All posts by Marie Engen

TFSA Estate Planning options

The TFSA (Tax Free Savings Account) has become a popular saving and investment vehicle for many Canadians. It has also potentially become a significant portion of retirement savings.

When TFSAs were first introduced I thought they were pretty straightforward. However, we still get lots of questions, and Gordon Pape wrote an entire book about them (The Ultimate TFSA Guide), so there’s still some confusion.

A lot has been written about how to invest within a TFSA, but what happens to these funds when the planholder dies? The amount in the account at the date of death is tax free: then it depends on who the funds are given to.

Estate Planning For Your TFSA

There are three different estate planning options for your TFSA:

  1. Appoint a successor holder
  2. Designate a beneficiary
  3. Assign the funds to the estate

Successor holder

Only a spouse or common-law partner can be appointed successor holder.

Continue Reading…

The pitfalls of naming your children co-executors

I was named executor on both my father- and mother-in-law’s wills. I had copies of the wills and other documentation I might need. So, imagine my surprise when I just recently found out that I am a co-executor on my own parents’ wills. These wills were prepared in 1992 and I was thinking: “When were you planning on springing this information on me?”

My brother and I are joint executors. You can name more than one person to serve as executor and a lot of people appoint their adult children as co-executors. The primary reasons are they want to treat their children fairly, and they don’t want to hurt any of their children’s feelings. By making sure they are all included in the administration process it can help share the burden.

Related: So you’ve been asked to be an executor

These are perfectly valid reasons. It can be a good idea: or a terrible idea.

Drawbacks of naming co-executors 

It is understandable that parents wouldn’t want to appear to play favourites in naming their executor. Continue Reading…

Banks behaving badly

The media has been all abuzz lately about the Big-5 Banks and the shady practices they are using to dupe unsuspecting customers. I was approached twice by CBC for an interview which I declined both times. The reason? First of all, the mere thought of appearing on live national TV gives me a full-blown panic attack. And, secondly, I don’t really agree with the media’s strong irascible outrage the GoPublic admissions have provoked.

Related: Banking on a high pressure sales culture

This is my opinion based on being a former bank employee and a current customer.

A little bit of history

When I first started working in the banking industry, the business was only transactional. Customers came into the bank to cash their cheques, withdraw cash, pay some bills. Maybe they wanted to buy a GIC or take out a loan. There was limited choice available at the time. Customers went into the bank for a reason and came back out with what they wanted – not unlike going to Wal-Mart for a pack of socks or Safeway for a loaf of bread.

Continue Reading…

Estate Planning For Couples: You Can’t Take It With You

According to an Ipsos Reid poll commissioned by the CIBC, only 30% of Canadians have a formal estate plan in place. The reasons for not having one vary – some people think they are too young, or don’t have enough assets. Some believe that their belongings will automatically go to their spouse. Many couples think they have lots of time, and some just don’t want to deal with it.

Everyone needs to plan for the inevitable.

Estate planning is for your loved ones and for your own peace of mind. It means arranging how you leave your money and property when you die and it must follow the laws of the province you live in (or where the property exists).

Estate planning involves:

  • writing your will and naming someone to be responsible for carrying out your wishes
  • distributing assets during your lifetime as well as upon your death
  • arranging insurance to cover costs and provide for your survivors
  • specifying who will handle your affairs if you become unable to manage them yourself, and giving them direction through a power of attorney and medical directive.

Estate planning for young families

When you are raising a family, and are just starting to accumulate assets, consider these steps: Continue Reading…

Do you live next door to a Millionaire? Or is it you?

51es1dfibl-_sy344_bo1204203200_Two decades ago, Thomas Stanley and William Danko set out to interview wealthy people for their best-selling book The Millionaire Next Door. They started out in the affluent neighbourhoods on streets dotted with extravagant homes with luxury vehicles parked out front and in-ground swimming pools in the backyards.

They were shocked to find out that the people living in these homes were not wealthy at all. Many of these upscale homes had huge mortgages. The luxury cars were leased and, while the occupants had high salaries, they had very little net worth. They only seemed wealthy.

Instead, they found millionaires in modest homes in reasonably priced neighbourhoods, working and living next door to people who have a fraction of their wealth. They were living well below their means and not calling attention to themselves. They didn’t have the big-spending lifestyle most of us associate with rich people.

To be clear, for this purpose a wealthy, or high net worth, individual is described as someone who has at least $1 million in investable assets that is not inherited. These assets do not include their home or cottage.

Also not included are the ultra-high-net-worth, super wealthy individuals with a bankroll of more than $100 million who actually represent only a small minority of Canadians.

The road to riches

What can the average Canadian learn from the habits of the wealthy? Danko and Stanley found these factors common to wealthy people:

1.) They live well below their means

When I first read this book years ago I thought – what a bunch of cheapskates with their Timex watches, $50 suits, and 10-year-old Ford trucks! If I had that kind of money, I’d at least upgrade a little. I’ve known a few people who had a large amount of assets and spent hardly anything, ultimately leaving their wealth to relatives, and often distant ones at that.

I understand now that the millionaires mentioned do tend to be frugal, but they enjoy luxuries that are meaningful to them, and only once they are well on the road to security and financial freedom.

2.) They chose the right occupation

Many are small business owners or entrepreneurs, but you don’t have to own a business to get into this circle. Often they are hard-working, well-educated, middle-to-high income earners.

I’m not suggesting you choose a career primarily for the high salary. But, it’s obvious that if a person is educated and trained in some sort of profession, they will do much better than say, a cashier or shipper-receiver.

3.) They have a good marriage

Dual incomes enable couples to get ahead financially much more quickly. However, even more important are spouses who have similar values and goals and are willing to resolve any differences and work together in building their wealth.

There is no quicker way to lose half the assets of a household than to go through a divorce.

4.) They are skillful in targeting opportunities

People shouldn’t worry about the doom and gloom reporting on the news and things they can’t control. Instead, have a long-term view of investing and don’t let emotions sway your decisions. Have cash available to buy when markets are down and to take advantage of any bargain opportunities.

Start saving and investing in your early years to take advantage of compounding and reinvested dividends.

Pay less for purchases by shopping for bargains and learn to negotiate. Avoid high-interest credit-card debt. Use smart tax reduction strategies.

Allocate your time, energy, and money efficiently, in ways conducive to building your wealth.

5.) Their adult children are economically self-sufficient

Children are taught money management at an early age and encouraged to enrol in secondary education. As adults, they don’t ask their parents for money or bail-outs or help with the bills.

Final thoughts

Danko claims that it’s really about buckling down and living on less:

“How in the world can you be an investor and let compounding work for you if you are not a saver? And how can you be a saver if you are in debt? Many people who are strapped with debt are looking for a magic bullet, but continue the free-spending ways they have become accustomed to. Live on 80% of what you make, and save and invest 20%. Let the time value of money work for you.” 

Calculate how much money you will earn over your working life. Most people will earn well over a million dollars in their lifetime, but very few will become millionaires.

Accumulating wealth takes discipline and hard work.

We all want a sense of long-term security and peace of mind as well as the comfortable lifestyle that wealth provides.

Saving diligently, being frugal, setting aside a portion of your income for the future and investing wisely are the strategies to becoming the millionaire next door.

Do you think you live next door to a millionaire? Or, is it you?

MarieEngenMarie Engen is the “Boomer” half of Boomer & Echo. In addition to being co-author of the website, Marie is a fee-only financial planner based in Kelowna, B.C. This article originally ran at the Boomer & Echo site on September 20, 2016 and is republished here with permission.