Category: Topic

Managing money for aging parents

RobHLeave a comment

Before my own parents died, I managed their investments and taxes for about 10 years. Here are some things we had set up that made things much easier as they relied more and more on me in their final years. In my case, they placed their trust in me while of sound mind and body. Things probably look a lot different if this isn’t the case for you. And once again, I will remind you that I’m not a lawyer.

Make sure they have a will, you know who prepared it, and you know where it is

I cannot imagine how much more complex managing my parents’ estate would have been had there not been a will. They made a habit of reminding me where theirs was kept periodically. This was a tremendous relief after they died. In Ontario, the rules of probate dictate that a will has to have an “Affadavit of Execution” in order to be considered a valid document. What this means practically is that the legal team who prepared the will in the first place has to certify that yes, they did indeed prepare the will and the signatures on the will are the ones they remembered. So, as executor, this meant I had to march the signed will over to the law firm who prepared it, and they had to call the lawyer who signed it out of retirement to come in to the office to fill out the Affadavit. (If this sounds crazy to you, I can assure you, you’re not alone…)

Have a Power of attorney (PoA) set up

Having your parents’ logins (which I know is a very common practice) is NOT the same thing as the steps I’m outlining here. While you may be able to do quite a bit this way, having a PoA is much better. The PoA I’m referring to is the “Continuing Power of Attorney for Property” as mentioned by the feds. (There’s another, separate, PoA for health decisions, but that’s not what I’m talking about here). PoA is only applicable to living people — the PoA document doesn’t have any authority once the person is dead, that’s what the will is for. The PoA document is a necessary but rarely sufficient document to get a bank or broker to talk to you on behalf of your parents. Every financial institution I dealt with insisted that I fill out their own forms in addition to providing a PoA to get the ball rolling. Many lawyers prepare PoA documents as part of their will package, but for my parents, we just used the free form on the Government of Ontario website1. With this form I was able to get my own “authorized attorney” login for my parents’ RRIF/TFSA/investment accounts at BMO Investorline.

Set Up an Authorized Representative with CRA

An “authorized representative” is someone designated by the parent as being able to communicate on their behalf with the Canada Revenue Agency. It’s a common practice if you happen to hire a tax pro to prepare your taxes. I was my parents’ authorized rep; it’s surprisingly easy to set up by following the instructions over at https://www.canada.ca/en/revenue-agency/services/tax/representative-authorization/overview.html.

Simplify, simplify, simplify

Any extra bank account, any extra RRIF/TFSA/RRSP/Investment account creates more work and more headaches to the eventual executor of the estate, ESPECIALLY if it involves multiple financial institutions. Do those you leave behind a big favour and ruthlessly eliminate any extras.

A joint bank account between a child and a parent can be very useful

Here you have to be quite careful, lest you inadvertently create a “bare trust” under CRA rules. Here I’m talking about enough money to deal with post-death expenses — last utility bills, funeral expenses…This is helpful since (as stated above) a PoA no longer has any validity once the person who signed it is dead. My parents added me to their joint chequing account many years ago…since this account was quite modest in terms of its holdings (it was really only for day to day expenses) I never had to worry that they had set up a bare trust.

  1. If anyone reading this has any sort of influence on documents posted by the Government of Ontario on their websites, could you please let them know that requiring the use of Adobe Acrobat to open and edit pdfs goes against all notions of equal access to their constituents? My poor little Chromebook doesn’t do Acrobat. ↩︎

Do this TODAY with your RRIF, RRSP or TFSA

RobH7 Comments

Disclaimer: I’m not an accountant and I’m not a lawyer. Consult a professional if desired.

Summary: Make sure your RRSPs, RRIFs and TFSAs have named SUCCESSORS or BENEFICIARIES to save those who survive you time, effort and money.

The CRA lets RRSPs, RRIFs and TFSAs of a dead person pass to other people without tax penalties. But the account(s) have to be properly set up. Make sure they are! It only takes a moment.

The CRA does like us to pay taxes. But they are not completely heartless. They’ve set up the concepts of successor annuitant (for RRIFs), successor holder (for TFSAs) and “Beneficiary” (for RRIFs, TFSAs and RRSPs) to help lower the tax burden of someone who has died.

A “Successor Annuitant” for a RRIF basically takes over the account of the dead person. This can only be a spouse. This is similar conceptually to the named successor holder of a TFSA. The benefits?

  • There’s no sale of the assets of the RRIF/TFSA unless desired; everything can pass “in kind” to the successor
  • The successor does not take a tax hit1 (although the dead person does in the case of a RRIF/RRSP2)
  • The funds are not considered part of the estate, which means these funds will avoid probate. That’s good because you won’t have to pay the estate administration tax (aka probate fees) and access to the funds is MUCH quicker since you don’t have to wait for probate to be granted (a months long process, typically)

A “Beneficiary” is someone who gets the money in the accounts. This can be anyone. Or even more than one (e.g. the children of the TFSA holder or children of the RRIF holder). The same benefits apply

  • The named beneficiary or beneficiaries don’t take a tax hit
  • The funds in the TFSA/RRSP/RRIF are not part of the estate

Both the “successor Annuitant” and the “Beneficiary” are set up at the account level by your financial service provider (e.g. your bank, your broker) usually set up at the time the account was created. (Remember those long forms you had to fill out when you first opened a TFSA, RRSP or RRIF? It was on the application form). These can of course be changed at any time. One common situation where a change is warranted is after the death of one spouse — this would be a good time for the surviving spouse to name their children as beneficiaries of their RRSP/RRIF/TFSA.

The actions you should take? Call up the people who manage your RRIF/RRSP/TFSA and make sure that:

  • If you’re the holder of a RRIF/TFSA, are married, and intend to give everything you own to your spouse, make sure you name your spouse as the SUCCESSOR
  • If you’re the holder of an RRSP, are married, and intend to give everything you own to your spouse, make sure you name your spouse as the BENEFICIARY
  • If you’re the holder of a RRIF/TFSA/RRSP and don’t have a spouse, or want to name someone other than your spouse for the funds, then make sure they are named as a BENEFICIARY

This only takes minutes, and can save those who remain after you’re gone time, effort, and money!

  1. Not 100% true. The recipients have to pay tax on the gains made by the holdings between day of death and the day of liquidation. ↩︎
  2. For RRIFs, this is true. Put simply, under tax rules, the dead person is considered to have sold the entire RRIF on the day they died and must declare it all as income. ↩︎

Reduce Travel Costs by Paying Attention to Foreign Exchange

RobH3 Comments

Travel is something I like doing. Spending money on seeing new places, trying new things, all good from my perspective. But spending unnecessary money to line the pockets of a bank? I’m not so good with that.

For many years, I’ve used my credit card everywhere, in every country. Very convenient. I recall my first big trip abroad (circa 1992) where my main source of money was Travelers Cheques, if you can believe it. (Looks like they aren’t even available in Canada anymore).

But I never realized how much this habit was costing me. From https://www.cibc.com/en/personal-banking/credit-cards/articles/foreign-currency-credit-card.html:

It’s common for a credit card company to charge a foreign currency conversion fee between 1% and 3% of the transaction amount.

What’s especially sneaky, and the reason I never gave it much thought, is that the fee is buried in the exchange rate that is posted as part of the transaction. As a result, it’s easy to miss how much you’re giving to the bank.

Now, 1% to 3% extra for a cup of coffee or a taxi ride isn’t going to break the bank, but for a multi-night stay in a hotel? Show tickets? Car rentals? It can start to add up.

Here are two products that I use to help get rid of those fees. There are others out there, but these I have used myself and can recommend them.

Wealthsimple’s Cash Card

I’ve been rather curious about Wealthsimple for a while now. I started with using their “pay what you want” tax service and saw it got a mention from the Globe and Mail’s Rob Carrick (an excellent resource, by the way) which led me to investigate further. This is NOT their “beta” Wealthsimple Infinite Visa credit card that is coming out in 2025.

From https://www.wealthsimple.com/en-ca/spend:

Now you can feel like a local while shopping abroad. With no additional foreign transaction or ATM fees from Wealthsimple, your Cash card is a must-have travel companion.

The Cash Card, as far as a vendor is concerned, looks like a MasterCard. But to you, the card holder, the Cash Card looks like a debit card. Any transaction charged to the Cash Card is instantly debited, so you have to have the money available in your Weathsimple account before you go on a shopping spree.

Signing up for the Cash Card was done online, in minutes. Putting money on your Cash Card can be done using Interac e-transfer from your “usual” bank account, and is available pretty much instantly as well. Cash Card supports Apple Pay and as a nice bonus, also provides you with a “virtual card” accessible from the Wealthsimple app so you can enter credit card details for online purchases. You can also order up a physical card, but I’m still waiting for mine….The Canada Post strike apparently is still being used as an excuse in that regard. (Not a big deal, I rarely use a physical card anymore).

I’ve now successfully used the Cash Card for US dollar and British pound purchases, and the rate I got was exactly the same as the rate I saw in real time from Google (cries quietly at the current exchange rate):

  • Pro: Very easy to set up, does what it says — no extra foreign exchange fees
  • Pro: Supports multiple foreign currencies, with only a few exceptions.
  • Pro: It’s free, and the money in your Cash account actually earns a bit of interest.
  • Con: You have to have the money available up front, it’s not a credit card that you can pay later.

CIBC’s US Dollar Aventura Gold Visa Card + CIBC US Dollar Savings Account

If instead you’re looking for a REAL credit card and you’re only interested in US dollar transactions, then CIBC’s US Dollar Aventura Gold Visa might be a choice. I signed up for this card because a lot of my retirement funds are in US Dollars, I travel and shop in US Dollars pretty regularly, and I happen to bank with CIBC which also makes things easier.

However, unless you already have a US Dollar bank account that can pay off your US Dollar credit card, you’ll need to set that up at the same time. So for that I used the CIBC US Dollar Savings account. This should not be confused with CIBC’s US checking account which isn’t required (I have this account too, but have very limited use for it).

So, applying for these products is the typical Canadian bank experience. Multiple days, multiple forms, mildly unpleasant, but as a self-directed investor, not unusual, either.

The Visa card has an annual fee ($35, which includes up to 3 additional cards) and allows you to collect a small amount of Aventura points which can be redeemed for cash or gift cards. The card supports Apple Pay and generally works like any other card you may have used. Just make sure you don’t accidentally use it for a Canadian dollar transaction or else you’ll get charged that extra conversion fee that you were trying to avoid in the first place.

The savings account pays a paltry amount of interest (0.05% for balances under $10,000 USD) and charges $0.75 USD for every transaction. So, nothing to write home about there. But it is in essence a Canadian bank account in every way; this means (for example) it can be set up as a legitimate bank account with your online broker.

  • Pro: if you’re already banking with CIBC, both the credit card and the savings account are linked to your existing CIBC bank card, so you can see everything from one login.
  • Pro: Related to the above, you can set up auto payment of your USD credit card from your USD savings account
  • Pro: Related to the above, you can easily move money from your Canadian accounts to your US accounts. Of course, with this convenience comes the added foreign exchange fee that you were hoping to avoid, but if you’re short US Dollars, then it’s an option. (In another post, I’ll talk about how I convert US dollars cheaply).
  • Pro: It’s a real credit card, meaning you can defer payment.
  • Con: Compared with Wealthsimple, it’s somewhat painful to set up
  • Con: it’s only useful for US dollar transactions

For most people, the Wealthsimple Cash Card is the easy way to save money on foreign transactions, and the downside is small. If you have access to US dollars (maybe you’re paid in USD, or like me, have investments in USD), then perhaps the CIBC Aventura card might make sense, too.

Thanks, Wealthy Barber

RobH3 Comments

My investment journey started a long time ago, when I somehow got myself a copy of The Wealthy Barber. I can no longer recall the specific lessons I picked up from that bestseller, save one:

“Pay Yourself First”.

It’s a really simple tenet that reminds me that the only person funding my retirement is me. If you fail to pay yourself first, “future you” will pay the price. It doesn’t have to be a lot, but it does have to be a regular and prioritized occurrence.

One way to prioritize saving is to make it automatic. Every paycheque, carve off a fixed amount to redirect to your firewalled retirement account. At the beginning, maybe that’s just a savings account, but it could just as well be an online broker, as long as that broker is helping you by paying you interest on the money you’ve saved.

As time went on, I came to realize that paying myself first also meant NOT paying advisor fees for my managed retirement portfolio and instead investing that money in future me. It was, at the time, a bit of a scary decision, but one that I do not regret at all.

I was reminded of this very influential book because I discovered you can download the updated version, “The Wealthy Barber Returns” for free from RBC Direct Investing. Do check it out! https://www.rbcdirectinvesting.com/_assets-custom/includes/wealthy_barber.pdf

What’s in my retirement portfolio?

RobH17 Comments

So what’s in my retirement portfolio these days? A fair question. My portfolio is 100% in ETFs excepting the cash position. For historical reasons, a lot of my retirement savings are in US dollars. As as result, you’ll see ETFs listed here that trade on the US stock exchange, in US dollars. It’s not an approach I’d recommend for most people as it adds a lot of complexity to the mechanics of moving money around, which is really what decumulation boils down to!

The pie

The chart shown below is the summary of all my accounts: personal and spousal RRIFs in CAD and USD, TFSAs for me and my spouse, and non-registered accounts in USD and CAD. It comes pretty close to my target of 80/15/5: 80% equity, 15% bonds, 5% cash. Let’s visit how that comes about.

Summary of funds held in my retirement portfolio

What’s in the pie?

AOA: This is what I call an “All-in-one” ETF that trades on the US stock exchange. It’s an 80/20 fund, 80% equity, 20% bonds. Its US weighting is pretty high, its Canadian weighting is pretty small (about 2.4% by my calculation).

XGRO: This is the Canadian sibling of AOA. An “all-in-one” ETF that trades on the Canadian stock exchange. It’s also an 80/20 fund, with a much stronger tilt to the Canadian equity market.

HXT: Is a fund that I only hold in my non-registered account. Through behind-the-scenes accounting and swap contracts, it provides no-dividend access to the S&P/TSX 60. This is useful from a tax perspective if you’re still earning a salary since it effectively defers any tax impact until you sell shares.

XIC: A variant of the S&P/TSX 60 that caps the contribution of any one company to prevent the “Nortel effect” seen in the late 1990s. I’ve been too lazy to clean this out of the account.

DYN6004/DYN6005: Are Scotiabank HISAs in Canadian and US funds (High Interest Savings Accounts). On my provider’s trading platform, they look like mutual funds, but are just savings accounts that pay a decent interest rate, monthly. They have consistently provided the best rates of all the HISAs available on my provider’s platform.

SCHF: A very low cost equity fund that trades in USD. It provides exposure to international developed markets except the USA. It has about 8.5% weighting for the Canadian equity market. I used to have this in my registered accounts, but dropped it in favor of AOA. It’s still in my non-registered accounts so I don’t have to take an unnecessary capital gain.

HXS: The sibling of HXT, but it covers US markets. Only held in non-registered accounts.

VCN: Provides broad exposure to the Canadian market including smaller companies.

In an ideal world, my portfolio would just hold AOA/DYN6005 for US funds and XGRO/DYN6004 in Canadian funds. Eventually, as I decumulate my holdings, that’s what it will look like. Simple is best.

So why is my portfolio not aligned with my ideal model? Three main reasons:

  • Some of the “extraneous” holdings are in my non-registered accounts and I don’t want to incur a capital gain just to make the portfolio simpler.
  • I want a little bit more Canadian market exposure since I do live and spend money here.
  • No pressing need to. The splits between Canada/US/International equities are fine where they are. I try to trade only when necessary.

I’ll revisit this post from time to time as I go through decumulation to see how it evolves. Prior to hitting the button on retirement, I had a lot more ETFs in the list, basically attempting to build the equivalent of XGRO and AOA through other ETFs. For a small cost, (roughly 0.15%) AOA and XGRO rebalance their holdings quarterly so I can just let them run on autopilot, confident that they will always be close to my desired 80/20 splits. That’s why these two ETFs make up the lion’s share of my retirement portfolio.