Thursday, May 24, 2018

Does Mediation Work?

If you can’t resolve your family conflicts respectfully, does mediation work?  That is the question I asked Robert (Bob) Stocksa business consultant and coach.  Our usual chit-chat eventually turned to a conversation about mediation, Bob’s area of expertise. 

Networking is learning.  Learning is networking.  When anyone attends a Canadian Association of Farm Advisors (CAFA) meeting, they are privy to a wealth of knowledge offered by other advisors in attendance.  This is exactly what I received, a first-hand glimpse into the role of a mediator when families stop talking about important matters.   

Many years ago, Bob made the decision to take courses in Conflict Resolution through a college in Boulder, Colorado.  Today, he vows that his old school mentality has helped him serve his clients effectively both in the past and present.

The two styles of family conflict are matrimonial (between a husband and a wife) or inter-generational (between parents and children or siblings).  When a family is having disputes, bringing them together into a room to air their concerns and grievances doesn’t work.  Bob prefers to have the initial conversations with them individually.  You have an opportunity to hear everyone’s objectives in advance on a one-on-one basis.  You not only hear their objectives but you understand their objectives.  This is critical.  People need to feel they have a say if the issues are ever to be resolved.  They want to feel they are in control of their destiny if a deal is to be made.

Bob shared his father’s wisdom. His father combined a valid statement with a direct question, “You might be right and I hear you, but will it do you any good?”  It’s a question we probably should ask ourselves often when confronted with the choice of either winning the argument or winning the relationship.   Harboring resentment against family does not do any good for anyone.  When you do, you unknowingly cause more harm to yourself.  This phrase shines a new perspective on the subject: “Holding a grudge is like drinking the poison and waiting for the other person to die”.  We never want to be in a position where our thinking is clouded by our emotions.

The first step in resolving conflict always involves an important communication skill, listening.  When people feel they have been heard, then they are ready to move to the next step, finding a resolution.  So the probing begins.  Bob starts by asking:  “What deal do you need so you can move on from this place of being stuck?”  

Bob referenced a very insightful and popular book. Christopher W. Moore’s book, The Mediation Process, Practical Strategies for Resolving Conflict  is used by many conflict resolution practitioners, faculty, and students as the all-inclusive guide to the discipline of mediation and conflict resolution.  Here’s the logic behind this process.  Mediation is a better alternative compared to having matters settled in court.  The decisions made by the courts might not result in a desired outcome.  A mediator, like Bob, helps people decipher their own solutions. There are no easy answers but the important thing is to find a way to talk about the issues which have people feeling stuck.  The families are persuaded to push through their problems and hurt feelings and to think about how they can get to a better place than where they are presently.         

Another best-selling book, Getting to Yes, Negotiating Agreement Without Giving In written by Roger Fisher and William Ury, supports Bob’s belief that no one should cave into agreement.  “No one wants to feel forced to do something they do not want to do.  They should not be forced into a deal they do not like.”   All options needs to be considered.  The decision is to pick an option which is better than a worse one.  Reaching a Win-Win agreement far outweighs a Win-Lose or Lose-Lose agreement.  

Mediation always works.  The only time mediation doesn’t work is when the parties are not willing to pay the consultation fees to have the conflict resolved.  That’s the clincher. If people could see into a crystal ball the situation going from bad to worse, they might change their minds.  Do they want to pay a little now for a consultant or pay a lot later for a lawyer and court fees?  In the end, the result may not be pretty if they choose to wait by avoiding both the conversations and the fees.    

As I write this blog, I think of my family’s situation.  My father and his brother passed away without talking to each other.  I reflected on the question Bob poses to his clients, “What are we trying to accomplish so you don’t spit at each other when you pass on the street?”  I realize that my family’s situation is not an isolated case.  Many families find themselves in a similar dilemma.  Hurt feelings and unresolved conflicts cause relationships to blister with anger, grief, and sadness.  If there’s a slight chance you can mend the broken bridges in your relationship with mediation, you are encouraged to try regardless of the cost.  

Thursday, May 10, 2018

Where Do You Fit?

The information is hot off the press.  I am not picking through old data.  This week the Financial Planning Standards Council (FPSC) released its latest report on Financial Stress.  When asked, people will share their biggest fears and concerns but generally money isn’t something we discuss with our family and friends.  We might complain about the price of groceries and gasoline but we are reluctant to fully disclose every detail about our personal finances. 

If you were asked the same five basic questions about views on money that 1,106 Canadians were, where would you fit in the conversation?  Here’s your chance.  Below are the questions.  Once you have answered them, you can compare your results with those people surveyed.

Question #1

In general, what tends to cause you the most stress in your life?

  • Money
  • Personal Health
  • Work
  • Relationships

Question #2

How often, if ever, do you feel embarrassed about lacking control over your current financial situation?

  • Always
  • Sometimes
  • Rarely
  • Never
  • No Answer

Question #3

How much do you agree, or disagree, with the following statement:  I have lost sleep because of financial worries.

  • Strongly Agree
  • Somewhat Agree
  • Somewhat Disagree
  • Strongly Disagree
  • No Answer

Question #4

To what extent, if at all, do you feel pressure to keep up with your friends’ or colleagues’ financial status?

  • Very Pressured
  • Somewhat Pressured
  • Not Very Pressured
  • Not At All Pressured
  • No Answer

The results are found in this Omni Report:Financial Stress.   We can determine whether or not our answers align with others. 

Money is the one thing we all have in common.  It’s certainly understandable not to share our money concerns with every person; however, when we struggle about doing the right thing with our finances, talking with a financial planner may give us peace of mind.  Doing so is no different than seeing a doctor about a health concern.

We are usually looking for something: where we buy our new car or home, where we spend our next exotic vacation or where we purchase something small like a camera or an appliance.  We tend to do homework in our endeavors to make the right choice. Therefore, we shouldn’t be reluctant to seek advice about money matters when we can’t figure things out on our own.  The main reason for doing so is to live your life without regrets.

Here’s the final survey question. 

Question #5

What is your greatest financial regret – that is, if you could go back in time and do things differently, what would that be?

  • I would have saved money/more money/saved earlier
  • I would have invested more/invested earlier
  • I would have bought a property/invested in real estate/land
  • I would have done more schooling/higher education/different stream
  • I would have avoided debts/not overspent on credit cards
  • I would have made the right decision when selling/buying property
  • I would have kept my job/worked longer/wouldn’t retired earlier
  • I would have been more responsible with money/budgeted earlier
  • I would have saved more for retirement/retirement plan
  • I would have spent less money on leisure/gambling
  • I would have tried to get a higher paying job
  • I wouldn’t have bought a car
  • I would have spent less money
  • I would have had a separate bank account with spouse/no divorce
  • I would have avoided bankruptcy/managed business better
  • Other
  • No regrets
  • No Answer

The survey reveals that more than eight-in-ten Canadians (83%) have at least one financial regret.  What’s yours, if any?

This article, Change Your Mindset If You Want to Succeeddoesn’t talk about money.  It simply talks about life.  My biggest takeaway was this quote from business coach, author, and speaker Ali Golds. She says, Celebrating triumphs can also help put self-doubt to flight and take the spotlight off setbacks. “Who cares about mistakes? I don’t,” adds Golds. “I celebrate every achievement, even tiny ones, because without them I’d never have gone on to bigger successes.”

After answering the above survey questions, we may want to change one way we handle money. Ali Golds’ reasoning can apply to our money concerns.  If we need to make changes to our financial circumstances, then we need to develop a strategy.  Ignoring the problems doesn’t help.  Action may or may not result in triumphs and successes every time but we can celebrate the strides we do make towards our financial goals.  Any change, big or small, to improve our financial well-being is a step worth taking. 

Thursday, April 26, 2018

Tax Time Again!

Preparing a tax return, even if your part is only gathering all the information for your accountant, can be an overwhelming and stressful chore. However, it’s a task which must be done every year. It ranks right up there with spring cleaning around the house and yard. 

Many have a tendency to procrastinate and push the deadline as far as midnight on April 30th.   If you step over this deadline, then you may face interest and penalties.  If you are a proprietor of an unincorporated small business, your deadline is June 15th.  However, tread cautiously.  If you owe taxes as a result of your business income, the tax bill is still due and payable on April 30th.  The most sensible thing to do is to file your tax return by the end of April.   You want to avoid adding more money to the government coffers with interest charges on the balance due. 
The best rule is to follow Thomas Huxley’s advice. “Do what you should do, when you should do it, whether you feel like it or not.”   This is the power of discipline. 

Why Should We File a Tax Return?

I believe we need to understand “why” we need to do something to motivate us into action.  Once we know “why” then we are apt to file our tax returns on time.  

1. One reason for filing a tax return is to take advantage of applicable tax credits to reduce the amount of taxes payable.   Your income information slips report only your income and the minimum required deductions but other eligible provisions may lower your taxable income further.  Specific examples are tax deductions like RRSP contributions or tax credits for a dependent child under the age of 18.  Ultimately, the result is the possibility of a “tax refund” once the calculations are completed. 

2. Another reason is you may be eligible for money through one of the government’s social benefit programs once your return is filed.  Without taking the initiative of reporting your income, you may be saying "No thank you" to money that rightfully belongs to you.  Depending on the level of your combined family income, you may be eligible for the GST/HST credit benefits or Child Tax Benefit.      

Other social benefit programs for people over the age of 65 are Old Age Security and Guaranteed Income Supplement.  The Allowance provides a benefit for those between the ages of 60 and 64.

3. Your tax returns keep you “in the know”.  If you are not a financial guru, your return may be the only document to tell how you are doing from an income vantage point. Are you descending or ascending the income ladder?

4. If you are still not totally convinced that you should file a tax return, my last resort is you have to do this because it is the law. There are late-filing and failure-to-file penalties in addition to the interest charges due on outstanding taxes.  Coming up with the money to pay taxes is difficult; we certainly don’t want to add additional charges to the balance.   If you choose to ignore Canada Revenue Agency (CRA), they will chase you for the money that rightfully belongs to them. 
5.  When you are self-employed and are applying for a loan, the one way for a lender to verify your income is your annual tax returns for the last three years. No verification of income means no loan.

Why Are We Reluctant to File Our Tax Returns?

The most likely reason for failing to file a tax return is quite often linked to fear.  We may be afraid we may have a tax bill and won’t have the money to pay CRA.

In the Toronto Sun news article, Failure to file taxes could bankrupt you, John Waters, head of tax and estate planning at BMO Nesbitt Burns, says, if you’re struggling to meet the deadline, even if you don’t have the money to pay, "at least file to stop the bleeding on that 5% penalty and just get hit with the interest charges on the unpaid taxes."

The truth is you don’t want to get on the wrong side of Canada Revenue Agency (CRA).  Even when you file your return and are unable to pay the taxes, you should explain your situation to CRA. If you don’t, CRA is a powerhouse with the ability to collect the money.  Funds can be garnished from your bank account to satisfy the debt.  Your financial institution will receive a “requirements-to-pay” order (also known as a Third Party Demand).  If the money is not in your account at the time, then your account will be frozen.   The Third Party Demand will only be lifted once the payment has been made or at the very least satisfactory financial arrangements are in place to have the order removed.  To read more, click here to read, CRA Garnishments: Requirement to Pay Tax—A Canadian Tax Lawyer Analysis.

How Can We Overcome the Obstacles?  

Once we understand that we can run but we can’t hide from CRA, we need to take a proactive approach and prepare for the yearly routine of submitting our tax returns. 

  • The first step to eliminate our feelings of frustration is to find a method to keep all our important documents in one place. With unlimited access to the Internet, we can always search for ways to organize our tax information. 

  • If you can’t do this yourself, the second step is to ask for help.  There are people, even friends, who are “number people”. They would love to help us get organized and stay organized.  

  •  Lastly, we can pay for the service of a professional tax accountant to prepare our tax returns. 

The completion of an onerous task results in the greatest feeling. This is especially true when our tax returns are filed on time and our relationship with Canada Revenue Agency is maintained.  There is a reward at the end for doing this.  If it’s not money, then it is peace of mind or if we are lucky, it might even be both.

If you need additional information, the Government of Canada has prepared a series of videos, Preparing your Income Tax and Benefit Return.  These videos may provide helpful information for you.     

Thursday, April 12, 2018

What We Know

How often have we heard, “It’s not what you know but who you know”?  In all honesty, the proper proclamation should be “It’s what you know and who you know”.  Our expertise and experience are just as valuable as those of “who you know”. 

The Parkland CAFA (Canadian Association of Farm Advisors) Chapter gathers monthly for their regular learning event.  It is a meeting of the minds to learn something we might know very little about.  The presenter on a given topic is the expert. We tap into their resources and access their authoritative wisdom and knowledge. At any given meeting, the two professionals or agri-business experts know something the rest don’t. Their willingness to share is an opportunity for us to learn.  When applicable, we even refer clients to the appropriate professional who can better help them.

I believe everyone understands you can’t know everything.  Having an expert in your network circle is a valuable “fill-in” for the information and experience you lack.  A fitting expression, “Mind the Gap”, heard when you travel the rail system in London, can also be applied to our knowledge gap.   A person can only know so much, has only so much brain capacity, and has only interest in a specific area of expertise.  There may be some logic to the statement “a jack-of-all-trades and a master of none!”  When we try to be everything, we have to ask ourselves, “Is this fitting for what I am trying to accomplish for my clients?” As a CERTIFIED FINANCIAL PLANNER®  professional, I know my limitations and rely extensively on other professionals.  I appreciate having them in my network; they’re my links to information and experience.    

This past month’s learning event highlighted two hot topics:  Trusts and the Need for Them, both from a tax and legal perspective; and TOSI (Tax-on-Split-Income), the new rules and the exceptions-to-the-rules.  Our professionals, Jason Heinmiller, a tax expert, with Collins Barrow and Shawn Patenaude, a lawyer, from his legal firm, Shawn Patenaude Legal Prof. Corp, are privy to the latest updated information.  Procedures and processes are constantly changing. This is especially true when there’s a change in government.  In 2017 the federal government implemented new rules regarding the way income is distributed to shareholders of private corporations. The experts, Jason Heinmiller and Shawn Patenaude, addressed the impact this new legislation has on tax vehicles such as trusts and corporations.

Our professionals discuss new legislation with their peers. They dissect and analyze the logistics of the information to fully understand the new proposals: how they apply, when they apply; what exceptions exist; and who they affect. They exchange thoughts, ideas, and ask each other, “If we can’t do this, can we do that?”

The best professionals work together in tandem with other professionals to decide on the ideal strategies for their mutual clients.  The collaboration is important especially with multiple generational and blended families. Family business situations are both complex and complicated. Because peoples’ intentions are different, a strategy which might work well for one family operation doesn’t mean it fits another.         

When we try to work in isolation and try to do it all, we do our clients a disservice.  When professionals work together as a smart team, their clients benefit from the best quality advice and service.  When the clients receive a wealth of information from all the angles, they are able to make the right decisions. I’ve said before, “Good information leads to good decisions.”  Good decisions avoid financial and costly errors.  Some strategies cannot be undone and are permanent arrangements with dire consequences.  

This is an example of a costly consequence.

A father included his son as a joint owner on a piece of real estate.  Their relationship became estranged.  When the father requested that his son relinquish his ownership to the property, the son refused.  The courts decided if the father wanted the son’s name off the title, the father was obligated to buy his son’s half-share interest at the current fair market value.  We don’t know if the father sought legal advice when he was deciding to make the real estate joint with his son.  However, if he had, all the possible outcomes would have been discussed. 

Advisors help farmers make informed decisions around management, finance, marketing, tax, or legal issues.  If necessary, they network with other CAFA members. This networking creates links to a wealth of knowledge and expertise. When a basketball or football team executes play after play, they work together to accomplish a goal. That goal is to secure a win.  Win after win create champions.  We are all champions when we work together as a team.  John Wooden said, “A player who makes a team great is more valuable than a great player.”  

Thursday, April 5, 2018

Resolve Money Arguments

Fighting over money isn’t unusual. In fact it’s more common than you think.  Surveys have attested to this fact.  Concocting the ideal recipe, to repair a couple’s relationship broken because of money, isn’t easy. Certain methods are required to create meaningful conversations in order to make any progress. The ultimate goal is to live in peace and harmony without money woes to disrupt the home. If you find yourself in a stressful relationship, hunt for the secret ingredient that helps resolve arguments about money.  Here are a few thoughts and ideas.       

1.  Schedule a meeting in advance.  You might scoff at this crazy idea but think about it.  If spontaneous conversations about money haven’t worked in the past, always ending in the same result -- an argument -- wouldn’t this crazy idea be worth a shot?  Isn’t it better that everyone is prepared?   Emotions erupt when people are caught off guard.  Imagine opening a credit card statement. Suddenly your eyes detect an unexpected transaction for $300 to a clothing store or an automotive shop.  Or imagine the shock when your bank phones to advise that your joint chequing account is overdrawn.  Most likely you “hit the roof”.  Having a rational discussion at this point would hardly be the time. You need time to calm down.  Seeking rather than demanding an explanation will be well received by the accused when your emotions are in control rather than out of control.  When a meeting is scheduled and the agenda is known, people are not as likely to be on the defensive.  Consider creating an agenda about the issues that are tormenting your finances.  The first meeting will feel somewhat awkward.  You need to keep ironing the creases, meeting after meeting, until they run smoothly.  Attempt to schedule a meeting once a month to discuss the cost of current expenses, review bank and credit statements, and plan future expenditures.   Is the dishwasher on the fritz?  Does the truck need new tires? What’s the synopsis for the children’s tuitions?  Like any organization meeting, the agenda includes both old and new business.  I am certain you will never run out of things to talk about but you will run out of time to discuss all the things. All the more reason to table items for the next month’s meeting.

2.  Identify your beliefs about money and their origin.  Some beliefs stem from childhood experiences. You repeatedly may have been told by your parents, “Do you think money grows on trees?” leading you to believe money is scarce.  If money was continually lavished upon you, the belief may be you can buy whatever you want when you want. Imagine your spouse growing up in a totally different home environment than yours.  Can you see how your views about money can differ? Resolve to develop joint beliefs, the ones worth keeping in your relationship.  A simple detail may be calling your “budget” a “spending plan” because you dislike the connotation of budget, causing you to feel restricted.  A more complicated notion may be that your belief is vacations are a waste of money yet both may agree that in exchange for a vacation a hot tub will provide endless enjoyment all year around.  You may also conclude that “stay-cations” could be as much fun.

3.  Discuss your money management to determine what works and doesn’t work.  When managing your monthly expenses, read the blog, Do Joint Expenses Require Joint Accounts?  Discuss whether a change is necessary to the way you presently handle your finances. Try a new approach; review the process in a few months. If it’s not working, change the process again.  Learn as you go.  If one spouse cannot be trusted to manage the finances, then don’t put yourselves in that predicament. Recognize each other’s strengths and weaknesses to benefit both of you.

4.  Learn to be assertive. Assertive means respecting yourself and other people.  It is the ability to clearly express your thoughts and feelings through open honest and direct communication. This means learning how to talk appropriately. I had to learn this new approach. Start your sentences with the unselfish “I” statements.
I feel afraid we won’t be able to handle an emergency.
I am worried we are not saving enough for our children’s educations.
I am thrilled we saved for the down payment on our new home.
I am angry because I feel money is spent on needless things.  
If you would like to learn more about Assertiveness Training, click here.

5.  Consider writing a letter to your spouse. If you can’t express yourself verbally, try writing your feelings. Men and women are created differently.  If you are sincere about learning how to express your feelings, John Gray has a unique way to deal with your emotions.  

In a Feeling Letter, you want to be able to express your feelings of anger, sadness, fear, regret, and then love. My format allows you to fully express and understand all your feelings, so you can communicate those to the other person in a loving focused way.

6.  Provide a mutually supportive and positive learning environment.  This advice is part of the Toastmasters’ mission statement where people come together to develop their communication and leadership skills. If we are instructed to create this unique setting with strangers, then the same should be true in relationships with our loved ones. Most times, building relationships with strangers is easier than with our spouses. We don’t live and communicate daily with the new people on our block the same way we do with our better halves.  We may have been disappointed, angered, or provoked by their foolishness.  These repeated events lingering in our memories are difficult to erase. Therefore, being supportive under these conditions is difficult.  If we feel like that, is there a chance our partners may feel the same? Maybe we could do ourselves a favor.   One of the steps in Twelve Steps Recovery Program is to make a searching and fearless moral inventory of ourselves.  Is there some housecleaning we need to do within ourselves?  Do we harbor any resentment? Why do we become so easily angered? Are we approachable about money matters?  In order to create a supportive environment, we need to begin with ourselves.

Communication involves expressing your views about money clearly, discussing without any hidden agendas, and understanding your differences could be the “recipe” to strengthening your relationship. Your significant person has thoughts about how life should be enjoyed and how money should be spent.  As long as you can agree on certain specific points, you may release the remaining points and agree to disagree about the way every last penny should be spent.  Striking a balance between keeping your finances and relationship in check (or is that “in cheque”) is important.  Don’t stop hunting for the secret ingredient until you find it. When you do, please share.    

Thursday, March 22, 2018

Why "Give"

The Power of Giving

Julia Wise and her husband, Jeff, typically give 30 to 50 per cent of their income away. One year their charitable donations totaled about $160,000. Julia says it’s a way to help make the world a better place and will help teach her children about the family’s values.  She says, “There’s always someone who needs the money more than I do.”

Do you faithfully carve out a percentage of your income to donate to charities? There are a number of compelling reasons why people do this.  Most would like to see a “better world”.  Sharing the wealth is one way to achieve this. Charitable giving is a very personal and private act of kindness.
Julia states she feels privileged to have acquired a good education which landed her a good job with a good salary.  Her interview on CBC Radio Show “Out in the Open” is fascinating as she addresses the questions and ponders others’ concerns about their extravagant generosity. You can click here and listen to this podcast.

A Different Perspective

A change in our perspectives about the things that really matter was mentioned in a previous blog, When We Have So Much.  Terry Aberhart, CEO of Aberhart Farms Inc. and Sure Growth Technologies Inc. (an agronomic consulting company), shared his experience on a trip to Ethiopia.   I asked you then to imagine going without food, clean water to drink or bathe, and medication to treat a curable ailment.  I believe most would find this unbearable because we have never lived in this kind of environment.

Sometimes role playing isn’t a bad thing when we get too comfortable in our day-to-day lives. I often think about what would happen if my life drastically changed, and I was living in poverty, and looking to the food bank for my daily meal.  What if I had no shoes to wear? What if I had to sleep on a park bench?  These role-playing scenarios sound like a bad dream but there are people who live this daily.

Compelling Reasons

We can empathize with other people who are less fortunate than we are from a health perspective.  Every year, the first weekend in March, the Kinsmen Telemiracle Foundation hosts a 20-hour telethon to raise money for people who require special needs equipment and access to medical treatments. The generosity tugs at your heart strings and brings tears to your eyes as you watch the dollars roll in and the words echo the message, “Which way are we going?”  The only answer is “Higher”.  This year was no exception. The Regina Leader Post headlines Telemiracle Smashes Record with more than $7.1 million in donations.  The sum is an accumulation of both small and large donations.  The largest donation ever was a bequest of $1.5 million from the late Dr. Philip Thacker, Professor Emeritus of the University of Saskatchewan and a Kinsmen member.  Peoples’ compelling stories inspire others to donate and raise money in countless ways.

Philanthropists have their personal reasons for giving. In a rare interview for the magazine, Farming for Tomorrow, Mr. Jimmy Pattison said “The best thing that ever happened to me was that I had no money.”  Today Mr. Pattison is patriarch to one of the country’s largest private companies – the Jim Pattison Group (JPG).  Reading through the article, you learn quickly that he attributes his success to good values, honesty, integrity, and hard work. He has lived and strived through challenges and opportunities which make him grateful for the success he has achieved.  Now he lavishly donates his money primarily to the health-care sector.  The new Children’s Hospital of Saskatchewan in Saskatoon is one of the fortunate recipients of Mr. Pattison’s generosity.  Last May, he presented a donation of $50 million towards the facility.  

The Monetary Incentive

I am not entirely convinced that people donate money primarily to receive tax credits. From a financial perspective, this is certainly an incentive.    Canada Revenue Agency rewards you for your generosity.   If you have taxes owing, your tax credits are like gift certificates to offset your tax bill.  The higher the amount of donations, the greater the tax incentive will be when you file your tax return.   If you are limited to the amount you can donate in any given year, then you might choose to claim your donations together in one year.  You are allowed to carry forward any donations in any of the next five years.

A lower tax rate is applied for donations of $200 and less; and a higher rate for donations over $200 for any given year.  Here is the link to the federal and individual provincial donation tax credits.

Using this donation tax credit calculator is one way to determine your tax credit entitlement for your province of residency.  The following math illustrates the credit for a Saskatchewan resident who has contributed $1,000 in donations.

Federal charitable donation tax credit
            $ 30 (15% on the first $200)
            $232 (29% on the remaining $800)
            $262 is their total federal tax credit.

Provincial charitable donation tax credit
            $  22 (11% on the first $200)
            $120 (15% on the remaining $800)
            $142 is their total provincial tax credit

This Saskatchewan resident has a combined federal and provincial tax credit for 2017 of $404 ($262 + $142).

Never Too Small or Too Large

I believe that the majority feel a tug on their hearts to be generous with their money.  No one can make someone do this. We have often heard a child use this phrase, “You can’t make me!”  A small child may refuse to participate in a game or eat their veggies.  But once they have had the experience, they are more willing to experience more of the same.  I associate this with charitable giving or philanthropic giving.  The ultimate payoff is witnessing the benefits of the donations. People find this rewarding and desire to do more good in the world.  Philanthropists are financial helpers willing to promote the welfare of others, “especially by the generous donation of money to good causes which meets basic needs.”
Regardless of the amount of any donation, it’s the contribution that matters. Donations are not limited to size; they are not measured as too small or too large.  In the end, the accumulated dollars create and impact a better world.  Let’s all keep on giving whatever amount we can to a beneficial cause.  

Thursday, March 8, 2018

Long Term Care Insurance: An Overlooked Need

The Reality

Most people love a good reality show but only if it turns out well.  We occasionally watch a clip when an accident occurs and the person escapes grave injury.  They are able to get up and walk away.
Imagine this.

The towering poplar and maple trees’ branches lean over the farm buildings.  When the rain drips down from the leaves, the shingles deteriorate. When the leaves fall and remain on the roof, even more damage occurs. One day, the farmer evaluates the situation.

“A chain saw and ladder will fix this problem,” he thinks.  The ladder is cautiously propped up against the tallest maple tree. After precise calculation, he determines the branch that needs to be cut.  There’s only one problem: he miscalculates and the law of physics prevails. The ladder falls to the north; the chain saw to the south, and the farmer and the ladder bounce onto the ground below. 

“This is going to hurt!” is my husband’s first thought when he comes to terms with what just occurred.  He’s winded and cracks a couple of ribs.  

For me, when reality kicks in, my first thought is, “This could have been much worse!”  

My husband is generally not accident prone. He doesn’t usually get caught in situations like this but sometimes an accident just happens by accident.  That’s reality.

The unknown in his situation is the “what if”. 

Being self-employed and working on your own comes with a disadvantage. You are the sole-proprietor and key operator of your farm business.  You don’t have the privilege to phone your supervisor, tell him you are injured, expect someone to step into your farmer boots, and take over during a lengthy recovery.

The reality is present in any sole proprietorship where there is limited amount of excess cash for medical expenses and hired help.  The value of your business is invested in the assets, the equipment, buildings and land. You can see the assets but cannot and do not want to liquidate them. This is when an injection of insurance money helps fund, at the very least, the health care expenses while one recovers.

The Mistake in Identity

The most common mistake most people make is associating Long Term Care (LTC) Insurance with funding the cost of living in a long-term care facility or nursing home.  But quite frankly, this type of insurance can be beneficial during anyone’s life time.  Many health situations can have a lengthy recovery period.  You may recall someone you know who has been in this situation. Whenever a person is restricted from performing any two daily living activities, they are entitled to make a claim for benefits.  These activities are defined as:
  • Eating
  • Bathing
  • Dressing
  • Toileting (being able to get on and off the toilet and perform personal hygiene functions
  • Transferring (being able to get in and out of bed or a chair without assistance
  • Maintaining continence (being able to control bladder and bowel functions)

Think about it.  Any unexpected debilitating illness or an accident could limit your activity and warrant the need for long-term care insurance at any age.

The Push-back 

I often recognize there’s a “push-back” to insurance.  Fighting your financial battles can be done by carefully evaluating your own personal situation and the associated risks. 

The real questions are:

          How many types of insurance do I need?

          How much can I afford to pay for the coverage?

When you face the decision of funding your health care costs, you can choose to self-fund, share the risk, or transfer the risk.

Sun Life Financial describes these choices best in this brochure, A Health Conversation featuring Long Term Care Insurance.  

A.  Self-funding means to allocate a portion of existing assets into a “health fund”.  This approach requires discipline and risks underestimating who will need care, when care will begin, how long it will last, and how much it will cost.

B. Share the risk means to self-fund initial care and transfer the risk of a catastrophic need to long term care insurance.

C.  Transfer the risk to insurance means that all risk of an unexpected illness or need for care is transferred to long term care insurance or critical illness insurance if the individual is still in good health.

My Number #1 concern for any aging couple is when their situation changes, where one spouse is required to live in a private care home while the other continues to live in their home.  Essentially, the couple’s total lifestyle costs may have doubled.  They are managing and juggling two homes: the expense of private health care and the expense of home ownership (utility bills, insurance, taxes, and others). They are doing so with the same retirement income they had when they were living under the same roof. 

The Compromise

I totally agree you can’t be fully insured against every risk.  We have many different kinds of insurance: life, disability, property, and medical health insurance.   Now I am inviting you to consider an additional kind of insurance, long-term care insurance.

In every insurance circumstance, you are able to negotiate how much risk you are willing to assume when you self-insure (use your money) and how much premium you can afford when you share the risk with the insurance company.

With long-term care insurance, the task is to tailor your financial need to an affordable premium.  When you choose one option over another, you are able to adjust the cost of the premiums. For example, you can select a minimum number of days, either 90 or 180 days, before you require financial help and are able make a claim.  You can also choose the length of time you want to receive a weekly benefit to be paid, from a minimum of 100 weeks to unlimited.  Your age and health will also have a bearing on the cost of the premiums.  If you are slightly interested in long-term care insurance, make the decision sooner rather than postpone it. Most often, we have a tendency to shrug the decision off with a casual “I’ll-think-about-it.” 
Our Decision   

My husband’s tree incident triggered our decision to get long-term care insurance. When he applied, he chose a five-year benefit period.  We know this will buy us “time” in any catastrophic event to determine whether his health will improve so he could continue to farm or whether he will have to “pack it in and call it quits.” You could say this insurance policy gives us time to make the right decision without any added financial pressure.

The other feature we appreciate is “The return of premium on death benefit”.  No one likes the thought of spending money (or should I say ‘wasting money’) on something they may never benefit from using.  The thought of a death occurring without the opportunity to take advantage of this coverage may cross many peoples’ minds.  For a slightly higher cost, this feature is an add-on which ensures the insurance company will return the premiums if the insured person dies while the policy is in effect. Granted, you personally wouldn’t benefit from the money.  The premium money goes to the estate likened to money sitting in a savings account.

Your Decision

I am a firm believer that good information leads to good decisions. Making the time for a heart-to-heart conversation with your trusted insurance advisor is the only way to receive good information.  If you don’t have an advisor, ask for recommendations from your family and friends. You could interview insurance advisors.  You are like an employer seeking someone to work on your behalf. You must understand the information they are providing to you. You should feel comfortable with their recommendations.  

As a CERTIFIED  FINANCIAL PLANNER® professional, I don’t sell insurance but I do know its importance in a well-constructed financial plan.  Insurance is part of a wealth protection strategy and the premium should never be viewed as an “expense.” I don’t have a preference for any particular insurance company.  They all provide the same kind of products with slightly different features and premiums.  

To learn more about long term care insurance, click this link, to access a guide provided by the Canadian Life and Health Insurance Association (CLHIA).  You may also watch this “Learn and Plan” video produced by Sun Life Financial.  There is no shortage of information, only a shortage of time to sort and sift all of it.  Please make the time to discover the ideal fit for your financial needs.