How can small business deal with today’s currency fluctuations?

Mal Spooner is a veteran fund manager and currently teaches at the Humber College School of Business.
Mal Spooner is a veteran fund manager and currently teaches at the Humber College School of Business.

Right now it’s no secret that selling merchandise to Americans is pretty lucrative.  We also know that it hasn’t always been this way.  A relative of mine who sells lighting products to customers the U.S. is a case in point.

My brother-in-law built a very successful business with his wife from the ground up.  Their decision to sell to markets in the US worked fine, but the real boost to sales occurred when their son joined the business and talked them into selling on the Internet.  Online sales boomed, but of course so did their company’s vulnerability to exchange rate risk.

A few years ago, he was struggling to make his usual margins (which are not that big at the best of times) when the CAD/USD exchange rate approached par.  In other words, a C$ was pretty much equal to the US$.  Cross-border shoppers from the Canadian side of the border were in heaven (myself included), whereas exporters were beginning to panic.  After all, their costs were still in Canadian dollars, which was an advantage when they received sales revenue in a much stronger $US.  Converting back into Canadian currency provided a substantial bonus to their profits and quality of life.

Things are great once again, but how can a smaller business owner(s) plan ahead to make sure that currency risk doesn’t threaten their livelihood?

The graph below illustrates the impact currency can have on a business.  Imagine a fictional Canadian company that began selling a specialty cheese to the U.S. marketplace in June of 2006. The sale price stays the same (due to competitive pressures) at US$ 2.50.  Costs are steady in C$ 1.98 range.  Sales made in US dollars must be converted back to Canadian dollars.  
USD-CAD sales and profits
It is easy to see how just the exchange rate can wreak havoc on a businesses revenues and profitability.  Is it possible to anticipate or prevent this volatility?  When companies are accustomed to very large orders, it is possible to contact your bank and make arrangements to use the currency forward markets in order to ‘hedge’ your profits.  For instance, if one expects to have to convert a significant amount of foreign currency into one’s domestic currency once the order is delivered, you can arrange to lock in the forward exchange rate today, thereby knowing exactly what your margin is (and will be).

However, the orders for most small businesses aren’t large enough to make hedging a viable option. Can you plan for currency fluctuations?  Experts agree that there is no robust way to forecast exchange rates.  Experts have been frustrated trying to predict exchange rates for years, and the forward markets/futures markets are not very good predictors of the exchange rate that will actually occur in 3 to six months.

One approach that has been around (seems like forever) is the purchasing power parity theory.  The price of a consumer product (same materials, can be sourced locally or at same prices) should be the same in different countries, once adjusting for the exchange rate.  Below, the table compares the price of the rather ubiquitous iPhone in Canada, Europe and Asia.  The price of the iPhone 6s 16GB (unlocked) in the U.S. is about $699, and should be more or less the same in Nanjing, China (their currency (is the remninbi or RMB) adjusting for the exchange rate as it is in Berlin Germany (euros).  As you can see from the table, this is not the case (the prices and exchange rates are not 100% accurate due to rounding).

iPhone intl pricing

Because Germans and the Chinese have to pay an even bigger price, it suggests the the USD is overvalued relative to those currencies.  The Canadian dollar on the other hand, based on this overly simple approach is actually still a bit overvalued compared to our neighbour to the south even at these depressed levels.  Of course, our proximity to the US might simply give Canadians a great deal on iPhones not available in other countries.

We should therefore expect the USD to depreciate relative to both the EUR and RMB in due course – the forces of supply and demand (for products, services and therefore currencies) should cause disparate prices to equilibrate.  The mobile device in theory should cost the same to the consumer no matter where he/she lives.  Should the USD decline significantly (perhaps even compared to the Canadian dollar) then the margin on good and services businesses in those countries are earning today with decline.

When sales are in another currency

The problem, is that historically purchasing power parity is also a poor predictor of exchange rates. The game of international finance is extremely complex.  Not only are exchange rates determined by differing interest rates in countries, balance of payments, trade balance, inflation rates and perceived country risks, the rates are also influenced by expectations associated with these variables and more.  The bottom line for smaller businesses is that when it comes to foreign exchange risk – they are completely exposed.

So what can be done?  Planning.  It is tempting to become overly optimistic when exchange rates have drifted in your favour, encouraging further investment to facilitate more sales in the stronger currency.  Buying equipment, hiring permanent labour and leasing more space introduces higher fixed costs that might dampen or destroy profitability when the tide turns the other way.  It is important to consider ‘what if’ scenarios frequently – and especially before laying out more capital. For entrepreneurs the biggest mistake is to take for granted that the status quo will continue.  All of a sudden, you might be buying yourself a bigger house, a fancier car and sending the kids to private school – all based on current income which is linked to the current prosperity of your business.

Currency instability is a fact of life, and the best way to be prepared is to expect the inevitable. Rather than rush to spend more on expanding the business put aside a ‘safety’ cushion during good times that can be drawn upon during bad times.  If your commitment to the US, European or other markets is firm, then park the cushion into currencies you are vulnerable too.  For example, invest your cushion in US dollar denominated assets – U.S. Treasury bills will provide a natural hedge for your sales.  Similarly, if a significant volume of your sales are in Europe and the company borrows funds for operations, borrow some funds in euros as a hedge – then if the euro appreciates you’re able to pay those obligations in the same stronger currency thanks you your euro receivables.

It is widely believed today that the USD is likely to depreciate relative to a number of other currencies, and perhaps imminently.  Today might indeed be the ideal time to begin considering ‘what if’ scenarios and the actions you can take to plan ahead.



Practical Reasons People Do Not Make Their Own Wills

Danny had questions about wills when he called my law office. My practical answer may help you decide how to make your own will.

Danny: I have to make a will and don’t know how. All my friends of my age say it’s easy. I have gone online and found so many websites. They offer will making services and free forms. Is it true I can make a will by myself? Will it be legal?

Ed: I should clear up the common misconception about making your will by yourself. There are more practical factors to consider when making a will.

The simple answer is that there is no legal requirement for you to make a will with a lawyer, Danny. But most people prefer to invest in a lawyer-prepared will.

There are many reasons why you may never get around to doing it yourself. I am not trying to sell you a will. Let me email you more reasons that you can share with your friends.

Here is the gist of the email I sent Danny.

1. Time – you are busy with your job and family. They take all of your time. You do not have extra time to do the research needed to make your own will. If it was a priority, you would have done it by now. That is the issue. It takes time to do things right.

You never know what an online source produces is guaranteed right for you. Who is qualified to prepare a valid will? Sure, they can ask you a standard checklist of basic questions such as:

  • Are you married or single?
  • What province do you live in?
  • Do you own a house?

But more importantly, can you ask anyone questions?

Here are things that are important to you like:

  • How do I make sure my children will have money to go to school?
  • Who should be my executor if I have no one I trust?
  • How can I save taxes?
  • What obligations do I have to my spouse or common law partner?
  • Can I do whatever I want with my money?

You can read my blog post to answer this last question, Honey is it Truly only Your Money?

2. Paperwork – most people make mistakes filling out simple forms. Making a will and having it properly signed is important. Mistakes you or your witnesses make can mean your will may not be legal.

If you make a will mistake, who knows about it? Usually nobody, until you are gone, that is. It is then too late for you to fix it. Your beneficiaries may then need to hire lawyers. Your relatives and their lawyers will need to see a judge. It will cost thousands to try and repair any mistakes. Some will mistakes can’t be repaired.

That would leave you without a will. Wasn’t that what you wanted to avoid in the first place?

Most people do not want to die without a will. You do not want to force your relatives to hire lawyers and go to court. Dying intestate or without a will passes all your estate burdens to them. Without an executor in your will no one has the power to pay your bills.

3. Advice – most people do not understand their legal obligations. When you make a will you deal with complex laws that change daily. These include family law, property, estate and tax laws.

You may think your situation is simple. But I find people want and need help when making important decisions.
Deciding who should be your executor or guardian for minor children is a complex decision. Most people need help understanding all their options. Only a lawyer can provide legal advice.

Using an online form to prepare your will does not help you with your specific questions or circumstances.
There other factors you need to consider as well, Danny.

Investing in a professional prepared will provides protection. Here are benefits to consider:

4. Security – knowing a professional has prepared your will. This gives you added comfort. You don’t have to worry about the what-ifs and if you’ve made a mistake.

5. Making an investment – will lawyers are available almost every price range. A lawyer-prepared will is an investment. Like insurance, it saves you money down the road. Spread the cost of a lawyer-prepared will over the years. The protection and comfort you receive costs pennies a day.

6. Comfort and peace of mind – your loved ones and property will be protected. You will need guidance from a professional if you:

  • own a business
  • share ownership of more than one property
  • are in a second marriage or common law relationship
  • have assets in more than one province
  • have minor children
  • your beneficiaries have special needs
  • charities count on your financial support
  • have a cherished pet to provide for

Make sure you get the right estate planning advice to make a will. Don’t leave it to chance or until you have the time to do it yourself. Get it done right.

Danny, resolve to invest your time in finding the right lawyer to help you. Then invest in a professionally-prepared will.

Edward Olkovich (BA, LLB, TEP, C.S.) is a nationally recognized estate expert. He is a Toronto estate lawyer and Certified Specialist in Estates and Trusts Law. Edward has practiced law since 1978 and has written numerous estate books. Visit his blog,, for more free valuable information. (c) 2016

Will Letter of Instruction

Written by Steve Nyvik, BBA, MBA ,CIM, CFP, R.F.P.
Financial Planner and Portfolio Manager, Lycos Asset Management Inc.

A Will Letter of Instruction helps your Executor in carrying out their duties – like organ donation, burial verses cremation, and funeral service details, reporting and paying your taxes, making the application for probate, paying your bills, and distributing your remaining assets. Your Executor is also the person who will have to defend your wishes in court or decisions they make where you have not left specific instructions. You can make their job so much easier and reduce much stress if you provide them with the information they’ll need. Leaving written information behind will help your loved ones who might not remember everything during such a traumatic time.

Below is my Will Letter of Instruction Template (you might even include all fields and put “not applicable” which is helpful information).



To Be Read Upon My Death:


(Legal First Name) (Legal Middle Name) (Legal Last Name)


To my Executor(s):


(Executor(s) of My Will)


1. Financial Information: Attached to this letter you will find:

  • a Balance Sheet that summarizes everything I own and all liabilities I have.
  • A Budget Cashflow that summarizes what we generally receive in cash each month and our expenses. This is also augmented with information as to how bills are paid.
  • Bank and Investment Statements of Account for all of my bank accounts, investment accounts and retirement accounts (RRSPs, RRIFs). For my chequing and savings type accounts, please note the following:
  Name and address of Financial Institution Account # Online account password(Put “N/A” if

Not Applicable)

ATM Machine Card Code Location of Bank Card Account has a statement or passbook?
1 StatementPassbook


2 StatementPassbook


3 StatementPassbook


4 StatementPassbook



2. End of life

Please note the following documents:

Document Type I have / do not have

such a document

Document Location
Do Not Resuscitate Order Yes  / No _____________________________________
Representation Agreement Yes  / No _____________________________________
Enduring Power of Attorney Yes  / No _____________________________________
Medical Insurance Card _____________________________________
Funeral Pre-Needs Agreement / Advanced Funeral Plan Yes  / No _____________________________________


2. If I should I suffer an accident or illness such that the prospects for my recovery are unclear or doubtful:

  • If I have not completed a Representation Agreement, then:

It is my wish that the following person(s) (understanding that this is simply a wish and not a legally enforceable appointment) _________________________________ be consulted on decisions such as:

  • life-saving measures, like cardiopulmonary resuscitation (chest compressions, drugs, electric shocks and artificial breathing aimed at reviving a person who is on the point of dying),
  • on treatments (like a major surgery removing the gallbladder or part of the colon) that might prolong the process of my dying, on artificial feedings or mechanical breathing, and
  • on pain medications that could dull my consciousness and indirectly shorten my life.
  • If I I do not have “Do Not Resuscitate Order” in place, then:

It is my wish that _________________________________ contact my doctor to discuss such arrangements.

3. Organ Donation

(i)   When it is determined that I am brain dead, I wish to donate  / not donate  my organs.  Such a donation could save a life or vastly improve the life of someone who’s suffering.

(ii)  I have  / have not  completed a registration form with the British Columbia Transplant Agency to donate my organs.

(iii)  My Organ Donation Card can be found at: ____________________________________________

4. Will Information

(i)    My Last Will and Testament was executed on _________________ (Day / Month / Year)

  • I have / have not  made a Codicil to this Will.
  • I have / have not  included a side-letter to clarify the reasons for my planned distribution or for dealing with specific bequests.
  • An original copy of my Will, any Codicils and any side-letters can be found in my:

A) home filing cabinet ,

B) office filing cabinet ,

C) home safe ,

D) office safe ,

E) safety deposit box ,

F) lawyer’s office ,

G) accountant’s office ,

H) financial planner’s office ,

I) Other (Specify): ______________

5. Important Records

My important records can be found at my:

A) home filing cabinet ,

B) office filing cabinet ,

C) home safe ,

D) office safe ,

E) safety deposit box ,

F) lawyer’s office ,

G) accountant’s office ,

H) financial planner’s office ,

I) Other (Specify): ______________

6. Safety Deposit Box

I do  /do not  have a safety deposit box.  It can be found at _______________________________

and the key can be found _____________________________________________________________.

The following people have signature authority on the box:___________________________________.

7. Safe

I do  / do not  have a personal safe.  The combination is: ________________________________

The safe can be found: _______________________________________________________________

8. Care of Minor Children – Directions to Guardians

  • Wishes concerning their education



  • Wishes concerning their religious upbringing



  • Other wishes / things to note



9. Final Wishes

On my death, my final wishes are as follows:

(i) Where arrangements have been made

  • I have / have not  made all of my funeral arrangements.

Contact the following person with respect to my Advanced Funeral Plan:


(Funeral Service Director Name)        (Firm / Funeral Provider)           (Telephone Number)

  • I have / have not  pre-paid any funeral costs.

Pre-paid costs made include:  burial costs , plot , my casket  / my urn , my plot marker (tombstone) .

(ii) Where arrangements have not been made

  • I wish / do not wish  for my burial and funeral to conform with the requirements of my religious background.  If so, please contact prior to death Minister/Rabbi:


(Name of Minister / Rabbi)          (Church /Temple Name)                   (Telephone Number)

  • I do / do not  want to be cremated.  Should I wish to be cremated, my remains are to be dealt with as follows:



  • I have / have not  prepaid any funeral related costs.

Pre-paid costs made include:  burial costs , burial plot , my casket  / my urn , my plot marker (tombstone) .

Information can be found at:


If I have purchased my burial / cremation plot, note the following:

Location of deed: __________________________________________________________

Name of cemetery / resting place:  _____________________________________________

Section Name / # _____________________________________, Plot # _______________

  • I have a deceased spouse , parent , child , and I wish to be buried next to such person if I check here .

This person’s name is: ______________________________ and he/she is buried at: _______________________________________

  • The Minister/Rabbi I wish to perform my service is: ________________________________

Name of Church / Synagogue: _________________________________________________

Address:                    ________________________________________________________

Phone:                        ________________________________________________________

  • It is my desire that my funeral arrangements be handled in the following manner:



Funeral Director:       ________________________________________________________

Funeral Home:           ________________________________________________________

Address:                    ________________________________________________________

Phone:                        ________________________________________________________

Special Requests:                                                 ___________________________________



Obituary Reading:                                               ___________________________________

Tombstone Engraving:                                        ___________________________________

Engraving translation (if not in English)             ___________________________________

In lieu of flowers please ask for donations to:    ___________________________________

Other special requests:                                         ___________________________________

  • I would like the following people to be my pallbearers:

_________________________________        _________________________________

_________________________________        _________________________________

_________________________________        _________________________________

10. Documents

The following papers and executed documents can be found in the following locations:

Document Type I have / have not such document Document Location
Pre-Nuptial or Post-Nuptial Agreements Yes  / No _____________________________________
Divorce Decree or Settlement Yes  / No _____________________________________The decree or settlement requires

/ does not require  that certain payments be made in the event of my incapacity or after my death

Life Insurance Change of Beneficiary Designation Form Yes  / No _____________________________________
Income Tax Returns & Data (Past & Present) _____________________________________
Automobile Papers (Ownership and Insurance) Yes  / No _____________________________________
Real Estate Papers
(Home, cottage, other)
Yes  / No _____________________________________
Social Insurance Number Card Yes  / No _____________________________________
Passport Yes  / No _____________________________________
Credit Cards _____________________________________
Any hidden possessions / money? (think about what happens if house is sold) Yes  / No _____________________________________
A list of computer access codes, key passwords, or instructions on how to find them. Yes  / No _____________________________________
Other: _____________________ _____________________________________
  1. Other: _____________________

11. People to contact:

(i) Family and Friends:

Name:                       _________________________ Name:                       _________________________
Relationship to me: _________________________ Relationship to me: _________________________
Address:                   _________________________ Address:                   _________________________
                                 _________________________                                  _________________________
Phone:                      _________________________ Phone:                      _________________________
Email:                       _________________________ Email:                       _________________________
Comments:               _________________________ Comments:               _________________________
                                 _________________________                                  _________________________
Name:                       _________________________ Name:                       _________________________
Relationship to me: _________________________ Relationship to me: _________________________
Address:                   _________________________ Address:                   _________________________
                                 _________________________                                  _________________________
Phone:                      _________________________ Phone:                      _________________________
Email:                       _________________________ Email:                       _________________________
Comments:               _________________________ Comments:               _________________________
                                 _________________________                                  _________________________
Name:                       _________________________ Name:                       _________________________
Relationship to me: _________________________ Relationship to me: _________________________
Address:                   _________________________ Address:                   _________________________
                                 _________________________                                  _________________________
Phone:                      _________________________ Phone:                      _________________________
Email:                       _________________________ Email:                       _________________________
Comments:               _________________________ Comments:               _________________________
                                 _________________________                                  _________________________

12. Key Contacts:

Investment Advisor / Financial Planner:Financial Planner and Investment Advisor Name:         Steve Nyvik, MBA, CIM, CFP, R.F.P. Life Insurance Agent:  (for life insurance claim) 

Agent’s Name:         Steve Nyvik, MBA, CIM, CFP, R.F.P.

Firm Name:              Lycos Asset Management Inc. Firm Name:              _________________________Address:                   _________________________


Phone:                      (778) 878-6643Email:              Phone:                      _________________________Email:                       _________________________
Comments:               _________________________ Comments:               _________________________
                                 _________________________                                  _________________________
Wills & Estate Lawyer(for probating Will)Lawyer’s Name:       _________________________ Tax Accountant(for preparation of tax returns)Accountant’s Name:                                 _________________________
Firm Name:              _________________________ Firm Name:              _________________________
Address:                   _________________________ Address:                   _________________________
                                 _________________________                                  _________________________
Phone:                      _________________________Email:                       _________________________ Phone:                      _________________________Email:                       _________________________
Comments:               _________________________ Comments:               _________________________
                                 _________________________                                  _________________________
Banker(for bank accounts, mortgage & safety deposit box) 

Banker’s Name:       _________________________

Employer(for company disability, life insurance pensions, profit sharing, stock and option plans and death benefits)Boss’s Name:           _________________________
Firm Name:              _________________________ Firm Name:              _________________________
Address:                   _________________________ Address:                   _________________________
                                 _________________________                                  _________________________
Phone:                      _________________________Email:                       _________________________ Phone:                      _________________________Email:                       _________________________
Comments:               _________________________ Comments:               _________________________
                                 _________________________                                  _________________________

Key Contacts CONTINUED:

Representative Agreement(for Medical and Personal Care Decisions)


Representative’s Name: _________________________

Enduring Power of Attorney:(for financial decisions)


Attorney’s Name:    _________________________

Firm Name:              _________________________ Firm Name:              _________________________
Address:                   _________________________ Address:                   _________________________
                                 _________________________                                  _________________________
Phone:                      _________________________Email:                       _________________________ Phone:                      _________________________Email:                       _________________________
Comments:               _________________________ Comments:               _________________________
                                 _________________________                                  _________________________
Family Doctor:(for medical issues – like DNR, capacity assessment)


Doctor’s Name:        _________________________

Guardian for my children(You should appoint a guardian in your Will for your children in case you and your spouse do not survive their minority [under age 19 in British Columbia]). 

Guardian’s Name:    _________________________

Firm Name:              _________________________                                  _________________________
Address:                   _________________________ Address:                   _________________________
                                 _________________________                                  _________________________
Phone:                      _________________________Email:                       _________________________ Phone:                      _________________________Email:                       _________________________
Comments:               _________________________ Comments:               _________________________
                                 _________________________                                  _________________________

13. My citizenship and benefits information:

Citizenships:I am  / am not  a Canadian citizen.

I am  / am not  a United States citizen.

I am  / am not  a citizen of another country.  Specify country: ________________________

I am  / am not  entitled to military benefits.  Specify: _________________________________I have  / have not  worked in a foreign country.  My identity # is _______________________

I am  / am not  entitled to governmental benefits.  Specify: ____________________________

I have  / have not  a US Social Security #.  It is #_____________________________I have  / have not  a US Taxpayer Identification #.  It is #_____________________________

14. On my death, there is an entitlement to life insurance death benefits , survivor pensions , term annuities or joint survivor annuities . See details below:

(i) Life Insurance

Name of Insurance Company

Policy Number Owner Beneficiaries Death Benefit ($) Employer Paid Premium LOCATION OF THE POLICY

Yes  / No

Yes  / No

Yes  / No

Yes  / No

Yes  / No

Yes  / No

(ii) Pension Plans

Name of Pension Plan Survivor Benefit
(Amount per month for my survivor)
Pension Guaranteed Payments (to what date) Is pension bridged for OAS/CPP?(If yes, what’s the reduced amount at your age 65?)
Yes  / No 




Yes  / No 




Yes  / No 




(iii) Annuities

Name of Insurance Company What is the source of the annuity capital? Type of Annuity Pension Guaranteed Payments?(to what date)


Not Sure

Other: _________

(i) Life Only(ii) Joint Life

(iii) Life & # of years guarant’d

(iv) Other



Not Sure

Other: _________

(i) Life Only(ii) Joint Life

(iii) Life & # of years guarant’d

(iv) Other

15. Trusts

  • I have / have not  settled a Trust.  If I did settle a Trust, the purpose of the Trust is for


and the trust document can be found: ___________________________________________

  • I am / am not  currently the Trustee for a trust.  If I am a Trustee, the Trust instrument

can be found: _________________________________________________________.

  • I am / am not  a beneficiary of a trust.  If I am a beneficiary, the Trust instrument can

be found: ________________________________________________.

  • Upon my death, my heirs will / will not  receive a distribution or benefits from a trust.


16. My Marital Information:

My current Marital Status is: (check all that apply)

  (i)  Legally married / Common-Law          Spouse’s name: _____________________________

(and living together)

There is a marriage contract

/ a pre-nup agreement  / no agreement


(ii)       Divorced                                          Former spouse’s name: ________________________

Date of Divorce: _______________ (Day / Month / Year)

Former spouse remarried?  Yes     No

Any payment obligations (maintenance/support orders) remaining under the agreement/decree?

Yes      No                   Not Sure

Former spouse still alive?

Yes      No                   Not Sure

(iii)       Separated                                         Spouse’s Name: ____________________________

Date of Separation: _____________ (Day / Month / Year)

Is there a separation agreement?

Yes       No

I have  / potentially have  / do not have  any financial obligations remaining.

(iv)       Single                                       

(viii)     Other                                               Specify: ___________________________________

Were you previously in a Common Law relationship?     Yes       NoIf yes, when did it previously end:     _______ years ago

Is there a separation agreement?                                       Yes       No

I have  / potentially have  / do not have  any financial obligations remaining.

17. Joint Property Ownership Intentions

For any assets you own with others as Joint Tenants (with right of survivorship), without the documentation of your intentions, this can create uncertainty as to whether the assets were intended to be a gift to your Joint Tenant or if held in-trust for your estate (i.e. the bank account was joint so someone can help you pay your bills).  This uncertainty can cause friction between family members and potentially large legal bills.  Court rulings on cases where the intentions have not been formally stated are inconsistent – in some cases the presumption of gift was applied and in others a presumption of resulting Trust with funds belonging to the estate was applied.A notarized “side letter” or Will codicil is recommended so that your intentions are formally documented to help avoid these problems.  In the absence of such a letter, this table is intended to help the Executor know your intentions as to how each jointly owned asset is intended to be distributed.
  Property Description(also identify location) Names of Joint Owners


Joint Bank Account #1 Gift to surviving ownersTo pass through Will
Joint Bank Account #2 Gift to surviving ownersTo pass through Will
Joint Investments Account #1 Gift to surviving ownersTo pass through Will
Joint Investments Account #2 Gift to surviving ownersTo pass through Will
Jointly owned
Real Estate #1
Gift to surviving ownersTo pass through Will
Joint owned
Real Estate #2
Gift to surviving ownersTo pass through Will
Joint owned
Real Estate #3
Gift to surviving ownersTo pass through Will
Other Jointly Owned Asset #1 Gift to surviving ownersTo pass through Will
Other Jointly Owned Asset #2 Gift to surviving ownersTo pass through Will
Other Jointly Owned Asset #2 Gift to surviving ownersTo pass through Will
Other Jointly Owned Asset #3 Gift to surviving ownersTo pass through Will
Other Jointly Owned Asset #4 Gift to surviving ownersTo pass through Will

18. Personal and Family History (For Obituary)

I have  / have not  written my obituary.  It is located at _________________________________

Here are some things to know about me:

What I like to be called: ________________________  My nickname: _________________________

I was born in __________________________ on __________  ____  ________.

City, Country                                Month       Day     Year

I was raised in _________________________

City, Country

My spouse’s name: ______________________________ He/She is alive  /died before me

Some thoughts about my spouse: _______________________________________________________


My parents were               ____________________________ and _____________________________

(Father: Full Name)                                         (Mother: Full Name)

My grandparents were      ____________________________ and _____________________________

(Grandfather: Full Name)                               (Grandmother: Full Name)

I have no children .

My children are:    _____________________________________ Born _____________________

_____________________________________ Born _____________________

_____________________________________ Born _____________________

_____________________________________ Born _____________________

My profession was: _________________________________________________________________

I went to School at: __________________________________________________________________


(Name of School, Year Graduated, Diploma/Degree)

I have  / do not have  detailed information on my family’s history.  It is located at:


Information I would like in my obituary:





19. Distribution of Personal Possessions

20. Specific Bequests of Personal Property not addressed through my Will

My wishes are as follows with regard to specific personal possessions that are not specified in my Will or by Codicil (these wishes are NOT legally enforceable but merely suggestions for my Executor(s) and Trustee(s)):

  Recipient(spouse, child, friend, etc.) Gift Location

21. Reasons for Specific Gifts / Significance of Gifts











22. All other Personal Possessions not addressed through My Will or in (A) above

For my remaining personal possessions (those not specified in my Will AND not specified above), I would suggest to you that they be distributed as follows (eg. all to my spouse, hold a family auction, my beneficiaries draw straws):






23. Reasons for the Planned Distribution of Overall Estate:












_______________________________________      _________________________________
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When Life Insurance Can Make Sense

“… a foolish man builds his house on the sand.  And the rain fell, and the floods came,
and the winds blew and beat against that house, and it fell, and great was the fall of it.”
– Matthew 7:24-27

 Written by Steve Nyvik, BBA, MBA ,CIM, CFP, R.F.P.
Financial Planner and Portfolio Manager, Lycos Asset Management Inc.

When building an investment portfolio, it is important to build on a solid foundation.  For this reason, it is important to consider the implications of the death, disability or illness of the family breadwinner, property loss, theft or damage, and liability claims.  That way, if a disaster does happen, the family doesn’t get wiped out in the process.

For this article, we’ll discuss the issue of life insurance.  Personally I’m not a big fan of life insurance.  I consider it an expense you shouldn’t pay for unless you clearly need the protection.  I’d like to take you through what I consider are the exceptions to where life insurance can make sense.

1. Protection of the life of the family breadwinner

For a family with young children and few financial resources, the death of the family breadwinner can leave the surviving spouse and kids without means to support themselves.  So, getting enough insurance cheaply is generally the goal.  One source for cheap insurance may be your employment group insurance.  If the cost per dollar of insurance is lower than that of buying private insurance, then you might top up your group coverage.

We’ll also check to see if your employer pays any part of the insurance cost as this “taints” the proceeds making them taxable.  Here we’ll explore whether it’s better for you to pay the entire life insurance premium (and have your employer pay more of the cost of other benefits) so that the life insurance proceeds will be tax-free.  We might also look at private term insurance to top-up your coverage if needed as the limits on group insurance may not be adequate enough for your needs.

Where you own a business

If you own a business, term insurance for which your business is the owner and beneficiary can make great sense.  Although the life insurance premium is normally not deductible, you are paying the insurance premiums that have been subjected to just the company tax rate (The small business tax rate for British Columbia is 13.5% combined).  As such, you might be able to buy up to 30% more insurance for the same money compared to buying the insurance personally from after-tax employment or dividend income.

The company owned life insurance death benefit is paid to your company on your death tax-free.  The death benefit (less the tax cost which is ‘nil’) is credited to the Capital Dividend Account.  This amount can then be paid out as a tax-free ‘capital dividend’ to your family.

Note that the company owned life insurance is an asset of your company and the death benefit can be subjected to your creditors.  Should you be in a position where you are able to retain some company income, an investment holding company can make sense as a way to remove surplus hands from exposure to potential creditors.

2. Insuring an annuity

Insurance on a life annuity to replace the capital on death can make sense.  Let’s look at annuities and then see how insurance can work together with it.

A) What is an annuity?

An annuity is a contract providing you with periodic cash receipts (usually paid monthly, quarterly or annually) in exchange for an up-front lump sum payment.  There are two types of annuities:

  • those that pay for only a specific period of time (term certain annuities), and
  • those that pay as long as you live (life annuities).

A life annuity bought from personal monies (non-RRSP/RRIF or non-company money) qualifies as a Prescribed Annuity which is entitled to beneficial taxation as only part of the income is taxable.

Let’s say you’re a 65-year old man and you have $250,000 to invest.  You want to invest this money to provide you with regular income to meet your living needs.

One possibility (see “Option 1” on Schedule 1) is to buy a corporate bond that earns 4.5%.  At the 40% tax bracket, your after-tax return is 2.7%.

Another choice (see “Option 2” on Schedule 1) is to buy a Prescribed Annuity for $250,000.  The annuity will pay you $19,996 each year no matter how long you live.  And as a Prescribed Annuity, only $5,431 of each year’s receipts is subject to income tax (i.e. 72.8% of the total receipts is a tax-free return of capital).  So at the 40% tax bracket, you’ll end up with $17,793 in your pocket each year.  A bond would have to pay interest at a rate of 11.86% to give you the same amount of income after-tax.

There are two reasons why you receive this big boost in yield.  First, you lose access to the capital – you’re only entitled to the monthly cash receipts.  This makes sense because the insurance company must invest those monies for the long term to generate excess returns to pay you your guaranteed return.

Second, on death, the cash receipts terminate leaving no annuity capital for your loved ones.

B) That’s where life insurance comes in

Where you want the annuity capital for your loved ones when you’ve passed away, you can do this through buying life insurance.  With life insurance, the annuity capital will be paid as a death benefit to your loved ones when you’ve passed away.  But to provide this return of annuity capital on death, part of the annuity cash receipts is used to pay life insurance premiums.

Schedule 1:                 Comparing the Returns of Bonds to Annuities

Option 1

Option 2 Option 3

Option 4


Prescribed Annuity Insured Annuity

Charitable Insured Annuity

Investment Amount


$250,000 $250,000


Less: up-front insurance premium



Net Amount of Bond/Annuity Purchase


$250,000 $249,344


Interest Rate


Gross Annual Income


$19,966 $19,913


Taxable Portion


$5,431 $5,416


Income Tax (40%)


($2,172) ($2,167)


Add: Charitable Credit


After-Tax Income


$17,793 $17,747


Less: Annual Insurance Premium



Net Annual Income Receipts


$17,793 $9,875


After-Tax Cash Yield


7.12% 3.95%


Pre-Tax Yield


11.86% 6.58%


Note:      The annuity is a life only annuity with 0 guaranteed years of payments based on a 65 year old male.  The life insurance is a Term to 100 policy for a non-smoker male age 65 at a cost of $656 per month.  This is an illustration only and does not constitute an offer to buy an annuity or life insurance.

This return of annuity capital is shown under the third alternative (see “Option 3” on Schedule 1).  For a 65 year old non-smoking man, $250,000 of term-to-100 life insurance is purchased costing $656 per month.  (Note that with insurance you pay the first premium up-front).  That leaves $249,344 to buy the Prescribed Annuity.  The annuity will pay $19,913 each year of which $5,416 is taxable income.  When taxes of $2,167 and the full-year’s insurance premium of $7,872 are paid, you end up each year with $9,875 in your pocket.  A bond would have to pay interest at a rate of 6.58% to give you the same amount of income after-tax.

One of the neat things about an Insured Annuity is that if your spouse dies before you, you can discontinue the term insurance.  As a result, your net after-tax receipts increase from $9,875 to $17,747; that’s 7.1% after-tax.  A bond would have to yield 11.83% to provide the same return.

If you need income and are charitably inclined, you can boost your income and also provide a nice endowment to your favorite charity.  Under this option (see “Option 4” on Schedule 1) your insurance premiums payments become charitable donations (as the charity owns the insurance) for which you’ll be entitled to the charitable credit.  Assuming you have more than $200 annually in other donations, the charitable credit on the $7,872 insurance premiums will be $3,440 (based on the highest tax bracket rate of 43.7%).  Here you’ll end up with $13,315 after-tax in your pocket each year as long as you live – almost double the after-tax income of the corporate bond of Option 1.  A bond would have to yield 8.88% to provide the same return.  By your age 84, you’ve gotten your capital back and you’re still receiving $13,315 a year.  On your death your favorite charity receives $250,000.

3. Maximizing pension income

Let’s say you’re married and you participate in your employer’s defined benefit pension plan – this is a pension that provides a guaranteed amount of pension income based on your average salary and years of service.  At retirement, you’ll have to make a decision on the type of survivor benefit you wish to provide for your spouse on your death.  The problem is that the cost of a survivor pension can be very hefty.  We’ve seen these costs range as high as 20% to 35% of the unreduced (life only) pension.

Under a pension maximization strategy, you maximize your pension income by taking the life only pension only if you can buy a survivor pension at a cheaper cost elsewhere.

To see how this works, let’s assume that a life only pension (the unreduced and non-guaranteed pension) you’d receive would be $4,000 per month until you die at which time your spouse gets nothing.

You want to provide a pension to continue for your spouse after your death.  Your company offers you a 100% Joint and Last Survivor Pension.  Here this pension pays you $3,000 a month (instead of $4,000) as long as you live.  And when you die, it pays $3,000 a month (= 100% of your $3,000 pension) as long as your spouse lives.

Under a pension maximization strategy, you elect to take the life only pension of $4,000 per month if you can provide a survivor pension of $3,000 per month at a cost of less than $1,000 per month.

Let’s say we can buy an insurance policy (like a Term to 100 policy) that provides for the same $3,000 a month survivor pension at a cost of $300 per month after tax (or $500 before tax at the 40% tax bracket).  As a result, you’ll end up with $6,000 more a year in pension income.  And if your spouse dies before you, you could cancel the insurance policy and end up with $12,000 more each year of pension income.

The reason why this strategy can work is that your employer is determining your pension options based on a life expectancy table for a group of people at your retirement age – it is not based on your particular health.  So, if you’re healthy you might be able to lock-in a cost of insurance that’s cheaper than your future group rate.

4. Business insurance

There are three common situations where one might buy life insurance related to a business:

A) Key man insurance

The purpose of taking out key man insurance is to compensate the employer for the loss of income resulting from the loss of the service of a key employee in the event of their death.  For the life insurance component of the policy, it is normally term insurance over the employee’s expected employment.  (The policy might also include coverage in the event of the key person’s sickness or injury.)

Life insurance might also be provided as a remuneration retention tool as part of a group benefits package for your employees.  Although there are requirements as to the number of employees required for a group to be established and that all full-time employees may need to participate, it can represent a cost effective way of providing benefits by you that an employee might not otherwise be able to obtain on their own.  For example, an employee might not be insurable and qualify for private insurance.  Alternatively, private benefits – like extended healthcare, tend to be available to lower coverage limits or not be as comprehensive as group benefits.

B) Buy-Sell insurance

In the event of your death, a Buy-Sell Agreement funded with life insurance provides insurance proceeds to your business partner who is contractually obligated to buy out your interest in the business on your death at a guaranteed price by a guaranteed date.

Similarly, in the event of your business partner’s death, a Buy-Sell Agreement funded with life insurance (which some refer to as “Buy-Sell insurance”) provides you the proceeds to buy out your deceased partner’s business interest.  The last thing you might want is to be in business with your deceased partner’s spouse or kids.

A Buy-Sell Agreement that’s fully funded with life insurance provides an opportunity to reduce the capital gains tax liability on the deemed disposition of your shares.  For example, if your shares pass to your surviving spouse on your death and vest in their hands, you’d want your surviving spouse to have an option to redeem your shares at a pre-established fair value that’s fully funded by life insurance.  The redemption can be structured as a return of capital (for which the company is required to declare a capital dividend equal to the fair market value) and no capital gains tax might result on your shares.  If you have no spouse, there will be some amount of capital gains tax given the Stop Loss rules that limit the amount of dividend to a 50% capital dividend (with the balance a taxable dividend); however, the savings still makes good sense.

C) Maximizing your company value on your death

If you own private company shares, on the last to die of you and your spouse, these shares are deemed disposed at market value resulting in capital gains taxes.  Taxes are payable a second time where company assets are disposed of (creating taxable capital gains) and distributed to shareholders (which might be in the form of dividends subject to tax).  So, your company investments are subjected to tax twice – once at your death and then again when realized and distributed.

If your company has surplus assets, it may be possible to reduce these taxes where the company owns an insurance policy on the life of the shareholder.  Here surplus company assets are used to pay insurance costs which reduces the pool of surplus assets.  What this does is convert surplus assets to a death benefit that can be excluded in valuing the company for tax purposes.  Most or all of this death benefit is credited to the Capital Dividend Account that can then be paid to your heirs tax-free.

The result is that through insurance you may be able to reduce capital gains taxes at death.  And this reduction in taxes can be greater than a plan to simply redeem company shares at death.

The Next Step

If you think insurance can be of value to you or if you’d like us to review your existing insurance policies, please call our financial planner, Steve Nyvik.

Executor Checklist

Written by Steve Nyvik, BBA, MBA ,CIM, CFP, R.F.P.
Financial Planner and Portfolio Manager, Lycos Asset Management Inc.


Below is a checklist of some of the key duties and responsibilities of an Executor to wind up the affairs of a deceased person.

PART 1:  BEFORE DEATH – “Pre-Planning”

Should a friend or loved one wish to appoint you as their Executor, the more preparation you do prior to their death, the easier it will be for you to carry out your duties.  You should sit down with your friend / loved one to understand their financial affairs, the family situation and get guidance on any potential conflicts and issues.  If you can, you should get written information on the following:

  • his/her financial situation – what he/she owns and owes and monthly income and living needs,
  • how property is titled,
  • any insurance policies (employment group life insurance and private insurance),
  • any special valuable assets – what they are worth, where they are located
  • pension information – what survivor pensions might be received and how much
  • bank account statements,
  • investment statements,
  • key persons contact info – family and friends, pastor/priest/rabbi, funeral director, estate lawyer, investment advisor, insurance agent, tax accountant

In addition, you’ll want to enquire about the following:

1. Care of loved ones

To help your friend/loved one, you’ll want to make sure that someone they trust is appointed their representative under a Representation Agreement.  This agreement empowers the representative with authority to make personal care and healthcare decisions on his/her behalf.  This can be helpful to ease issues during the last part of their life.

2. Access to Funds to pay bills and meet living needs of Dependent Persons

Prior to death, you’ll want to make sure that loved ones have an ability to pay bills and withdraw funds to support dependent loved ones.  There should be bank accounts or brokerage accounts with sufficient funds to meet needs.  For accounts solely in their name, there should be an Enduring Power of Attorney to access monies.  For joint accounts, the joint owner will have access to monies.

On death, bank accounts and brokerage accounts registered only in the name of the deceased will become frozen.  As the Executor, you want to make sure that on death there’s at least one year’s worth of funds available to meet last expenses and the needs of loved ones.  If there’s life insurance that is “in force”, the death benefit will be paid to the named beneficiary but it can take a few months before this occurs.

3. Documents

As the Executor, you’ll want to get the following documents:

  • Will and any Codicils
    Your appointment as Executor will likely come through the Will.  As such, you want to get hold of a copy (and know where the originals are located) of the Will and any Codicils (these are amendments to the Will).  These documents are the basis of the deceased instructions to you on settling their estate.
  • Organ donation
    The intention of your friend/loved one may or may not be registered with the BC Transplant Society.  If not registered, you need to confirm with your friend/loved one their intentions.  As the appointed Executor, you’ll be the person with authority to make such decisions.
  • Funeral Arrangements
    As the Executor, you’ll be the person with authority to make the funeral arrangements.  You’ll need to know what planning has been done with a Funeral Director and with the Priest/Pastor/Rabbi.  You should also know whether any arrangements made were pre-paid or not.  If pre-paid, you’ll need to get hold of the contract.  And you should learn whether your friend/loved one requires that their end of life be handled according to their spiritual beliefs and to find out exactly what this means.
  • Will Letter of Instruction
    This instruction letter provides you with information not included in the Will to help you carry out your duties – like organ donation, burial verses cremation, funeral service details, location of documents, instructions on children’s needs and wishes for them, and distributing assets not dealt with through the Will.  This document can also include side letters that explain the reasons of the Will distribution to help defend the Will.

4. Meeting with Priest/Pastor/Rabbi

You might ask your friend / loved near the end of their life, whether they wish to meet with their priest/pastor/rabbi.  A priest might, for example, take their confession, administer the Sacrament of Healing, or give communion.  At that time, you might also learn about any religious requirements concerning their impending death.  There might be a wish to pray for your friend / loved one prior to death and issues concerning cremation.  If the funeral is to occur at the church, you’ll be meeting with the priest to discuss the funeral service details.

5. Pictures and Celebration of Life

You might ask your friend/loved one if he/she has prepared a “celebration of life” or their life story.  You might give your friend / loved one a template to help gather the main details or work together with their family (spouse or children).  At the same time you might inquire about pictures.


PART 2:  NEAR DEATH OR AFTER DEATH – “Implementation”

If you received in advance of death the information in Part 1, then you’re in pretty good shape.  The immediate concerns at death will likely be the organ donation and funeral arrangements.

1. Being a Detective

If you didn’t prepare in advance, then you need to need to play detective and gather information (refer to Part 1).

If an original copy of the Will hasn’t been given to you, then you have to search for it.  Many people keep the original Will in their home, with their lawyer or Notary Public, in a Safety Deposit Box, or in a home safe.  If you suspect it is in a Safety Deposit Box, try to find the keys and tell the branch manager of the financial institution that you are the Executor and are looking for the original Will.  If you can’t find the key, the box can be drilled open for a charge.  In your search, see if there’s an inventory list of all assets and liabilities.

The Will may have instructions about the person’s wishes for organ donation, burial or cremation, and/or funeral or memorial/funeral service.  If these things are not in the Will, you might look for a funeral plan arrangement – if the deceased was a member of the Memorial Society, a Funeral Arrangement Form is on file with them.  Also check the Driver’s License to see if there is any sticker indicating organ donation intention.  See if the deceased had any papers from a Funeral Director.

If you can’t find the Will, check with the Wills Registry at Vital Statistics.  If a Wills Notice was prepared, they will be able to tell you where the Will is located (i.e. most likely it will tell you the name of the lawyer or notary).  You need this certificate when you apply to the court for probate.

If the Wills Registry has no registration of any Will and you cannot find a Will, the law presumes that the deceased destroyed the Will with the intention of revoking it.  This presumption could be rebutted.  If a Will is presumed to be revoked or if the deceased never had a Will then the deceased is presumed by our laws to have died intestate and the provincial legislation will govern the distribution of the assets of the estate.  An application by the next of kin would need to be made to court for what is called the “letters of administration.”  Here the closest kin becomes the Administrator of the estate.

Look also through mail and files for bank statements and investment account statements (and account documentation as to beneficiary designations for RRSPs/RRIFs and Tax Free Savings Accounts).

2. Organ Donation

Check the BC Transplant Society website ( and enter their BC CareCard number to check the registry as to whether organ donation intentions were made on death to help save a life or materially improve the life of a person who is suffering.

As the Executor, you can confirm whether organ donation wishes have been registered or indicate the intentions of the deceased and complete the necessary forms at the hospital.

3. Funeral Arrangements

If the deceased completed the Will Letter of Instruction, then you’ll know their wishes, who is the Funeral Director, and whether there were any pre-paid funeral or cemetery plans purchased.

I there was no Will Letter of Instruction, hopefully your conversation will have alerted you to any pre-paid funeral or cemetery plans or whether he/she had met with a Funeral Director and completed an “arrangement form”.  If you didn’t learn about this, then you may have to play detective and speak with surviving family as to whether they met with a Funeral Director, his/her wishes and where he/she kept their documents.

Here you are looking for:

  • a pre-paid funeral or cemetery plan contract,
  • completed Funeral Arrangement Form, or
  • the Will or other written information indicating burial or cremation and funeral service wishes.

If other family members had previously died, you might find out who was the Funeral Director and enquire with him/her.

Knowing the financial situation of the deceased and their wishes, you can then put together a dignified funeral through contacting the Funeral Director and the Priest/Pastor/Rabbi.  Note that you are not required to follow any funeral arrangements that the deceased might have made.  The surviving spouse and family members might wish to come with you.  As the Executor, you’ll likely be the one signing the contract with the Funeral Director and paying the invoice.  You might then also go with the surviving spouse and meet with the priest / pastor / rabbi to make the funeral service arrangements.  In setting the date of the funeral service, consider time needed for out-of-town guests to arrive.

The Funeral Director will help you in ordering copies of the death certificate (you might order say 5 copies), as most organizations that you will deal with will require an original copy or certified true copy of the death certificate.  You’ll need copies for dealing with bank accounts, investment accounts, vehicles, real estate property, and life insurance claims.

Contact all family, friends and loved ones to inform them of the funeral details.  While contacting anyone who is a beneficiary, it may be helpful to obtain their full legal names, telephone numbers, email addresses, and their home addresses.

4. Meeting with the Bank

Take the funeral bill, original copy of the death certificate, and the deceased’s bank card and bank account statements to the bank where the deceased kept an account.  If deceased had accounts solely in his/her name, you will need to open up estate account with the bank.  For small bank account balances, the bank may be willing to transfer the balance to your bank account if you are both the Executor and sole beneficiary and sign a guarantee and indemnify the bank.  For larger balances, the bank will likely only provide access for funeral expenses to be paid.  Any additional monies in the account will likely require a probated Will to obtain access.

5. Meeting with the Estate Lawyer

With the financial information you’ve put together and copies of documents – such as the Will, any Codicils, Will Letter of Instruction, and side letters, you are now in a position to meet with the lawyer and determine whether probate will be necessary.  If probate is needed, you might then determine if you’ll make the application yourself or if you need the services of the lawyer.  Should you need the lawyer’s services, you should negotiate the lawyer’s fees, confirm what the lawyer will do (like whether they will be preparing the probate application), what you need to do, what interim financial support the estate can provide to dependents, and how to manage any contentious issues or potentially disgruntled beneficiaries.

6. Family Dependents and Care for Family Animals

The Grant of Letters Probate legally allows the Executor to deal with the assets of the deceased, but this takes time (expect it to take half a year or longer if there are any challenges to the Will).

Knowing the financial situation of any dependent family members and having met with the bank and estate lawyer, you might be in a position to appreciate what amount of interim financial support, if any, is required.  Your discussion with the deceased, Will Letter of Instruction, Will, and discussion with family members should hopefully enlighten you as to who will take care of any family animals.

For immediate funds one should turn to any assets that pass outside of the estate which are not frozen such as joint bank accounts, properties held in joint tenancy or assets passing to a designated beneficiary.  If the deceased had a life insurance policy, the designated beneficiary can immediately apply to have the benefits of the insurance policy paid directly to that beneficiary.  But again this can take more than a month (or several months) before receiving a cheque.

If there are no funds immediately available and the banks are unwilling to make alternate arrangements to help the survivors, you may have to arrange a loan for the survivor until the estate assets can be distributed.

7. Safeguarding Estate Assets

The Executor is responsible for the protection of all assets under the estate including real estate.  This includes theft, fire, loss and any other destruction.  If the Executor fails to preserve the assets he or she can be held liable.  You’ll need to meet with the property insurance agent and ensure there’s adequate property insurance as most insurance policies are cancelled automatically if a house is vacant for more than 30 days – ask about a “vacancy permit”.  And you’ll need to secure and safeguard assets against theft.  Here you might consider:

  • changing the locks on the apartment or house;
  • taking possession of any cash or jewellery;
  • putting any valuables into storage;
  • redirecting mail, canceling credit cards and subscriptions;
  • transferring of ownership registrations – like any automobiles and real estate;
  • collecting amounts owed to the estate;
  • opening an estate bank account and depositing income and proceeds from the realization of estate assets;
  • maintain residences, cottage, farm or other property, including the supervision of repairs;
  • if there’s a business, you should refer to the Shareholder Agreement or Buy Sell Agreement to determine what the estate is entitled to. If there’s no agreement, then you may need to visit the business and take any steps needed to stabilize the business;
  • for any rented premises, arrange for cleaning and the moving of furniture and personal property and provide notice.

8. If deceased owned a business, arrange for continuation & proper management of business

Where the deceased owned a business, in your document search, you should look for a Buy-Sell Agreement or Shareholders Agreement to determine what happens with the business on death and what amounts the estate or loved ones are entitled to.  Without any such document, you need to meet with key persons (directors, officers, key employees) in the business and, where necessary, take control and stabilize the business to ensure proper management and care while you get the deceased’s affairs in order before options are evaluated on its sale or windup.  You may need to become appointed a director and/or officer of the company as part of the requirements for you to provide competent management and supervision.

9. Apply for death benefits

Notify deceased’s employer (you are looking to find out if the deceased had group life insurance benefits as well as collect any unpaid wages) and complete claim forms – you will need Death certificate to do this.

Where there is a life insurance policy, contact the insurance agent, informing agent of death and providing agent with death certificate.

Also apply for Canada Pension Plan Death Benefit and the CPP Survivor’s Benefits.  If the deceased was receiving any other pension, contact the Pension Plan Administrator.

10. Meeting with the Investment Advisor

In order to file a Final Return, you’ll need to get the investment information from the deceased’s investment advisor.  You might call him or her in advance to notify them of the date of death and the materials you’ll need from Jan 1 to date of death.

For personal investment accounts, joint investment accounts, Alter Ego Trusts, and Joint Partner Trusts (where the deceased was the surviving spouse), you’ll need for each type of account a summary of:

  • income amounts (interest, Canadian dividends, foreign dividends),
  • realized capital gains or losses on investments disposed,
  • withholding taxes, and
  • investment management fees paid from personal and joint investment accounts.

You’ll also need for each a portfolio summary as at the Date of Death that indicates the fair market value and tax cost of all assets.

For RRSPs and RRIFs, you’ll need a portfolio summary as at the date of death.  These amounts will become income for the final return.

The advisor will need a copy of the death certificate.

The investment advisor might prepare estate account documents so that you will be listed as the Executor with authority over the non-joint investment accounts.  If you are the beneficiary of an RRSP, RRIF, or Tax Free Savings Account, your advisor might prepare a letter of direction for your signature so that you might arrange the transfer when desired.  However, note that the RRSP and RRIF remain technically tax deferred for up to one year from the date of death so you might not rush to transfer these amounts until needed.  If you are not the designated beneficiary of the RRSPs, RRIFs and Tax Free Savings Accounts, then you should ask the investment advisor to provide you with copies of the designated beneficiary forms paying attention to the date the designations were made.  Here you are looking to confirm that last date that the beneficiary designations were made between the beneficiary designation forms and the Will (assuming the Will either revoked or made new beneficiary designations).

11. Meeting with the Tax Accountant

As the Executor, you are required to file a Final Income Tax Return on behalf of the deceased.  In addition to this, there may also be three additional tax returns that might be filed:  (i) Return for rights or things, (ii) Return for a partner or proprietor, and (iii) Return for income from a Testamentary Trust or Estate.

It is helpful for the tax accountant to receive a copy of the death certificate, a copy of the Last Will, and the materials you obtained from the investment advisor.  The tax accountant will also need to know about other items that impact the final return – like employment income, pensions (gross pension and withholding tax), and other income tax items.  You might review the deceased’s prior year return to help figure out what other information the tax accountant might need.  You should negotiate in advance the cost for preparing these returns.  You might also ask about other filings or tax planning opportunities.  For example, it might be possible to make contributions to RRSPs and Tax Free Savings Accounts.  You might also enquire about the cost to prepare the Canada Revenue Agency Clearance Certificate for the Estate (if there is no Trust to continue on afterwards).  The clearance certificate from certifies from the CRA that all taxes, interest and penalties have been paid.  This removes any personal obligation from you to pay any subsequent tax amounts and gives you confidence to distribute the remaining estate assets to the beneficiaries.



Although there is much more to the entire process, this checklist gives you a sense of some of the duties and steps you’ll need to take.  Working with a financial planner and other professionals can greatly reduce the stress and complexity of the entire process.

Where we fit in

For our clients, we support the duties of the Executor and guide them along the way through their duties.  Where there is no other logical Executor to act, then I am (in my personal capacity) am willing to act as the Executor.  Where I am simply supporting a named Executor, there is no charge for my services for my clients.  Where I am to act as an Executor or Trustee, we make sure that you receive very good value for our cost which is about 50% less than the cost charged by a bank trust officer.

Our interest is to make sure that your goals are carried out in accordance to your wishes as we hope that not only will you be happy with our services, but also your children and future generations.

Plan Your Business Exit

Do you have a plan in place to ensure you get a great price for your business should you become sick, disabled, die or when you decide to retire?


Why you need to plan ahead

If you own a business that’s growing or at least making you a decent living, chances are it may be worth a fair deal and quite possibly represents one of your most valuable assets.  So to ensure you get paid what it’s worth if you intend to sell it, or to minimize taxes on passing it to one or more of your children, you need to plan ahead for that day.

And since your ‘exit’ may not be at the time of your choosing – should you become sick, disabled or die, you need to plan now!

Without a succession plan secured with a Buy-Sell Agreement or a Shareholders’ Agreement, your business might:

  • not survive your death,
  • survive but be worth substantially less as your intended successor chooses not to pay a ‘high price’ for your business,
  • survive but materially hurt as customers are taken by competitors or ‘stolen’ by disenfranchised employees.

Your planning should consider the business acumen/capability and desires of your family members and employees in addition to your needs.  This can affect who you might sell to – be it family members, a partner, key employees, or even a supplier, customer or competitor.

You might even find that the most profitable solution might be to “grow” your own successor.  By hiring a younger person with the right skills, similar integrity as yours, and working closely with them for a few years, you’ll increase the odds that you can dictate a premium price.

The more time you have to plan, the greater the chances you’ll get more money after tax.  It takes time (read years) to find the best successor who is willing to pay the price you want, establish a Buy-Sell Agreement or Shareholders’ Agreement, fund the agreement to guarantee payment to your family should you die, get the successor up to speed with your business so that he or she has the skills needed, and ensure the structure will qualify for a tax effective transfer.

Selling assets or selling shares?

When you sell your incorporated business, you’ll have to decide between two general approaches.  Either you can have the corporation sell assets of the business, or you can sell shares of the corporation.

1. Taxation on the Sale of Shares to an Arm’s Length Party

If you sell the shares of the operating company, the disposition of shares results in a capital gain or loss.  The amount by which the proceeds of disposition exceed the Adjusted Cost Base of the shares is a capital gain; one-half of the capital gain is a Taxable Capital Gain (and this amount is taxed like investment income).

If your shares are held by you personally and are considered “Qualified Small Business Corporation Shares”, “Qualified Farm Property” or “Qualified Fishing Property”, up to $813,600 of your gain may be exempt from tax.  If your Family Trust holds these qualifying shares, it may be possible to multiply this exemption by allocating capital gain proceeds amongst beneficiaries such as you, your spouse, adult kids, and parents.

Your capital gains exemption is reduced, however, by investment losses.  The amount that your exemption is reduced by is the Cumulative Net Income Losses (CNIL) over all previous years.  The CNIL itself is increased by these amounts: interest costs on investment loans, carrying charges and interest on any business that you do not have direct control over, losses on partnerships or co-ownerships, rental or leasing losses and capital losses deducted versus capital gains that aren’t eligible for the exemption.  The CNIL balance is reduced by investment income you have received over the years including interest income and dividends.  So, you might plan to clean this up by taking relatively low cost dividends over a few years.  The exemption may also be restricted if you ever claimed an Allowable Business Investment Loss (ABIL) in which case you need some capital gains that are taxable.

 2. Taxation on the Sale of Assets to an Arm’s Length Party

No capital gains exemption is available if you sell business assets.  So from your point of view, it’s better to sell company shares.  If you sell the assets from your company, the proceeds from the sale are taxed inside a company.  You’ll also have GST/HST sales tax on asset sales.  You then have to pay tax a second time on withdrawals from the company.

How the proceeds are taxed depends on the type of assets sold and the income generated.  If you are selling depreciable assets, such as equipment, this results in recaptured depreciation if the sale proceeds exceed the Undepreciated Capital Cost (“UCC”) up to the original purchase price, thereafter you’ll have a capital gain.  Recaptured depreciation is included in income and taxed as active business income.  If sold for less than UCC, one has a deductible terminal loss.

The sale of non-depreciable non-inventory assets, such as land and building or shares of an operating company, result in a capital gain equal to the sale proceeds less Adjusted Cost Base.  One-half of capital gains is included in income and taxed as investment income (assuming it is on account of capital and not as an inventory item being sold).  The non-taxed half is added to the Capital Dividend Account where one might elect to pay out a non-taxed capital dividend.  The sale of land may result in land transfer tax.

Gains on the sale of intangibles and goodwill are also included in taxable income at a 50% inclusion rate; the taxable portion is taxed as active business income as opposed to investment income.

The type of income (i.e. active business income versus investment income) and type of corporation (for example, a Canadian controlled private corporation (“CCPC”) versus a non-CCPC) determine the corporate tax rate.

If you are trying to sell your business, the buyer may prefer to purchase assets which is usually much cheaper.  The buyer gets a higher cost on depreciable assets which will help generate more Capital Cost Allowance (CCA) or tax depreciation to offset future income.  Buying assets and not the shares is less risky to buyer as it doesn’t include your business liabilities or tax risk of potential future reassessments.

Preparing your business for sale

Having your accountant structure your ownership and cleaning up the company for sale at least 24 months in advance so it qualifies for the qualified small business capital gains exemption is just one aspect of preparing your business for sale.

You might also take steps to prepare your business so it’ll command a higher price.  For example, all of your client knowledge and details in running the business smoothly needs to get put on paper (or even better into a computer database).  If your business can be run with little or no involvement by you, then the business is worth more as there’s less key person risk.

You might also be able to increase your sales price if you strengthen its competitive position (or competitive advantage) – like operating profitable business niches with little to no competition or developing the business so that it is the lowest cost competitor.  In addition to the niche business potentially being very profitable, it might also have higher odds of transition success – where customers have little other choice to buy products or services from your business.

If your family business has more than one range of business operations, you might find that splitting it into logical focused businesses and selling each piece to the highest bidder might be more profitable than selling the whole pie to just one buyer.

When to sell?

Deciding on the best time to sell your business can be difficult.  But generally you should be able to command a significantly better price if you sell when business prospects are good and you’ve got a few years of great historical financial results.

For example, if you forecast growth of 20% and can show for the last three years 20% year over year growth, you have a good case for a premium price that reflects the prospect of future growth.

Another option might simply be for you to hold onto your business as long as you can manage especially if multiples for your industry are low.  But if this means the business isn’t well looked after and customer service deteriorates, your selling price could be accordingly affected.  So, you might end up working a few extra years and not be ahead financially.

The price

One common problem small business owners have is that of not being able to objectively arrive at a fair price.  That’s because there may not be a “stock market” or commonly known industry rules of thumb to tell them the value of their business.  So any offer that isn’t a premium offer for their baby may seem too low.

Rules of thumb used in your industry, if available, may be a helpful starting point to get some ballpark basis of worth.

A business valuator might be able to improve on this rule of thumb estimate or might possibly help bring the buyer and seller together to agree on valuation principles.  Four common valuation techniques used are:

  • Comparable Company Analysis – this is an attempt to measure value by employing the market values of public companies possessing similar attributes to your business;
  • Comparable Transaction Analysis – this is similar to the previous technique except companies used as models are those that have been recently bought or sold;
  • Discounted Cashflow – here the worth of the company is based on the total amount of after-tax cash it can generate (usually the most expensive price); and
  • Liquidation Analysis – here the worth is derived through selling off assets less the cost of satisfying debts (usually the most cheapest price).

From the amount determined based on one or a combination of the above techniques, there may be one or more valuation discounts applied such as:

  • Lack of marketability discount – this applies to closely held businesses where there is virtually no market;
  • Minority interest discount – this applies to where a buyer purchases a minority interest (less than 50% interest) in the business and doesn’t end up with control;
  • Key-person discount – this applies where the company’s success is dependent on a key person and the loss of the key person would result in adverse consequences.

With a valuation, the assumptions used can have a drastic impact in the resulting estimate of value.  So it’s important that both the buyer and seller are in agreement with the assumptions or you might end up wasting your money on the valuation.

Earn-out Arrangements

Carefully structured, an earn-out arrangement can be a win/win in that the seller likely receives a higher value for the business while the buyer minimizes the risk of goodwill impairment and obtains favourable internal financing.

And if you don’t offer an earn-out, you’ll likely eliminate many prospective buyers who’d be more than willing to pay a premium.

Converting part of the business value to tax deferred proceeds

For a larger business, the use of an Individual Pension Plan (“IPP”) or a Retirement Compensation Arrangement (“RCA”), could help you save a substantial amount in taxes by spreading taxes out over several years or by being able to shift part of the company value to tax deferred assets.

An IPP can be thought of as a super RRSP.  In most cases, IPP contributions can be substantially higher than RRSP contributions – possibly more than double what you’d otherwise be able to save in an RRSP.

Should business liability be an issue for you, an IPP comes with creditor protection (note that there is some degree of creditor protection through provincial legislation for RRSPs and RRIFs).  Although an IPP has setup fees and maintenance costs, for some people, the added savings and creditor protection are well worth the costs.

An RCA might be used to spread proceeds over several years.  It might be especially of value where you are considering becoming a non-resident and take up residency in a lower tax jurisdiction.

Either or both of these techniques should be considered many years in advance (read more at least 10 years), in order for the real power of these tools to be spectacularly effective.

Spreading the gain over time – the Capital Gains Reserve

When you sell your business, you might find it tough to get all of your money up front – it might instead be spread over a number of years.

So you might consider offering the buyer financing that may be more attractive than might otherwise be available through traditional bank financing.  And in the process you might receive some tax relief through a capital gains reserve.

This reserve allows you to bring the capital gain into income over a maximum five-year period.  Without the capital gains reserve mechanism, you’d be liable for tax on the entire capital gain triggered by the disposition in the year of sale, even though you would not yet have received the entire sale proceeds.

Note that if you are selling the shares of a QSBC, qualified farm property, or qualified fishing property, you can claim a reserve over a 10-year period.  That might be just the thing to consider if selling to your children or grandchildren.

Buy/Sell Agreement

A Buy/Sell Agreement is a contract between two parties that defines how an owner will sell a particular business interest and how a buyer will buy that interest under certain situations.

A Buy/Sell Agreement may be general in nature to cover unplanned sales (in case of death or incapacity) or it may be very definite in nature tailored to a planned sale to a known buyer (in the case of a planned retirement).

Whether you leave by choice or by chance, a Buy/Sell Agreement ensures your business interest will be transferred at a guaranteed price and on guaranteed terms.

Having the agreement in place improves the odds of the business successfully transferring at a price that can provide adequately for your family and removing uncertainty to employees and partners that depend on the business.

Non-competition agreements

Whether you sell your company’s shares or assets, the buyer will likely want you to sign a non-competition agreement to protect the value of the business.  The payment you receive for signing this (or the implied value associated with this) may be fully taxed as regular income.  However, if requirements, such as filing an election with the CRA, are met, it may be taxed at a lower rate as a capital gain.

Maximizing after tax business proceeds on death

On the last to die of you and your spouse, shares of your incorporated business is deemed disposed at market value resulting in capital gains taxes.  Taxes are payable a second time where company assets are disposed of (creating taxable capital gains) and proceeds distributed to shareholders (which might be in the form of dividends subject to tax).  So, your company investments are subjected to double tax – once at your death and then again when realized and distributed.

If your company has surplus assets, it may be possible to reduce these taxes where the company owns an insurance policy on the life of the shareholder.  Here surplus company assets are used to pay insurance costs which reduces the pool of surplus assets.  What this does is convert surplus assets to a death benefit that can be excluded in valuing the company for tax purposes.  Most or all of this death benefit (above the policy ACB) is credited to the Capital Dividend Account that can then be paid to your heirs as a tax-free capital dividend.

The result is that through insurance you may be able to reduce capital gains taxes at death.  And this reduction in taxes can be greater than a plan to simply redeem company shares at death.  The sooner you plan for this, the cheaper your cost of insurance.

Are there holes in your business exit plans?

Below are some questions to help you begin thinking about your business planning and the status of your business succession.

  1. Have you thought about what will give you a full and meaningful life? Have you priced this out so you know when you can afford to retire?  If your business is worth more than what you need, why are you not planning your exit?  What are the costs to your spouse and family of working hard in the business versus retiring where they get to spend time with you?
  2. Have you thought through the implications to you and your family in the event of a serious illness, disability, or premature death? In such events, have you developed a disaster plan to ensure that you’ll get a good price for your business backed up contractually with a Buy-Sell Agreement or a Shareholder’s Agreement?  Or have you obtained sufficient disability, critical illness and life insurance to financially ensure you and your family’s well-being?
  3. Are you dependent on your business to meet your retirement cash flow needs? Are you growing your investment portfolio so that it will eventually be able to provide you with a satisfactory pension?
  4. Do you know what your business is really worth if it were sold tomorrow? (Have you had an independent person appraise your business so you know what a market offer looks like?)
  5. Do you have enough liquidity to avoid the forced sale of your business on death? Is there enough other assets available to satisfy the tax bill?
  6. Who will be taking over, or will you sell the business? Have you considered the importance of family involvement in leadership and ownership of the company?  If family is involved in leadership, have you thought through how to fairly deal with your family who are active and those that aren’t active in the business?
  7. Is selling your business to a successor (like a capable employee or employees) the best way to maximize the proceeds from selling your business? Do you have a successor in mind for your business?  Is the successor competent, honest and trustworthy?  Is your successor someone who would want to own your business?  Is the successor ready to succeed you – does he / she have the qualifications needed?  Is there an incentive plan for your successor with effective non-compete clauses?  Have you developed a training plan for your successor?  Have you put in place a Buy-Sell or Shareholder’s Agreement with the successor?  Is the agreement secured with resources or funded by insurance to guarantee cash will be available to be paid to you or your family on your planned or unplanned departure?
  8. Are you currently using techniques to reduce or eliminate income tax and estate tax?
  9. Are you planning to utilize the Small Business Capital Gains Exemption as a way to obtain tax-free proceeds on your business exit? Have you structured the ownership of your business so that the company qualifies?  Have you structured the ownership so that you’ll be able to multiply the exemption?
  10. Have you considered alternative corporate structures, stock-transfer techniques, IPPs and RCAs to reduce or defer taxes as part of your exit plan?
  11. Are you doing everything you can do to make your business more valuable to a buyer? Are you making yourself redundant so that it can eventually operate without your showing up to work every day? Have you looked at your staff to determine the effect should on or more persons leave?  Are your staff happy and properly compensated compared to your competitors?  Do you have a backup for each key staff person should someone leave so that your business can continue to operate?

The next step

If you’ve got a saleable business and would like to put together your exit plan, please call our financial planner, Steve Nyvik. Some of the things that Steve can assist you with include:

  • reviewing your current plans and provide some constructive comments;
  • preparing a financial roadmap (otherwise called a retirement projection) so that you can know when you can afford to retire;
  • structuring your investment portfolio to resemble a pension so that it can eventually replace the income provided from your business so that you are financially independent;
  • working together with you and your tax accountants, lawyers and pension benefits consultants to help you implement a tax effective plan backed with a Buy-Sell Agreement or Shareholder’s Agreement;
  • reviewing your insurance program to determine its adequacy to fully fund the buy-out in the event of your serious illness, disability or premature death.

Written by Steve Nyvik, BBA, MBA ,CIM, CFP, R.F.P.
Financial Planner and Portfolio Manager, Lycos Asset Management Inc.

Structuring your business

“The avoidance of taxes is the only intellectual pursuit that carries any reward.”  – John Maynard Keynes

Written by Steve Nyvik, BBA, MBA ,CIM, CFP, R.F.P.
Financial Planner and Portfolio Manager, Lycos Asset Management Inc.

If you are a Canadian business owner or have a professional practice, consider establishing a Family Trust as the owner.  The Trust might also include an investment holding company as a beneficiary.  Together, this structure provides significant tax benefits and flexibility in operating to achieve your financial goals.

Keeping After-Tax Funds in your Company

For professionals or business people earning more money than they spend, it makes good sense to incorporate and subject that income to the small business company tax rate which can be as much as 30% less than the personal tax rate.  By keeping funds within a company you have up to 30% more to invest to grow and help fund your future needs.  Note that this is just a tax deferral rather than a tax savings since once you withdraw money from the company, the taxes become payable.

But if your personal marginal tax rate drops, like maybe in your retirement years, you may realize an absolute tax savings when funds are withdrawn compared to having earned the business / professional income personally.

The Use of a Holding Company

The tax deferral sounds great as this can make a huge difference to your assets to support your retirement.  But what if there is any potential for business or professional liability?  By leaving funds within your company, are we simply leaving them for future creditors?

Where the liability has not yet occurred (and not foreseeable), it may make sense to have the after-tax funds “distributed” to a “holding company”.  This distribution puts your after-tax income out of reach of future creditors of your operating company and preserves the tax deferral.  Should funds still be required by the operating company, the holding company can loan money back to the operating company.

The Structure

1. The Traditional Structure

It has been common practice for a holding company to be incorporated that owns shares of the operating company.  This may permit payment of dividends on a tax- free basis from the operating company to the holding company.

The problem with this is that this structure can cause problems with regard to full access to the Small Business Capital Gains Exemption (now at $813,600 [as of 2015] per person) as the exemption is only available to individuals on their disposition of Common shares of a qualifying small business corporation.  In other words, the disposition of the shares by the holding company doesn’t qualify.

2. The Modern Day Solution

The modern day solution is to have a discretionary Trust created with possibly your children, you, your spouse and a holding company as beneficiaries.  The Trust owns all shares of your operating company for which the operating company pays all after-tax income to the Trust as dividends.

For funds required for living needs, the amount needed may be distributed by the Trust amongst you, your spouse and adult children.  Any remaining funds may then be distributed to the holding company as a tax-free dividend that preserves the tax deferral for the surplus amount received by the company.


To summarize, the modern day solution has maintains both key tax advantages:

1. Income Splitting

With the Trust owning the operating company, income splitting is preserved as the after-tax income is dividended by the operating company to the Trust.  The Trust then distributes cash needed for living needs amongst you and your adult family members and doing so in such amounts to manage  family member income levels and overall taxes payable.

Beneficiaries receive dividend distributions, when and if the Trustee decides.  Those distributions can vary from one year to the next and can be substantial in amount.  Dividend distributions are received by beneficiaries not in relation to any work that they perform.

2. Capital Gains Splitting and Multiplying the Lifetime Capital Gains Exemption

Should the business be sold, it may be possible to multiply the $813,600 Lifetime Capital Gains Exemption for “Qualified Small Business Corporation shares”.

On sale of the operating company Common shares by the Trust, it may be possible to split the capital gain amongst several adult beneficiaries where each individual may claim their lifetime capital gains exemption on the capital gain proceeds received.  For example, a Family Trust with 4 adult beneficiaries can receive up to $3,254,400 tax‐free (= 4 x $813,600) on the sale of shares that qualify for this exemption.

The Next Step

There are a host of issues to be considered before structuring your business or professional practice.  For a professional practice, one has to first consider the provincial statutes for your profession that have restrictions on company ownership.

If you are a U.S. citizen or U.S. resident, we then need to consider United States Income Tax and Estate Tax laws.

Even if you are only a Canadian, there are a number of potential Canadian tax issues to avoid like corporate income attribution and trust income attribution.  And there are requirements to ensure the operating company and holding company are considered connected for tax purposes to avoid of Part IV tax on the payment of the dividend by the operating company.  Finally, there is the “kiddie tax” for which we need to avoid income being received by minor children.

If you own a business or a professional practice, I would be happy to review your current situation, discuss how we might improve it, and quantify the potential tax savings, the costs of establishing a structure, and the annual costs.  Should you decide this is something to pursue, I can refer you to a tax accountant that my clients have satisfactorily dealt with to help you put in place an effective structure.  For clients of mine, financial planning is included as part of the service.


Choosing a Trustee

Written by Steve Nyvik, BBA, MBA ,CIM, CFP, R.F.P.
Financial Planner and Portfolio Manager, Lycos Asset Management Inc.


You’ve gotten advice on estate planning and have found that, through establishing a Trust,  you may be able to:

  • save income taxes over the lifetime of your loved ones,
  • save on inheritance or estate taxes,
  • creditor protect assets, or
  • protect your family members from themselves by limiting their ability to ‘spend away’ their inheritance.

What then becomes the challenge is choosing the right person or persons to act as Trustee.  Here are some factors you might take into consideration in making your decision:

1. Family First

Your spouse and adult children are your family and most likely may be inheriting most or all of your assets.  Unless there is a good reason, they should be managing their inheritance.  To help them carry out their duties, they can hire whatever professionals needed to advise them.  Such persons might include an estate lawyer, tax accountant, investment advisor, realtor or property manager, etc.

If your surviving spouse cannot manage even with the use of professionals, or having your spouse directly involved would adversely impact your estate planning objectives, then you might consider your spouse acting jointly with an adult child as co-trustees.

Should your spouse predecease you or die thereafter, then it may make sense for one competent adult child (especially if they live near you and the others don’t), who is honest and fair, to act as Trustee on behalf of one or more siblings.  If not, then consider the children (when they become adults) to act jointly as co-Trustees.  For siblings to act jointly, this may remove any perceived concern as to whether one child might attempt to act inappropriately to benefit themselves.  Where siblings don’t get along, by being co-trustees, they will have to come together to make decisions.  The danger of sibling co-trustees are that this could invite gridlock where nothing gets done, decisions made are sub-optimal, or decisions are not made in a timely manner.

2. Family Friend or Financial Professional

Going outside of the family requires you to rely on the goodwill of a family friend or paying a financial professional (like a business colleague, financial planner, investment advisor, or accountant in addition to your estate lawyer and bank trust officer) to act.  Trouble is that these persons normally don’t do their job for free – and some, like bank Trustees can be incredibly expensive.  Here you need to weigh the cost of the service to the value of having the Trust.  If the benefits don’t outweigh the cost, then don’t have a Trust.

Where you need to use a family friend or financial professional, besides the cost, consider the following:

  • Honesty and Integrity: If you don’t have trust in your Trustee to act honestly and according to your wishes, you have the wrong person.
  • Competency, Wisdom and Sound Judgement: The person you choose as your Trustee should have good financial decision making skills.  This person should spend time with you while you’re alive and of sound mine to understand you, your family situation and your wishes.  Some of the duties your Trustee will handle include: paying your bills, make decisions on keeping, selling, disposing, gifting or distributing property you may own to beneficiaries, complete your final tax return and Trust Tax Returns, make tax elections, make a probate application to court, safeguard your assets, enter into contracts, deal with an estate lawyer, interpreting your wishes and possibly defending them, and make decisions on beneficiary short term versus long-term needs relative to Trust assets.  Your Trustee should be empathetic to appreciate each beneficiary’s situation and be strong enough to make decisions in the face of conflicting beneficiary demands – even if one beneficiary is threatening to go to court.
  • Organized: Your Trustee must be organized and keep proper records. Your Trustee needs to document all transactions using prescribed forms as well as document reasons for any decision that is made.
  • Managing family relationships: With your death, hurtful childhood feelings or sibling rivalry may no longer remain contained.  Your Trustee needs to be able to deal with these unleashed feelings and the conflict and suspicion that comes with it.  Where children are suspicious of each other, it may not make sense to name one child as Trustee; instead name two, or all of your adult children as co-Trustees.  If there is a potential for mistrust or for abuse of Trustee power, it may make better sense to name someone independent as Trustee and avoid adding fuel to the fire at a period when your loved ones are facing extreme emotional stress.
  • Nearby: Ideally, at least one of your Trustees should live close to you, so he or she can perform duties efficiently and economically.
  • Would they be willing to serve: The role of Trustee in some cases can last for several years and involve significant personal legal liability.  Your Trustee can also be on the receiving end of anger and frustration of your beneficiaries that have been ‘held in-check’ all those years.  Once a potential Trustee appreciates the difficulties and risks, he or she may not even want to accept the role.  So you better ask them whether they would be willing to serve before appointing them.  You should discuss with them how much you will pay.  And you better have a plan as to how future successor Trustees will be selected.
  • Age: Will they die before the need for the Trust comes to an end?  Maybe you need to look for someone younger than you who can serve in that role for 20 or more years if the Trust might be needed for that length of time.

Where we fit in

For our clients, we are willing to support your Trustee or, if you have no spouse nor competent adult children, then we would be willing to help if you would like us to act as a Trustee.  For the role of Executor or Trustee, we charge 1% which you’ll find to be very competitive and typically much less than a bank Trustee.

Our interest is to make sure that your goals are carried out in accordance to your wishes as we hope that not only will you be happy with our services, but also your children and future generations.


How to Stop Gambling with Your Estate

Okay, so you don’t go to casinos. But you can still lose a ton of money.

It’s easy if you don’t have an estate plan. You can squander your money on taxes, lawyers and court cases.

You don’t have to gamble with your financial future. I’ll explain how you can avoid estate gambling risks to keep more of your money.

Failing to plan your estate makes you a gambler. What kind of estate gambler are you? Do you put everything on the line and roll the dice? Here are some examples of what estate gamblers do.

Estate Gamblers Play the Odds

You figured out most people your age don’t die. So, what’s the hurry? You are too young to worry about an estate plan. You will ride the wave. After all, you’ve been lucky so far.

Nobody you know that has died has had estate problems. Well, most people who have estate problems don’t go around bragging about family mistakes that got them into trouble.

Are you betting all your relatives will get along after you are gone? Will everybody follow your wishes? Will your spouse and children never have to worry if you are out of the picture?

Without a will, your wishes are not legally binding. Everyone will not necessarily agree to what has to be done and when. This means they all get lawyers to go to court and argue over your estate.

When you make a will, you name an executor to be the boss. The best bet you can make is to have a current will. Otherwise, your relatives will all hire lawyers to figure out how to divide your estate.

Estate Gamblers Do Nothing

Too many choices can lead to paralysis. So, you do nothing.

Get advice instead of doing nothing. It is not a weakness to admit you need help. Millionaire or not, everyone needs help to make the key money decisions.

If you are not sure how to make an estate plan, take small steps. Attend a local free seminar. Ask your banker or financial advisor to recommend an estate planning lawyer. Work with your partner to set goals and make decisions.

Estate Gamblers Do Not Invest in Advice

Do-it-yourself wills are the easiest way to make a mistake. You do not know what troubles lie ahead.

Can you find everything you need online?

Every jurisdiction, state and province has different taxes and laws. What you read in online legal forums may identify issues for concern. However, who guarantees such information is correct? These sources may be wrong or inappropriate for you. They are no substitute for proper advice.

Court cases flood lawyers every day with decisions that affect married couples, common law partners, people inheriting businesses and those with cross-border estates.

Even estate experts have difficulty keeping up with all the changes in estate law. What chance do you have to get everything you need by doing it yourself?

Estate Gamblers are Afraid to Make Mistakes

People who are afraid of making mistakes can procrastinate. But remember that no estate plan is risk-free. Things constantly change and so should your estate plan. What worked before you had a house, a business or children will need adjusting. You need to start somewhere and revisit it.

Discover what your estate planning options are. Read a simple guide like my easy-to-understand Estate to the Heart: How to Plan Wills and Estates for Your Loved Ones.

Laws change every day. Life gets complex. Know your limits and invest in a properly-prepared professional estate plan.

Make sure you have a will and powers of attorney. Will they work in every jurisdiction where you have substantial assets?

Estate Gamblers Don’t Review their Decisions

Estate tax laws change constantly. You need to stop being afraid of making changes. Your children marry, get divorced and have children of their own. All these events mean you need to review your estate plan.

Do you care about your family, loved ones and charitable causes? Doing nothing is the surest way to fail. Having an out-of-date estate plan is a close second cause of financial failure.

Understand that You Cannot Do This Alone

Take small steps. Get professional advice.

Think you don’t have enough money to fight over? Don’t make that mistake. It costs 10 times more to handle you affairs without a will. Without a plan you will pay the most in taxes. Everything is more expensive when you are not here to protect your money.

Look into getting a power of attorney. This puts someone in charge of your finances if, for example, you are too ill to pay your bills. While you are looking into your powers of attorney, ask your parents if they have powers of attorney. Find out if the documents are up to date and where you can find them if you need them.

Most people will need a separate power of attorney for property and one for health care decisions.

Make your will. Make sure you have the right executor. Will your executors be able to find your will? Stop gambling and tell them.

Get more estate planning solutions in my post, Easy to Use Estate Planning Solutions.

Edward Olkovich (BA, LLB, TEP, C.S.) is a nationally recognized estate expert. He is a Toronto estate lawyer and Certified Specialist in Estates and Trusts Law. Edward has practiced law since 1978 and has written numerous estate books. Visit his blog,, for more free valuable information.

Index and Sector ETFs: Mutual Funds: Speculation X3

How many of you remember the immortal words of P. T. Barnum? On Wall Street, the incubation period for new product scams may be measured in years instead of minutes, but the end result is always a greed-driven rush to financial disaster.

The meltdown spawned index mutual funds, and their dismal failure gave life to “enhanced” index funds, a wide variety of speculative hedge funds, and a rapidly growing assortment of Index ETFs. Deja Vu all over again, with the popular ishare variety of ETF leading the lemmings to the cliffs.

How far will we allow Wall Street to move us away from the basic building blocks of investing? Whatever happened to stocks and bonds? The Investment Gods are appalled.

A market or sector index is a statistical measuring device that tracks prices in securities selected to represent a portion of the overall market. ETF creators:

  • select a sampling of the market that they expect to be representative of the whole,
  • purchase the securities, and then
  • issue the ishares, SPDRS, CUBEs, etc. that speculators then trade on the exchanges just like equities.

Unlike ordinary index funds, ETF shares are not handled directly by the fund. As a result, they can move either up or down from the value of the securities in the fund, which, in turn, may or may not mirror the index they were selected to track. Confused? There’s more — these things are designed for manipulation.

Unlike managed Closed-End Funds (CEFs), ETF shares can be created or redeemed by market specialists, and Institutional Investors can redeem 50,000 share lots (in kind) if there is a gap between the net-asset-value and the market price of the fund.

These activities create artificial demand in an attempt to minimize the gap between NAV and market price. Clearly, arbitrage activities provide profit-making opportunities to the fund sponsors that are not available to the shareholders. Perhaps that is why the fund expenses are so low — and why there are now thousands of the things to choose from.

Two other ETF idiosyncrasies need to be appreciated:

a) performance return statistics for index funds may not include expenses, but it should be obvious that none will ever outperform their market, and

b) index funds may publish P/E numbers that only include the profitable companies in the portfolio.

So, in addition to the normal risks associated with investing, we add: speculating in narrowly focused sectors, guessing on the prospects of unproven small cap companies, experimenting with securities in single countries, rolling the dice on commodities, and hoping for the eventual success of new technologies.

We then call this hodge-podge of speculation a diversified, passively managed, inexpensive approach to Modern Asset Management — based solely on the mathematical hocus pocus of Modern Portfolio Theory (MPT).

Once upon a time, but not so long ago, there were high yield junk bond funds that the financial community insisted were appropriate investments because of their diversification. Does diversified junk become un-junk? Isn’t passive management as much of an oxymoron as variable annuity? Who are they kidding?

But let’s not dwell upon the three or more levels of speculation that are the very foundation of all index and sector funds. Let’s move on to the two basic ideas that led to the development of plain vanilla Mutual Funds in the first place: diversification and professional management.

Mutual Funds were a monumental breakthrough that changed the investment world. Hands-on investing became possible for everyone. Self-directed retirement programs and cheap to administer employee benefit programs became doable.

The investment markets, once the domain of the wealthy, became the savings accounts of choice for the employed masses — because the “separate accounts” were both trusteed and professionally managed. When security self-direction came along, professional management was gone forever. Mutual fund management was delegated to the financially uneducated masses.

ETFs are not the antidote for the mob-managed & dismal long term performance of open end Mutual Funds, where professionals are always forced to sell low and to buy high. ETFs are the vehicles of choice for Wall Street to ram MPT mumbo jumbo down the throats of busy, inexperienced investors… and the regulators who love them because they are cheap.

Mutual fund performance is bad (long term, again) because managers have to do what the mob tells them to do — so Wall Street sells “passive products” with controlled content that they can manipulate more cheaply.

Here’s a thumbnail sketch of how well passive ETFs may have performed from the turn of the century through 2013: the DJIA growth rate was about 0% per year, the S & P 500 was negative; the NASDAQ Composite has just recently regained its 2000 value.

How many positive sectors, technologies, commodities, or capitalization categories could there have been?

Now subtract the fees… hmmmm. Again, how would those ETFs have fared? Hey, when you buy cheap and easy, it’s usually worth it. Now if you want performance, I suggest you try real management, as opposed to Mutual Fund management… but you need to take the time to understand the process.

If you can’t understand or accept the strategy, don’t hire the manager. Mutual Funds and ETFs cannot “beat the market” (not a well thought out investment objective anyway) because both are effectively managed by investor/speculators… not by professionals.

Sure, you might find some temporary smiles in your ETFs, but only if you take your profits will the smiles last. There may be times when it makes sense to use these products to hedge against a specific risk. But stop kidding yourself every time Wall Street comes up with a new short cut to investment success.

There is no reason why all of you can’t either run your own investment portfolio, or instruct someone as to how you want it done. Every guess, every estimate, every hedge, every sector bet, and every shortcut increases portfolio risk.

Products and gimmicks are never the answer. ETFs, a combination of the two, don’t even address the question properly — AND their rising popularity has raised the risk level throughout the Stock Market. How’s that, you ask?

The demand for the individual stocks included in ETFs is raising their prices without having anything to do with company fundamentals.

What’s in your portfolio?

How will ETFs and Mutual Funds fare in the next correction?

Are YOU ready.