Eliminating hunger and poverty. Curing diseases. Building a just society. These are just some of the big, audacious goals that charities are trying to tackle within Canada and around the world. These goals are lofty enough, then you throw in a global pandemic and this proposition becomes exponentially more difficult. Charities across the sector are reporting revenues down markedly, with significant layoffs in progress – and more on the horizon. The size and scope of these shifts is beyond anything that we have seen before, far exceeding what we saw in the 2008/2009 financial downturn and with such broad effects even the most diversified revenue bases are seriously affected.
But much like gazing up from the base of a mountain and imagining the climb to its peak, achieving these goals can seem like impossible tasks. And indeed, they can be if we focus only on our own capabilities or push ahead without a strategy for giving.
Across the country, charities are modifying existing programs, developing new ones, and implementing measures to help prevent the spread of the virus – all in dramatically changed working environments.
However, when communities work together with a clear, well-informed plan, we can not only scale mountains, we can push them aside and achieve a positive impact that shapes the world for the better.
Driving change with intentional giving
As an individual, you may wonder how giving $100 or $200 to a charity can possibly make a difference. But imagine what we can achieve across Canada by working together as a team.
If all of us who can donate a few hundred dollars per year on average – perhaps 1% of our annual income – that’s billions of dollars to put toward solving important social challenges and achieving real impact.
What’s needed to make this happen? Intentionality.
Canadians are happy to donate here and there when someone comes knocking on behalf of a charity, but often not much thought or planning goes into our giving. As a result, our dollars can end up having less impact than we’d hope, or we end up giving less than we can.
Fortunately, we can overcome this by adopting a more intentional approach to giving and working together as Canadians to more effectively drive change.
Overcoming barriers to giving
Of course, the reality is that Canadians already contribute generously to charitable causes. However, together we have the potential to do even more to build up our social infrastructure and achieve those big, audacious goals. Two things that can help us boost our collective impact are clarity and confidence.
In the Thirty Years of Giving in Canada report, 69% of donors said they did not give more because they could not afford to do so. It is undoubtedly true that many Canadians already give as much as they can. But there are also many for whom uncertainty about their finances is the true barrier.
If you feel uncertain about your ability to give more, a trusted advisor can help you gain a clearer picture by assessing your current financial situation and helping you map out a financial roadmap. With more clarity on what you can afford to give, you’ll be in a better position to achieve significant impact.
The Thirty Years of Giving in Canada report found that 29% of donors cite concerns about inefficient or ineffective use of money as a barrier preventing them from giving more. A degree of skepticism is certainly warranted: sadly, the occasional news of a charity scam, or an event such as the WE charity scandal, can cast an unfair shadow over the entire sector dedicated to the society’s well-being.
Rather than limiting your giving due to pessimism, however, you can also seek out options for giving with greater confidence. For example, accreditation initiatives such as Imagine Canada’s Standards Program can highlight organizations that are committed to high standards of governance and accountability. When you are more confident that your money will be put to good use, you’re more likely to give more.
Joining forces to shape the world
Companies and individuals give to causes that are worthy. Philanthropy has grown each year, the new year more than the one before. But in difficult times, people dig deeper and give more to the organizations they care most about.
Achieving transformative social change requires us to dream big and join forces. None of us can eliminate hunger and poverty, cure diseases, and build a just society on our own. But working together with a clear, intentional plan, we can move mountains and create a better Canada for the benefit of everyone.
Elke Rubach is President of Rubach Wealth, a Toronto-based firm that helps established professionals and business owners support the people and causes they care about through comprehensive wealth and retirement planning. Contact Elke at 647.349.7070 or by email at firstname.lastname@example.org.
Bruce MacDonald is President & CEO of Imagine Canada, a national non-profit organization that creates programs and resources to strengthen charities, promote corporate giving, and support the charitable sector. Contact Bruce at email@example.com
A new year has begun, and just like every year, 2018 will have its share of ups, downs and surprises. When it comes to managing your wealth, the focus is often on long-term planning to protect against short-term blips and keep you moving forward toward your goal.
But what is your goal? Is it to retire with a certain amount of money in the bank? Is it to ensure financial security for your children and grandchildren, so that they will never have to worry about money after you’re gone? Or is it to leave a mark on your community or the world?
Tax-efficient strategies for growing and preserving your wealth are an integral component of sound wealth management, but they are only a means to an end. If the management of your wealth is not guided by your values, you may one day find yourself with piles of money and no idea what to do with it.
That’s why it is crucial for your wealth planning to be driven by big-picture goals tied to your values. And to gain clarity on these goals, you need to start by asking the big questions. For example: when it comes down to it, what does wealth and money actually mean to you?
Understanding what drives you
People spend much of their life directing time and energy toward their career or business. For many, this is simply a matter of survival, but this motivation is less applicable for high achievers who are already able to meet their immediate financial needs.
To reveal what truly drives you, you need to dig deeper. This involves thinking about not only what you want to do, but also why you want to do it.
Perhaps you want to build wealth that you can pass on to your children, but what are your underlying motivations and concerns? Do you want to give them the resources to achieve incredible things in life, or are you worried that they may lack the capacity to support themselves once you’re gone? On the other hand, maybe you are grappling with how best to provide them with a comfortable life without leading them down a path toward excessive privilege or entitlement.
Alternatively, you may be motivated to build your wealth so that you can share it with others through philanthropy. Yet even here, it is important to look deeper. Is your goal simply to give as much as possible and help as many people as you can? Or do you view philanthropic giving as an opportunity to become actively involved in tackling social issues and guiding social development in a hands-on capacity?
These questions are not always obvious and the answers are not always clear, but pursuing them will lead to greater alignment between your goals and your values.
Guided by values
Your decisions and actions today will influence what happens 10, 20 or 40 years from now. To avoid reaching the finish line and looking around to see where you’ve arrived, you need to create a roadmap for where you want to go.
At Rubach Wealth, one of our key roles is to act as a sounding board for our clients as they develop this roadmap. As you uncover and make sense of your core motivations, we can work with you to translate these into meaningful, overarching goals that will frame our relationship.
We can’t predict what 2018 will throw your way, but we can help you identify any gaps in your plan and take advantage of any opportunities that pop up. More importantly, we can help you maintain your focus on the big picture and chart a course forward that is guided by the values closest to your heart.
This is not a fun exercise, but it is an important one: imagine that you have recently passed away. Now put yourself in the shoes of your spouse or children who have survived you.
First and foremost, they are grieving. If your death was unexpected and sudden, they may also be in shock. In the days following your death, other emotions may be added to the list: confusion, summed up in the question “what happens now?”, and worry, with surviving family members wondering
“How will we manage financially now that you’re gone?”
The grief, shock and sadness are all natural reactions that cannot – and, arguably, should not – be avoided. On the other hand, the confusion and worry can and should be mitigated as much as possible. Fortunately, you can take active steps today to minimize the potential for this added stress at a time when your family is already grappling with a great loss.
The time for estate planning is now
An estate plan provides a map for your surviving family members outlining how you would like your personal and financial affairs managed after you die. It also serves as a guiding strategy during your lifetime, helping you make the most of available legal, financial and tax tools in order to preserve your wealth, provide for your family and build your legacy.
However, the thing about plans is you have to make them ahead of time. Putting off estate planning until you’re old or sick is a bit like waiting until the last minute to book your dream holiday: you may luck out and snag a great deal, but you’re more likely to end up squished into a middle seat flying to a dodgy resort, or perhaps not being able to go on holiday at all.
The process of creating an estate plan is highly personalized, but in general it includes the following elements:
Identifying your priorities
Creating a will
Designating a power of attorney and executor
Planning for taxes
Organizing all important documents
Some of these steps you may not be able to do right away and some elements may require updating over time. However, the important thing is to make a start. Having an estate plan that evolves over time is natural; having no estate plan at all is like rolling the dice and hoping for the best. Starting sooner rather than later also gives you a longer period to benefit from tax-saving strategies, which can make a significant difference in long-term estate preservation.
Death doesn’t happen on schedule
Death can happen unexpectedly, but what to do when a spouse or parent dies shouldn’t be a surprise. If you were to die tomorrow, would your spouse or children know where to start when it comes to making sense of your financial affairs?
Anyone who has been in this situation can relate to the horror of stepping into a home office or opening a filing cabinet and realizing that they have no idea what to do and what to look for. This is where estate planning can help to ease the confusion and worry. If you have developed a comprehensive estate plan, your spouse and children will be spared some of this stress as there will already be clear steps in place for them to take. Depending on your personal situation, these steps may include:
Contacting your lawyer
Contacting your financial advisor
Calling CPP to arrange death benefits
Having a clear and comprehensive estate plan is also critical to avoid litigation. If you pass away without a will or if you fail to identify a clear beneficiary for every single asset, your estate could very easily end up in court – bogged down by lawyers, legal fees, delays and fighting. Litigation is ugly, expensive and undignified, so clearly not something you want as part of your final legacy.
It all starts with communication and planning
Nothing aside from time and support from family and friends can ease the pain of losing a spouse or parent, but it is possible to ease the stress of dealing with such a loss. By ensuring an estate plan is in place, you can give your spouse and children peace of mind and a clear path forward at a time when they are likely feeling lost.
However, it is important to recognize that estate planning goes beyond the formal elements like creating a will and designating an executor. It also includes sitting around the kitchen table speaking openly about your wishes in the event of a serious illness and your preferences regarding funeral plans. It includes ensuring that your spouse and children know where to find property deeds, account numbers and other important information about your assets. And it includes sharing your hopes and worries for the future. Whether these issues come up naturally in conversations with your loved ones or you organize a family meeting specifically to talk about them, what’s important is that you have these discussions.
Thinking about your own mortality can be grim business, let alone planning ahead for your eventual death. However, when viewed as an opportunity to ease the emotional stress your family will face when you die, suddenly the importance and value of estate planning become clear.
Lawyers play a big role in preparing the legal components of an estate plan, but in general they are focused only on executing your instructions. In contrast, financial advisors can work with you to guide the process of estate planning and develop strategies that match your needs. At Rubach Wealth, we can help you build a robust estate plan to ensure that your family is well taken care of now and in the future, come what may. Contact us today to discuss how we can support you and your family.
Even if insurance is a topic that puts you to sleep, there is a major change coming in the insurance world deserving of your attention given its potential to significantly impact your wealth and what you are able to pass on to your loved ones.
Unless you work in the insurance industry, there’s a good chance that you aren’t aware of this or haven’t given it much thought.
What’s Happening with Permanent Life Insurance?
On January 1, 2017, new rules will come into effect that will change how permanent life insurance policies – which have both an insurance component and an investment component – provide tax-sheltered benefits.
Broadly speaking, the new rules will result in a general increase in the cost of insurance and a decrease in the speed at which premiums can be paid into a policy.
Although corporate-held policies may be less common than those held by individuals, they offer considerable tax advantages. For corporate-held policies, the biggest change under the new rules is how old you have to be at the time of your death to receive the full death benefit on a tax-free basis. Currently, if you are 73 or older when you die, the full death benefit can be paid out tax free as a corporate dividend to your chosen beneficiaries. Under the new rules, the amount of your death benefit that can be paid out tax free will be partially reduced unless you are 90 or older at the time of your death.
The good news: permanent life insurance policies established prior to January 1, 2017, will be grandfathered under the existing rules. As long as you set up a permanent life policy optimized for the existing rules before the end of 2016, you can lock in your access to the more favourable existing rules. However, some changes to the terms of existing policies may be treated as the creation of a new policy under the new rules and thus take away the grandfathering protection, so it’s important to get everything in order before the deadline.
What Should You Do?
The deadline may still be several months away, but the time to act is now. Insurance companies are experiencing a rush of applications as 2017 draws near and have warned that processing applications may take longer than normal.
The underwriting process – which can take anywhere from a few weeks to several months – must be completed before December 31, 2016 for a new policy to be grandfathered under the existing rules. So, now is the time to start the conversation and get the ball rolling.
You may not find insurance an interesting topic, but in this instance it is a timely topic that offers an excellent way to maximize the wealth that you can pass on to future generations.
We have the know-how and resources to identify the right policy for your needs, help you establish a corporation if required, and work with lawyers and accountants to structure things according to your requirements.
All it takes from you is a phone call to get things started:
“Am I better off with a big bank for my mortgage?”
This is a question that is frequently asked by property buyers when it comes to choosing a mortgage lender.
The answer, however, is very subjective as things like mortgage servicing, access to products and penalty calculations have to be considered when picking the best lender for your mortgage.
Do you need a branch?
One advantage that big banks offer over smaller mortgage lenders (monoline lenders) are the “bricks and mortar” branches. Some people prefer to have a face-to-face conversation with a bank representative when servicing or making changes to their accounts.
Something to keep in mind is that once people get their mortgage, they make their payments like they are suppose to and return to the bank only when the mortgage is up for maturity. Thus, never really utilizing the “face-to-face” experience they thought they would need.
Smaller lenders do not offer face-to-face experiences for clients. However, most smaller lenders provide online access to mortgage features such as pre-payments, changes in payment schedules, and remaining balance, that you would otherwise utilize a big bank branch to access.
Thus, consider if you are looking for fast access to information, simplicity and how hands-on you’d like to be with your mortgage when choosing a service level.
This is something that many home buyers don’t consider as most are focused on getting a good rate or long-term, when it comes to their mortgage.
Most banks have a portability clause that will let you transfer a mortgage over to another property if you decide to move. This comes with restrictions that vary between lenders, big and small. In the event that you cannot or do not want to port, it is important to understand how penalties are calculated.
With variable rates, the norm is three months’ worth of interest. There are some lenders that will reduce their interest rate by 0.10%-0.20% (on average) but will charge 3% of the balance as a penalty if contract is broken. For people who are planning on staying in their new home for at least the next five years, this is a great option. This is because the lender will let you convert to a fixed rate mortgage without any penalties and will also normalize the penalty if you decide to refinance with them given their clients some more options while saving on interest costs.
When it comes to fixed rate mortgages, penalties are calculated in one of two ways, whichever of the two is greatest.
The first is the three months’ interest and the second is an interest rate differential (IRD) calculation that will determine how much interest the lender is loosing by letting someone break the contract. The lenders do this by using the current balance, time left in term and the interest rate for the closest term to what is left (to compare what they would have to lend it out to).
What big banks do that most smaller ones don’t, is use their posted rates as oppose to the best rates to calculate this penalty. Believe it or not, this can easily add an enormous cost to breaking your mortgage.
Most big banks will provide access to a secured line of credit against your home, assuming you qualify and that there is enough equity in your home to being with. This may, later on, save you thousands if you decide to renovate, invest, pay down high interest debt, etc.
Most smaller lenders do not offer access to secured line of credits, or have options for bank accounts/investments to keep them all under “one umbrella”. Over the last little while, this product offering has been shifting, however.
The ability to keep all mortgage and financial dealings in one place is something that matters to some but not to others.
Big banks may offer special terms to attract new business on case-by-case basis. They look to manage and balance their portfolio with other business lines within the same bank.
Small lenders only lend out and do not have other business lines to worry about. Because of this they have to be very competitive with rates in order to generate business and they are also very competitive at time of renewal.
This has really no bearing whether you are a big or a small lender. However, I’m a believer that:
Features vary from bank to bank, even the big ones, and it’s important to know how they will affect you.
Some lenders will let you pre-pay at any time, saving you the interest cost compounded over the amortization of your loan. Other lenders, will only let you pre-pay on your anniversary date. For example, if a day after your funding day or anniversary date, you got a bonus and wanted to pre-pay your mortgage, you wouldn’t be able to. You literally would have to wait 364 days in order to make the pre-payment thus costing you 364 days of unnecessary interest.
Another feature that needs to be considered is the maximum amortization. Yes, 35 years is still available for some borrowers. And no, not all banks will force you to take a collateral charge as oppose to a standard charge (even within the big banks).
Which is best for you?
I encourage everyone looking to buy, refinance or renew their mortgage to focus on both the short and long term goals. Ensure that the lender you choose will not impede on these goals and if they do, then they’re not the right fit for you.