Mikestrathdee’s Blog


Preventing Prodigals
February 24, 2017, 10:15 pm
Filed under: Estate Planning, Generosity, stewardship, Theology, Uncategorized

 

By Mike Strathdee

(Published in January 2017 issue of Canadian Mennonite and the Jan/Feb issue of The Recorder magazine.)

Many of us are familiar with the the Parable of the Prodigal Son in Luke 15. There are great lessons in this story about grace and forgiveness, but I’ve never heard it used in the context of warning about giving children gifts before they are emotionally or spiritually mature enough to handle them properly.

We aren’t told how old the prodigal was when he made his disrespectful, audacious demand of his father, but clearly he wasn’t ready to handle money responsibly. When I heard that passage read some time ago, I couldn’t help wondering if the story could have been different if the father knew what we now know about human brain development. What was the father thinking? Could he have had any idea how poorly equipped his son was to handle the premature inheritance?

Science has taught us that even in well-adjusted people, it can take up to age 25 before the prefrontal cortex is fully developed. That’s important because this part of the brain helps people appreciate the consequences of their actions. In her book Payback: Debt and the Shadow Side of Wealth, Margaret Atwood argues that, knowing what we now understand about brain development, giving people access to credit cards too soon could be considered a form of child abuse.

Similarly, parents should consider whether allowing their children to potentially inherit more money than they’ve ever had before, as soon as they attain the age of majority, would be a blessing or a bane.

About 15 years ago, I was trying to make this point in an end-of-life planning seminar at a church in a small town. I was shocked to see a young woman stand up in her pew and say that she agreed with me completely.

Later, I heard the sad family story. Her father died when she and her brother were 19. Their mother had passed away earlier. They each inherited $60,000. It was way more money than either of them knew what to do with. Her brother chose particularly poorly, burning through all the cash and ringing up considerable debt in only 18 months. She is now determined to ensure that her children have a better understanding of money.

Another verse relevant to the topic of inheritances is Proverbs 13:22: “A good person leaves an inheritance for their children’s children, but a sinner’s wealth is stored up for the righteous.”

At first glance, this passage may seem to focus on skipping a generation and leaving everything to the grandkids. But when taken in context with other advice in Proverbs, we see that wealth can only be successfully transferred between generations if a values transfer comes ahead of the money.

Part of me wonders if we might have fewer prodigal sons and daughters, and fewer prodigal grandsons and granddaughters for that matter, if we were more explicit in modelling generosity and explaining our beliefs and habits. We can transfer good values to our children by educating them about responsible spending, good habits and about giving throughout our lives. We can also model generosity in our estate plans by including charitable gifts as if they were an extra child in the list of beneficiaries. Let your kids know what values are important to you and how you hope they will continue them with their inheritance.

Abundance Canada can help you design and carry out a generosity plan. Ask us how.

Mike Strathdee is a gift planning consultant at Abundance Canada serving generous people in Ontario and the eastern provinces. For more information on impulsive generosity, stewardship education, and estate and charitable gift planning, contact your nearest Abundance Canada office or visit abundance.ca.



Look to the U.S. for the next big catalyst for charitable giving

A couple of decades ago, some of the largest Canadian charities were suffering. Federal cuts to transfer payments, seen as necessary to balance the national government books, were a body blow to universities, hospitals and others.

Help for the charitable sector came in the form of a policy change in line with what donors enjoy in the U.S.  After considerable lobbying, Ottawa agreed to “temporarily” reduce in 1997, then permanently eliminate in 2006, the capital gains tax on appreciated securities when donors gifted them in kind to charity.

By some estimates, that single change resulted in charities receiving an extra $1 billion in donations almost every year since 2006.

With the Canadian donor pool aging and reportedly shrinking, maybe it is time for the sector to look to the U.S. once again for a big idea to kick start the next wave of giving.

In December 2015, Congress passed a bill making permanent a charitable gifting option that allows donors aged 70.5 and older to withdraw IRA funds – a tax-deferred retirement account analogous to our Canadian RRSPs –  to donate to their favorite charities. Withdrawals of up to $100,000 each year can be made without these distributions registering as taxable income.

Given the billions of dollars of RRIF (Registered Retirement Income Fund) income that Canadian baby boomers have to begin drawing down as they turn 72, there are massive possibilities here. Not only do some people not need all of the income they are forced to begin drawing, many are not looking forward to the accompanying tax hit.

A significant number of Canadians will move into the top tax bracket when they draw their last breaths, if that occurs before they have depleted their RRIFs.  In Ontario, that top bracket current stands at 53.5%. Charitable tax credits have been adjusted to match.

Getting a cash-strapped federal government to consider a break for retirement funds donated to charity will not come easily. Many leaders in the charitable sector will say their top lobbying priority will be convincing Ottawa to reinstate the proposed capital gains exemption for gifts of real estate and private shares that was accepted, but not enacted, by the former Harper government.

(Donald K. Johnson, who led the successful lobby for favorable treatment of donated securities some years back, is also pushing Ottawa to give exemptions for real estate and private share gifts. A Toronto Star story says such a change would result in additional donations to charities of about $200 million a year. The cost to the federal treasury would be between $50 million and $65 million.)

But it’s also time to start asking whether the lowest-hanging fruit for growing charitable donations could lie with the ever-increasing wave of RRSP savings that need to be converted to RRIFS and withdrawn.

Lots of good causes sure could use the help.



How to plan your digital estate
July 3, 2014, 1:19 pm
Filed under: Estate Planning, Financial Management, retirement, Uncategorized

First published in Canadian Mennonite, July 2014

The most surprising “friend” request I ever received on Facebook came from someone I knew only slightly.

That may not seem unusual, except the person was dead. When I clicked the Facebook page, which has since been taken down, I found an unusual memorial. It spoke of being glad to be free of pain and cancer, missing family and so on.

This memorial, a digital legacy, is becoming common.

That incident may seem silly to those of us who didn’t come of age in the computer era. But the question of what happens to digital assets—anything stored in electronic form—is becoming a hot topic for lawyers, trust officers and anyone who helps people do end-of-life planning. Some people’s digital assets may be worth more than their cars.

The list of things that qualify as digital assets and often don’t get mentioned in a will is huge: text documents, photos, multimedia files, user licences, profiles for online accounts (Facebook, LinkedIn) and subscriptions.

In some cases—accounts at financial institutions and rewards programs—substantial amounts of money are at stake. Or someone just may want an account or pictures taken offline.

Changes in technology are way ahead of how we think about changes we need to make in estate planning. Soon we will need to add “tech savvy” to the list of qualities we want our estate trustee to have.

Issues we need to consider include making a list of our online accounts, passwords and security questions, and where the information that will allow someone to access these is stored: computers, mobile devices, flash drives or websites.

“Normal” rules of how trustees get access to information when someone dies don’t apply to the digital world, complicating this new list of things to think about. Each company has different regulations on how it handles the situation, and standards are mostly lacking.

Google may require a U.S. court order before it will disclose any information. Yahoo allows no right of survivorship or transferability on accounts. There have been lawsuits in the U.S. over these policies.

Shoppers Drug Mart won’t allow the transfer of rewards points from a deceased person, but will allow the estate to donate them to certain charities.

One Kitchener, Ont., lawyer is now asking clients to do beneficiary designations for Air Miles points.

A handful of U.S. states have passed laws to impose some order. Nothing of the sort is in place anywhere in Canada.

An easy and important step for estate trustees to take concerning electronic assets is to notify credit agencies about the deceased’s passing. Identity fraud is on the rise, and the risks increase with the amount of online activity.

If the potential complications of all this makes your head spin, you are not alone. Please pass the Aspirin. All the more reason to think twice when you are asked to serve as an estate trustee. Turning the job over to professionals and letting them worry about navigating these complications could be money well spent.

To help you keep track of a wide range of accounts and assets, MFC offers a free, downloadable Personal Information Directory at MennoFoundation.ca/PID.

Mike Strathdee is a stewardship consultant in the Kitchener, Ont., office of Mennonite Foundation of Canada (MFC). For more information on impulsive generosity, stewardship education, and estate and charitable gift planning, contact your nearest MFC office or visit MennoFoundation.ca.



On the topic of impact – are you a fire hose or drip irrigation donor?
June 26, 2014, 2:25 pm
Filed under: Charitable Giving, Estate Planning, Financial Management, Generosity

Published in the June, 2014 issue of Gift Planning in Canada
On the topic of impact
Mike Strathdee
Helping donors understand the impact of how they support their favorite causes can take some explaining.
The people I have the privilege of working with generally
make giving decisions informed
by their faith. Unlike churchgoers
of earlier generations, the place where
they worship is often not the primary
or sole beneficiary of their giving.
In fact, it is common for me to meet
with folks who receive charitable
receipts from 20, 30 or more different
charities every year.
Without a doubt, deciding whether
to make large gifts to a few causes
or smaller donations to a greater array
of charities is a highly personal
decision. Getting people to recognize
that one-time gifts under $100
are costly for charities is sometimes
the first discussion point.
Once donors have narrowed down
who will be on their list, asking whether
they want their end-of-life gift to have
short, or longer-term impact can result
in blank stares. I am often asked,
“Isn’t it all the same?”
Water metaphors can be a useful
way of helping donors see the value
of different approaches. The metaphor
I have found most helpful is fire hose
versus drip irrigation.
A fire hose provides quick, intense
bursts of water – great for extinguishing
a blaze, with as much pressure as
possible, or responding to a large,
immediate need. If a person wants
to grow flowers or vegetables, however,
the amount of water that comes out
of a fire hose quickly may be
overwhelming. When growing fragile
crops, drip irrigation, with smaller
amounts of water released over a longer
period of time, is more helpful.
The fire hose approach to end-of-life
giving may be unhelpful, particularly if
the gift is to a smaller charity (or
a larger one that doesn’t have good
policies on how bequests will be used).
I once met with a couple who wanted
to leave a $180,000 gift to their church
– a small rural congregation – that had
no bequest policy. When they told me
that the church’s annual budget was
only $150,000, we were able to have a
good conversation about whether this
gift would be helpful or harmful.
They eventually decided to have the
gift to their church flow through the
Mennonite Foundation of Canada over
a 10-year period.
Sometimes, for donors with
significant charitable intent, there
is often an opportunity to combine fire
hose and drip irrigation gifts. There
are a number of reasons that people
will choose to support an endowed,
or drip irrigation approach to giving,
including ensuring that their support
will continue after they are gone
– incorporating both legacy and
sustainability elements. For example,
In a recent meeting with a couple that
had spent a fair bit of their career
working in the charitable sector,
I was happy to hear that they wanted
to give gifts to organizations that had
endowments. They knew that many
donors dislike supporting the
important work that goes on behind
the scenes, unnoticed or appreciated
and so decided to give support to the
administration of charitable work.
Other donors want to create (or
support) new possibilities for mission,
if a charity’s use of its long-term fund
is broad enough. Contributing to a
medium or longer-term fund to support
the cause(s) they care about fits well
with the giving wishes of more donors
than you might think. But they may
need to ponder different sorts of water
pressure to understand why.
Mike Strathdee, MA, CFP is a Stewardship
Consultant with Mennonite Foundation
of Canada, a national, faith-based public
charitable foundation. Based in Kitchener,
Mike works with individuals, families and
congregations throughout Eastern Canada
in the areas of charitable gift and estate
planning and financial literacy. Prior to
joining MFC in 1999, Mike had a 15 year
journalism career, including 13 years as a
business writer at the Kitchener-Waterloo
Record newspaper.



Things I wish I had convinced my father
January 23, 2014, 11:08 pm
Filed under: Communication, Estate Planning, Financial Management

First published in the Jan. 20, 2014 issue of Canadian Mennonite magazine

We almost missed it on the first pass, buried under the newspapers and magazines that were filling a large recycling bin. If we hadn’t been checking each piece, it would have been discarded unnoticed.

“It” was a letter I had long forgotten having written. My aunt, helping to clear out my father’s house this fall after his sudden passing, couldn’t believe Dad had kept the letter in his reading pile for so many years.

Dad told me in 2007 that he was naming me co-trustee of his estate and I wrote the letter to suggest steps he could take to simplify things. Making his wishes clear could minimize misunderstandings.

I mentioned that most people don’t state their wishes around distribution of personal effects. This is unfortunate, as disagreements about who should get an item that has fond memories attached to it are the greatest source of family conflicts after a loved one passes.

Dad had many musical instruments and all five of his grandchildren play one or more. Knowing his thoughts would have made some of the divvying up easier. Thankfully, no one has come to blows over any of Dad’s things!

As I haul stuff hither and yon, I wish I had convinced him of a few things:

• Federal deposit insurance protects up to $100,000 at chartered Canadian banks. Similar provincial insurance protects deposits at credit unions. Like many folks his age, Dad didn’t trust banks and spread his money around. But the only difference between 10 separate $20,000 deposits at 10 institutions and two $100,000 deposits is the work required to wind them up.

• Tell your trustees where important stuff is kept. My aunt and I had to visit numerous financial institutions before we discovered where Dad had rented a safety deposit box.

• Label your keys and tell someone where you keep them. Ask a Mennonite Foundation of Canada (MFC) consultant for a copy of our Personal Information Directory. We couldn’t find keys to Dad’s freezer, where a lot of important stuff was carefully wrapped in zip-lock bags. A crowbar took care of the lock, but not the answer to where his safety deposit box keys were located. I found those keys hidden in the back of a dresser drawer, weeks after paying to have the box drilled open.

• If you collect things of value, leaving records of the purchase date, maintenance schedule and so forth is helpful to trustees in establishing what stuff is worth.

• Put something in writing to inform your loved ones of your wishes for healthcare if you are incapacitated. Many Canadians have never prepared incapacity documents like powers of attorney or advance directives, and don’t understand the consequences of failing to prepare. Do your loved ones a favour and spell out your wishes. MFC can help. Ask for a copy of “Your will and estate planning guide” or meet with a consultant.

Mike Strathdee is a stewardship consultant in the Kitchener, Ont., office of Mennonite Foundation of Canada. For more information on impulsive generosity, stewardship education, and estate and charitable gift planning, contact your nearest MFC office or visit MennoFoundation.ca

http://www.canadianmennonite.org/articles/things-i-wish-my-father-had-done



Write a will now – for your family’s sake
January 21, 2011, 9:57 pm
Filed under: Communication, Estate Planning, Financial Management, Marriage, retirement

published in Christian Week Ontario November 2009

If you die tomorrow, would you leave behind a headache for your family?

Nearly half of Canadians have never made a will. Many more have never completed other documents that could save their family a lot of grief in the event of a tragedy. Only 21 per cent of Canadians under 35 have made wills, according to a national study conducted for FLA Group.

Young families may think estate planning can wait. But failing to name guardians for your minor children means that if both parents die, a judge could award custody to the family members you would least want your children to live with. Having the main breadwinner die without a will in place will lead to headaches, and likely financial hardship, for the survivor.

In Ontario, the estate of a person who dies without a will, leaving a spouse and one child, the first $200,000 goes to the spouse. Any balance will be divided equally between the spouse and child.  As minors can’t inherit, the child’s share will be held in trust until the child is 18. If the deceased leaves a spouse and more than one child, any balance (over $200,000) would be one-third to the spouse and two-thirds (in trust) to the children.

Even at age 18, many young people are not mature enough to make good choices about an inheritance. If you don’t make a will, your children receive their entire inheritance at 18.

My most vivid memory of a decade spent doing estate planning seminars and personal counselling involves a Sunday afternoon session in a small town’s biggest church. After I questioned the wisdom of letting children inherit at age 18, a young woman jumped up and said: “I agree with you completely. That’s a bad idea.”

Later on, she told me a sad story. When her father died, she and her brother were each left $60,000, payable at age 18.  Her brother wrecked vehicles, ran up debts and left a string of unpaid bills in the two years it took to deplete his share. She did a little better, but was determined not to repeat the mistake with her own children.

You should also prepare for the bad things that can incapacitate us without killing us. If you aren’t able to conduct your financial affairs and have never had a continuing power of attorney for property prepared, “a potential nightmare awaits the family,” Fish and Kotzer suggest in their book The Family Fight – Planning to Avoid it.

A Cambridge couple lived that nightmare earlier this decade. When the husband suffered a stroke, his wife found herself unable to complete the sale of the family home, yet needing that money for a condo they had purchased. His share of the home sale was held for a time by the Public Guardian and Trustee. It cost her a lot of grief and money to get the situation resolved.

Do your loved ones a favour –have a will and powers of attorney drafted ASAP.



Why it’s important to have Powers of Attorney in place
January 1, 2009, 5:42 pm
Filed under: Communication, Estate Planning, Marriage, retirement
From the October 1, 2007 issue of Canadian Mennonite
Failing to planMike StrathdeeMost of us put off preparing for worst-case scenarios. But changes in what health care and financial institutions require of clients means that there are many good reasons to get our affairs in order—for the sake of those we love, if nothing else.

People generally don’t realize the need to have valid Powers of Attorney for Health Care (known in some provinces as advanced/health care directives, living wills or proxy directives) in place, so someone can advocate for them if they can’t speak for themselves.

A recent Royal Bank survey found that only about 48 percent of adult Canadians have wills. A chaplain at a hospital in Kitchener, Ont., says his guess is that as few as 5 percent of the people he works with have a valid power of attorney.

Increased concerns about liability, and the fear of being sued, lead health care professionals to take a hard line on the issue of informed consent to treatment. If a tragedy left you unable to express your wishes, would you want to leave the decisions on treatment in the hands of people who may not know your values?

Here are a few stories about what can go wrong.

A few years ago, a Kitchener lawyer gave an example of the extra stress that can result from a lack of preparation. A woman went to check on her elderly mother, and found her on the kitchen floor, unable to speak coherently. The ambulance was called, but the mother had never granted power of attorney to anyone. The daughter couldn’t prove her mom wanted to go to the hospital, so she was forced to call a cab.

The daughter couldn’t prove her mom wanted to go to the hospital, so she was forced to call a cab.

Inaction in authorizing people to represent us can have serious financial repercussions as well. A man recently told me how his wife, aged 52 and 10 years his junior, had suffered a serious coronary attack five weeks earlier and was in a coma. Her workplace benefits package entitled her to apply for disability coverage, but the insurer was balking at processing an application from a spouse who couldn’t prove he had the right to speak for her. The couple had never considered the possibility that she might be the one to become incapacitated. No power of attorney had been designated.

In another case, a Cambridge, Ont., couple was selling their home when the husband became incapacitated due to an aneurysm. Both names were on the deed, so the husband’s signature was required to complete the transaction. They had never given each other power of attorney, so she was unable to complete the sale quickly. When the deal closed, half of the sale proceeds were sent to the Ontario Office of the Public Guardian and Trustee, to be held in trust for her husband. She had to apply to the courts for official guardianship of her husband, a process that took several months.

It is wise to set in place instructions about who should be in charge if you can’t be.

Ask your area Mennonite Foundation of Canada consultant for a free Estate Planning Guide or for guidance in your decision-making.

Mike Strathdee, CFP is a stewardship consultant with Mennonite Foundation of Canada’s Kitchener, Ont., office. For stewardship education, estate and charitable gift planning, contact your nearest MFC office or visit mennofoundation.ca.