But, this is not to say your investment advisor, whether a fee-for-service advisor or not, would not be suitable for the task. Some of the issues and reasons you may wish to put one of your advisors in place as your team’s quarterback are discussed below.

In many cases, I have observed that my client's investment advisors pay little or no attention to my client’s actual business affairs; other than to determine how much cash can be transferred from their corporation's to the investment accounts they hold for that client. So why does this matter? Because the client’s business is most often their largest asset and in many cases is the asset with the most risk. For example, two years ago I had a very successful parts supplier who as the recession began, was told by one of his major customers to halt shipments for a time. His business was in a high risk situation. His advisor had a significant portion of his portfolio in equities and never once considered the risk associated with his business in determining his asset allocation. How about a person who makes their money in real estate; should their advisor have any of their portfolio in real estate stocks? Maybe or maybe not, but the lack of diversification and resulting increased risk of holding real estate stocks in this scenario should be considered, and as I say, it is often totally ignored.  In addition, the income tax consequences of investing are such that the investment advisor should always co-ordinate with an accountant.

My client’s insurance advisors are a mixed group. Many are excellent and ensure they speak to me to understand my client’s needs including business structures, succession planning and income tax issues. However, the reality is many an accountant has shot down an insurance policy in their client’s best interest and some agents try to ensure the accountant is not involved when selling a policy to ensure the sale of the policy.

Lawyers are generally used to working with accountants and these professionals typically work together fairly seamlessly, however, they also typically have minimal interaction with the other advisor groups. In addition, many clients have lawyers they used for a real estate transaction or a will, etc. and they assume the lawyer can handle estate planning, US vacation home planning or similar other transactions not in their wheelhouse. I have seen several messy situations caused by real estate lawyers who decide they are probate planners and cause substantial deemed dispositions of real estate assets for income tax purposes. Again, if the lawyer was working as part of a team, they would have known to contact the accountant or tax lawyer before implementing any transaction.

Your financial world is a complicated place and where you have a team of advisors it is essential to get them all on the same playbook. You will typically be better able to achieve your key objectives in this way while ensuring the efficiency of professional fees.  

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

Housing Gifts and Loans to Children and Prenuptial Agreements

Over my twenty-five year career as a CA, I have dealt with many professionals who are experts in their field on various client files; from tax lawyers, to business valuators, to venture capitalists to forensic accountants amongst many others. Lately I have taken to asking (okay, twisting their arms) some of these professionals to write or provide comments for my blog on their specialties. Today marks the first of what I hope will be many contributions over time from these experts, with a family law contribution from Stephen Grant of McCarthy Tetrault.

Prenuptial Agreement or Family Feud?

I have recently blogged about considering a family meeting to discuss your will and the taboo topic of money amongst family members. However, the potential fireworks in confronting both those issues is like comparing a sparkler to a roman candle when it comes to your dear child entering into a new marriage.

It has been my experience that parents are loathe to discuss prenuptial agreements with their children once their child is in a serious relationship, as the children take any discussion as an affront upon their boyfriend/girlfriend or future better half. Thus, I try to raise the issue of future prenuptial agreements with my clients and their children when their children are just entering university, especially when the child has ownership in a family business or significant assets in their name.

I suggest this timing for two reasons: (1) the child is old enough to consider and understand the concept of a prenuptial agreement; (2) they will remember that you discussed this topic before they found the love of their life and thus, they will not necessarily consider it a personal attack upon their future spouse when you raise the issue of a prenuptial agreement.

For most families, the issue of share ownership or your child owning significant assets is a moot issue. However, in Toronto I see many parents gifting money to their children to help them purchase their first house, which I assume if a fairly common phenomenon across most of Canada. When I am informed or asked for my advice on housing gifts, I always advise my clients that they should go see their lawyer. I know most lawyers will then tell them that the gift should be documented as a mortgage or promissory note. By doing this, the parent will hopefully be entitled to get the loan back in the case of marital breakup.

The keen eyed will note I said "hopefully" above. I qualify my comment because the courts have discounted the value of the debt (mortgage or loan) where a judge has felt the debt was not valid and/or the child of the parent, who loaned the funds, would never be called upon to repay the debt to their parents. It is therefore imperative parents get proper legal advice to understand the best way to evidence the validity of the debt; which typically involves their lawyer drafting a debt document that has an interest rate and default and payment terms, to establish the debt is a bona fide debt and not a gift.

Noted Toronto litigation and family lawyer Stephen Grant of McCarthy Tetrault offers these further suggestions to protect family assets upon the marriage of your children.

• Make gifts (or inheritances) after, not before, a marriage.
• Explain to your children the importance of keeping assets segregated – especially ones that emanate from a post-marriage gift.
• Create a holding company for each child. “Gift” the holding company shares to that child after marriage and pay all future gifts to the holding company.
• Ensure that your own will has the requisite clauses to enable you to bequeath both capital and investment income such that the offspring recipient can exclude both from his or her net family property.
• If the parent undertakes an estate freeze to transfer a company to his/her children, ensure that the child does not "subscribe" or purchase the Newco shares, but that the shares are gifted.

Stephen suggests that your child gets legal advice about the financial consequences of marriage and divorce before marriage.

As someone who has seen clients directly or indirectly lose thousands of dollars upon the dissolution of their child’s marriage, I suggest you heed Stephen's advice above.

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

Creditor Proofing Corporate Funds and Do You Eat to Live or Live to Eat?

Creditor Proofing Corporate Funds

Most owner-managers of private corporations are concerned about creditors potentially gaining access to their corporation’s cash and investments through real or frivolous lawsuits. The simplest method to protect surplus corporate funds is through the use of a holding company. 

The Income Tax Act permits an owner-manager to transfer the shares of their operating company (“Opco”) to a new holding company (“Holdco”) without incurring any tax.  Following this type of transfer, the owner-manager would own the shares of Holdco, which, in turn, would own the shares of Opco.  With that type of ownership structure in place, Opco and Holdco would be what is known as connected corporations. 

When corporations are connected, they can typically pay their retained earnings (excess cash and other assets net of liabilities) of the corporation , as a dividend from Opco to Holdco on a tax-free basis.  This has the effect of removing excess cash and other assets from Opco so that it would no longer be susceptible to future creditors’ claims. This can be repeated in the future as Opco accumulates additional retained earnings.

If Opco requires ongoing cash and working capital, the funds received by Holdco could be loaned back to Opco on a secured basis provided a General Security Agreement (“GSA”) is registered by a lawyer. It is important to note the dividend first paid by Opco must be physically paid by way of a cash or other asset transfer and then physically loaned back to Opco by Holdco to ensure that the GSA is valid. 

Opco’s banker should always be advised in advance that Opco is undertaking a creditor proofing transaction.  Where a bank loan or other debt is present, the GSA will secure the loan but Holdco generally would still rank behind the bank or other secured creditors as far as payment is concerned.

The structure noted above is simple and effective. However, where the owner-manager or other family members have access to the $750,000 capital gains exemption and may potentially sell shares of the company in the future, this type of creditor proofing transaction may not be appropriate and some variation may be required. Depending upon your family and personal financial situation, it may be possible to creditor proof Opco, maintain potential access to the capital gains exemption and provide a means to income split with family members in one fell swoop by utilizing a “freeze” transaction.

This “freeze” transaction will be discussed in my blog in two weeks.

Do You Eat to Live or Live to Eat 

I love good restaurants, but I also love burger shacks, Middle Eastern shawarma and falafel restaurants and sausages from street vendors.

I list among my favorite things to eat steaks, corned beef and hot dogs in the meat area, shrimp, crab, sushi and lobster in the fish area, fries and potato chips in the fried area and ice cream and crème brulee in the dessert arena.

The above is a who’s who of the worst foods to eat cholesterol-wise (some say shellfish are not that bad for cholesterol) so in retrospect, I guess I shouldn’t have been surprised when my latest medical revealed my cholesterol had gone up. Poor food choices in conjunction with a lack of exercise due to a couple of back to back hockey injuries, finally took its toll. My wife, a very healthy eater promptly brought me into the fold and suddenly things I never heard of, or conceived of eating, like bran buds, flax seed and quiona, replaced donuts and fries. I now realize how much I am a live-to-eat person.

On the positive side, I have discovered that I actually like some foods that I would not normally look at, but in general my current diet is by no means a culinary delight. Hopefully I can get my cholesterol down and I can go back to a more balanced diet while eating smarter, but boy do I miss my bad foods.

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

Should I Stay or Should I Go?

The recent press controversy surrounding the income tax hit related to Registered Retirement Income Funds (“RRIF”) seems to keep oozing issues. This week the Financial Post talked about severing your residency ties with Canada so that the income tax bite would be a one time only 25% withholding tax on your RRIF, as opposed to a 46% hit on each withdrawal (assuming you are a high rate taxpayer).

At the mid-market accounting firm where I am a tax partner, the majority of our corporate clients have substantial net worth and have the wherewithal and income tax incentive to leave Canada should they wish. Over the years we have had multiple discussions with people who are unhappy about their income tax bills and whom out of frustration ask about becoming non-residents. The same issue arises when we have discussions about Retirement Compensation Arrangements (“RCA”). Under a RCA, you essentially pay income tax at 46% upfront, but if you become a non-resident you only pay a 25% withholding tax, resulting in a net refund of 21%.

Out of all the discussions we have had about the non-residency issue, I cannot recall one client who has decided to leave the country so that they would only pay 25% on their RRIF or RCA. The reality in my opinion, which may be off base, is most Canadians value their family, health plan and lifestyle more then the do the almighty dollar, and the income tax tail does not wag the lifestyle dog.

When I was at Price Waterhouse and the net worth of many clients was extremely high, I did see some clients take up residency offshore for income tax reasons, and we have all read articles about those individuals over the years. To each his own, but those people remind me of athletes that have it all in their current city with adulation and comfort, and yet they bolt to another city for $14,000,000 a year instead of $11,000,000. When is enough, enough? But I guess that is a philosophical blog for another day.


SHOEBOX TAX CLIENTS

I have been at many a cocktail party where some smart alec regales me with his/her story about their shoe box of records and how they torment their accountant every year. I usually shut them down by asking what kind of shoe box they have. They usually look at me quizzically and then I explain that unless they have a Berluti shoe box if they are male, or a Christian Louboutin shoebox if they are female, they probably cannot afford for me to prepare their tax returns.

Now you are probably wondering if I really say that, I can’t tell you, but I am The Blunt Bean Counter. Anyway, in all seriousness, I have been amazed over the years by how many people actually find it amusing that they torment their accountants by bringing in a shoe box at the last moment. I will not knowingly take on shoebox clients since I am doing a disservice to them and myself.

If you are one of those dreaded shoe box clients, I can only tell you that you are hurting yourself. The more disorganized you are, the better chance you have missed or misplaced you tax receipts/tax deductions, and the last thing accountants running around like chickens with their heads cut off in April want is a bunch of receipts to sort and add up. I would suggest your accountant, instead of using their energy to help you tax plan for future years based on your current return, will use their energy sorting receipts and have little or no energy left for the more important planning element.

Remember, if the shoe fits, wear it (check out the origin of this expression).

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

Intergenerational Communication Gap

In an article for CNBC, author Jessica Rao quotes Dr. Nancy Molitor, Clinical Psychologist and Public Education Coordinator for the American Psychological Association, as saying “Money is the most taboo, fearful subject that we can encounter as people.” An inability to discuss this taboo subject can have tremendous implications when taken in context of families and their money.

We are all familiar with the term generation gap, but the lack of communication between generations can be very costly from a both a financial and social perspective. The substantial wealth transfer taking place in Canada from parents to children, or from children to parents, makes clear communication between generations more important now than ever, yet the communication is mitigated by this taboo topic of money.

So what am I talking about? Let’s consider Emily, a widower with two children. Emily’s husband Bob passed away a couple years ago, but during his lifetime he amassed a significant estate due to the sale of his composite hockey stick company ten years ago. Emily has two children, John, a Bay street lawyer making $800,000 a year and living in the upscale Toronto Rosedale neighborhood, and Susan, stuck in a bad marriage, who never finished University and married early.

Emily was brought up in an era where you don’t discuss your family assets with your children. John knows he will inherit millions of dollars when mom passes away, but gives it little thought as he is very comfortable and only acknowledges the inheritance in that he does not fully contribute to his RRSP. Susan on the other hand has had a somewhat strained relationship with her mom since her early marriage. Although they  are currently on better terms,  Susan is too proud to ask her mom for money and she does not think she would receive a warm reception even if she got over her pride and spoke to her mom about her finances. What Emily does not know is that Susan’s husband is a cocaine user and she would like to leave him, but she is concerned about how she could survive. She also would give anything to go back to University to become a social worker, but that is currently just a dream.

Now imagine if everyone felt comfortable discussing money? Those that know Emily, realize that she would give Susan some sort of early inheritance, but she does not want to insult Susan and she is not aware of her husband’s issues and Susan’s dreams. Further imagine you were brought in as a family friend and could open up the intergenerational communication gap. Emily would be thrilled to provide an early inheritance to allow Susan to leave her husband and pay for the legal bills and, with Susan free of her husband, she would have the financial ability to go back to school to pursue her dream of being a social worker.

How is this gap bridged? I can’t answer that question. But I know I have advised clients who have the financial means that they should try and have a heart to heart with their children in respect of their children’s financial needs.

How about the alternative scenario of children who have the means to support less financially secure parents? Sam is a widower. He was a factory worker who scrimped and saved to buy a house and put his two kids through school. Sam does not have enough money to retire and decides to obtain a reverse mortgage on his house such that when he dies, the mortgage owing is deducted from the sale proceeds of the house. This is often a costly form of financing.

Sam is too proud to approach his children about his financial situation. However, if you were able to bridge the intergenerational gap, you would be able to inform Sam that his children, who are both successful, feel that they owe everything to Sam and would be happy to either gift dad some money or provide him a loan at lower interest then the bank so he wouldn’t have to reverse mortgage the house.

The two scenarios above have many variations. However, pride, secrecy, and perceived “grabbing of the family money before the body is cold” prevent any kind of open communication.

I have no magical fix, however, if you are the parent, consider speaking to your children about their financial situations and dreams to see whether you can assist them in realizing those dreams. If you are tight for money in retirement, at minimum let your children know if you are undertaking a reverse mortgage or similar financial arrangement so they can potentially assist you or, at a minimum, understand that your estate has been compromised by a mortgage. 

If you are the child in need, have a frank conversation with your parents to let them know your issues so they don’t perceive you to be “money grabbing” and, if you are a successful child with a parent of limited financial resources, offer to help or to pay for your financial advisor to sit down with your parent.

Maple Leaf Rant

Little did I know that when my parents let me stay up late to watch the Toronto Maple Leafs win the Stanley Cup in 1967, that it would be the beginning of a Stanley Cup drought of 43 years and counting.

So when the Maple Leafs hired Brian Burke a couple years ago as general manager, I was pleased. Burke had success with the Anaheim Ducks, seemed to have the sense of humor needed to deal with the Toronto sports media and had an aura that said “Don’t worry, I know what I am doing and I will get it done.”

In my opinion, Burke also arrived at a time that Maple Leaf fans were so worn down by mediocrity and worse, that the Leaf Nation would allow him time to build properly using the draft and astute signings.

However, for some reason, Burke, who I am sure would succeed 8 times out of 10 as a GM, seems to have badly misfired in Toronto; as surprisingly, he, and not the Leaf fans, appears to have limited patience.

Burke’s first puzzling move was signing Martin Gerber late in the 2009 season to bolster a weak goaltending situation. As a fan, I was ecstatic that the goaltending was weak. The Leafs had a chance to get into the lottery for a top pick and poor goaltending may have helped them lose games and achieve a higher draft pick. However, Gerber won several meaningless games for the Leafs that year to move them down to the seventh draft pick. Considering Gerber was then released following the season, his signing was the first perplexing move made by Burke.

The second odd move occurred when Burke started signing veteran free agent defensemen the next fall. Once again, one would have thought he would have traded all the veterans for younger players to build from youth and to ensure a high draft position the following season.

The third and most puzzling move was the trade of two number one draft picks and a second round draft pick for Phil Kessel. One can understand Burke’s thinking in that Kessel was young and his acquisition was like getting a guaranteed number one choice. However, the Leafs gave up three draft picks and if Kessel (a player whose temperament has been questioned) performed well, he would seemingly only help the Leafs to maybe fight for one of the last playoff spots.

Well, we all know that last year, the Leafs did poorly and Boston got the Leafs’ second pick in the draft and it now looks like the Bruins may get another high pick this year. Burke may end up building the Bruins, not the Leafs. Meanwhile, the Leafs only have a few individual players who appear to be useful for the future and no draft pick again in 2011.

The whole direction Burke has taken has been very confusing and disappointing and I now have gone from having confidence to being sceptical that Burke can fix the Maple Leaf mess.

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