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  • Category: Succession Planning

    How to talk to aging parents about their financial affairs

    There comes a point when adult children should be asking certain questions of their parents to ensure that their financial affairs are in order. As parents age, achieving financial independence for retirement is a primary objective and effective planning should start well ahead of time. Similarly, planning for the smooth succession of assets on death is critical to maintaining family harmony through a difficult time. Here is a list of questions adult children should be asking their parents, now, to better plan for retirement and beyond.
    [read more >>]

    Found money: How to unlock value from an old insurance policy

    In my insurance practice, I am meeting more and more baby boomers with the same predicament:  they have a life insurance policy they no longer need, that has no cash value and annual premiums that are getting more and more expensive.  It becomes a source of irritation to see cash going out the door each year with no perceived value.

    Sometimes this happens because a policy was taken out years ago at a time when they were just starting out and had limited assets to protect their families should they die prematurely.  Sometimes it’s a case of having a policy that was needed to fund a shareholder’s agreement that is no longer required today.

    So what do you do with an old insurance policy that has no cash value when the premiums are expensive and the need has changed?

    Well, you have a couple of options.

    You can keep it and keep paying the premiums until the term runs out. You can let the policy expire.  This stops the premiums of course, but it can be tough to walk away from that given the amount of money invested over decades.

    In our practice, we work with clients to consider another option:  one that creates value from the policy and helps them satisfy their charitable giving desires.

    It works like this:

    1. You take steps to make sure that the policy will be in force when you die. For example, if you have a Term10 policy you need to convert it to a Term-to-age 100 policy.  This can be as simple as signing a policy conversion form without providing medical information.

    2. We obtain an independent actuarial value for the policy based on the net present value of the death benefit.  So for example, a five million dollar policy might have a fair market value of $500,000.

    3. You donate the policy to a charitable organization that issues a tax receipt for the amount of the value as determined by the actuary.  So, using our example, a tax receipt for $500,000 results in a tax credit of $233,500 (assuming the highest marginal rate in Ontario).  In other words, you’ve unlocked $233,500 of value from your policy.

    Now, the charitable organization owns the policy but the annual premiums still must be paid.  You can make an annual donation to the same charity to cover the premiums and receive a tax receipt for that amount, therefore essentially cutting the cost of the premiums you had been paying in half. In some cases, we have been successful in working with charities that will pay the premiums for the policy as they view the vehicle as another asset class within their endowment funds.

    Point being, either way, you have options if you have an outdated policy for which there is no cash value.  Something to think about next time you receive your annual premium notice and wonder why the heck you’re continuing to pay into it.

    Does wealth breed selfishness?

    A guest blog by Dr. Julie A. Morton.

    Provocative new research at the University of California, Berkley, suggests that those of means ARE different from their more humble brethren, and NOT in ways that would make one proud.  According to studies conducted by social psychologist Paul Piff and his university colleagues, wealthy individuals are more likely to LIE, to CHEAT and to STEAL then their less fortunate counterparts. They are even more likely to do things as mundane as cutting off other drivers and refusing to wait for pedestrians at crosswalks.

    The research points to a number of reasons, but three stand out: [read more >>]

    Is the next generation ready to fund retirement?

    Last week’s federal budget included the much anticipated changes to the Old Age Security (OAS) pension. But not nearly as soon as some thought.

    With changes being phased in over six years beginning in 2023, the reality is that the majority of Canada’s baby boomer population will be unaffected by the changes. Currently, at over $6,000 per year with a claw back feature reducing the amount received based on income, the reality is that for most of our clients OAS is an afterthought in their retirement planning.

    But what this change does signify is a continuation of two societal trends that have been going on for decades. [read more >>]

    A night at the Oscars

    i-120e2dc27470ed5f49b7e424b7250243-Oscar-Award.jpgOn vacation with my family last week in Los Angeles, we couldn’t help but get caught up in the Oscar mania that surrounded us. As we drove through the streets of Beverley Hills, and walked the famed Rodeo Drive, we were struck by the irony and the contrasts: California, the near bankrupt state, bloated with debt, yet opulence everywhere you turn. Every car seems new and everyone is in a hurry to get to where they can be seen wearing the latest fashions.

    As a parent, it was refreshing to hear my 25 year-old daughter say, “this all seems so pretentious.” I couldn’t help but smile and feel relieved that ‘she gets it.’ See my blog – We’ve failed our kids, shame on us.

    On our flight home, we all watched The Descendants; the George Clooney flick that garnered so much attention at the Oscars. Clooney plays the role of Matt King, a wealthy lawyer who is the sole trustee and one of many beneficiaries of a $100 million+ family property that is to be sold.

    The parallel story line deals with Matt’s new found responsibility for his two daughters as a result of his wife’s comatose condition after an accident. Matt and his family have lived quite modestly and he shielded his daughters from their massive wealth.

    My favourite line in the movie: Matt says, “I don’t want my daughters growing up entitled and spoiled. And I agree with my father: you give your children enough money to do something but not enough to do nothing.”

    This is actually a paraphrase from one of the world’s wealthiest and best investors, Warren Buffett (maybe why the line resonated with me). When asked how much money he would bequeath to his children, Buffett replied, “I want to give my kids just enough so that they would feel that they could do anything, but not so much that they would feel like doing nothing.”

    Regardless of source, this is a great summation of the balancing act parents face in providing for the needs and wants of their children. How ironic given the opulence in the city the movie was featured.

    5 Things To Know When Developing Your Estate Plan

    i-4d71ca3cf9c9755b9d871474fd598f4d-estate_planning_tab_DB_Feb2012.jpgMy partner, Kelly Willis, wrote a poignant post last week about the loss of her husband and the estate challenges she found in her path, all during a time she struggled with her bereavement. As a private client lawyer with many years of estate planning under my belt, I wanted to share some of the more frequent issues and misconceptions I have witnessed in dealing with families who  were unprepared or had inadequate estate plans.

    [read more >>]

    Bereavement is bad enough

    i-5cba52b5a1f520ae0e81e2f9512dcc98-estate-planning_KW_Feb2012.jpgMy husband passed away a year ago last month.  We ought to have been prepared.  Two years earlier he had been diagnosed with a rare form of cancer for which there was “little predictive data”. We chose to be optimistic. When he died due to complications from surgery I was shocked and devastated.

    Shock was the protection I needed to get through those first few weeks, but as reality set in grief took its place. It was in this condition that I was catapulted, like so many others in my position, into the surreal state of dealing with my husband’s estate.  If there is any benefit in my experience it is to help others become better prepared.

    I have to confess I was ‘fortunate’ under the circumstances. My husband had a valid and current will; our affairs were reasonably straightforward; I had been the ‘chief financial officer’ during our marriage so I was used to managing our finances; and I had the support of the professionals here at my firm whom I trusted as advisors and friends. In theory, I was well equipped to handle my responsibilities as executor.

    [read more >>]