Vetting Guidelines: What To Do Before Choosing to Give to a New Charity

Vetting Guidelines: What To Do Before Choosing to Give to a New Charity

Philanthropy:  It’s a two-fold benefit for the gifter since a) there’s usually a good cause benefiting from the donation and b) there’s a potential the gift is eligible as a deduction at the end of tax season.

But, did you notice a keyword I used in the first sentence above?  “Usually?” Like all money management areas, the giving of our finances must too be properly channeled — scams abound.

Typically, the charities that wealthy donors give to are well-known, publicly-vetted institutions with plenty of transparency. However, once in awhile a criminal enterprise veiled as a goodwill cause targets benevolent circles — and their checkbooks.

Know your cause

I like to impart a few thoughts, or questions, to my clients before they donate — what I call the Four Rs:  Have you done your Research? What’s the charity’s Reputation? Does the charity or nonprofit in question get Results? Is there a prior established Relationship?

One of the most credible resources to consult is right at your own fingertips on the internet. Guidestar is widely regarded as a primary go-to source for up-to-date, comprehensive data on nonprofits. Additionally, consult with the Federal Trade Commission on legitimacy issues.

And reputation? Have there been any scandals? Searches under Google’s general and news options can vet ethics questions fairly quickly. Or simply ask other people.

Finally, are the charitable organizations you are interested in getting acceptable results? Do they maximize a donor’s gift for its cause? Ask a representative of the charity to show documentation for the previous two or three years and check it out for yourself.

Unsolicited donation requests

It’s not unusual for a nonprofit to be proactive.

But, when receiving phone calls from someone claiming to represent any nonprofit, exercise caution. Scam artists impersonating representatives of credible charities are an unfortunate, year-round nuisance.

Politely ask them to mail a hardcopy of their request. If they pressure you or ask for details — like a social security number — those are red flags; hang up.

In general, it’s just a good rule of thumb to never give over the phone.

How much?

Deciding how much to give can be tough — a little or a lot? Cash or not? Would an in-kind gift, such as an asset, be better than cash?

This can be dictated by the needs of the charity. If it is new and legitimate, the organization might benefit more by cash. More established organizations will know how to utilize or liquidate property or fine art intended to be sold and turned into cash.

The question of amount may also be dictated by taxation category brackets, or, for those seeking last-minute tax deductions.

In the end, however, it really is up to the gifter. Apply some common sense and stick to some of these points and navigating new charities shouldn’t be tough, but will instead bring a sense of inner satisfaction.

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What to Know Before Investing in Fine Art

What to Know Before Investing in Fine Art

Entering the fine art market can be a wonderful compliment to anyone’s investment portfolio and high-net worth. But, it can also be a fair-weathered investment, fickle and subject to the ebb and flow of world financial markets.

Understanding what you’re buying, it’s value and viability to retain that value can’t be overlooked. Additionally, your pocketbook can take a hit after the purchase if you’re not careful.

Why? You’ve got to know what you’re doing.

Appraisal and taxes

Two institutions are widely considered the leaders of assessing the fine arts marketplace around the world, though there is debate which is the premiere authority by art-world enthusiasts. The European Fine Art Foundation (TEFAF), a revolving-location art fair headquartered in Holland, issues a report annually, as does the global art fair Art Basel, begun in Basel, Switzerland, one of the three locations the organization hosts its arts gathering every year, along with Miami and Hong Kong.

The global fine art market rose significantly following the end of the Great Recession, peaking at $68.2 billion in sales in 2014, according to TEFAF. Sales and marketplace value can be two different things in any given year, so having an accurate value appraisal of your piece or collection is important.

Maintaining appraisal records is your responsibility and will keep you from landing in hot water with the IRS, who will assess a fair market value on the piece in question at the end of the tax season. There are many lessons to be learned as a collector and understanding taxation on your pieces is one of them.

Trends

This is a big one where collectors, especially those new to contemporary art, can make mistakes. Any art show with a high degree of publicity can tend to inflate the value of a particular piece or collection, and with a trendy new artist, that point is punctuated moreso.

However, don’t get caught up with the Joneses. Be smart and look at the big picture. Celebrity or popularity in art pieces, not to be confused with Pop Art genre of the 1960s, can dramatically bloat the sale price of a piece, which doesn’t translate to value retention. But if you like a piece then you like it; such is the saying, “Art is in the eye of the beholder.”

It’s very fashionable to have a works considered in vogue, but be wise if you want pieces to have an investment quality to them.

Another issue to watch for are limited edition runs of prints. This is really up to you, but buying limited edition prints as a form of investment should be considered cautiously.

Nothing beats an original work of art and anything that is a copy, even with a signature, well, is just a copy.

Proper documentation

Every piece you acquire must come with authentication paperwork and billing receipts. Its history needs to be traced.

Many attorneys and experts see the problem of forgeries time and time again, so it cannot be overemphasized — buyer beware.

Never purchase a piece that is not certified, which comes at the consensus of more than one expert, credible art gallery or auction house.

Another reason for keeping proper records and having the piece’s record history is to prevent being held liable for purchasing a stolen piece. Think of it in terms of forensics: With billions of dollars changing hands every year, fine art is a commodity. As such, it is subject to the same scams, thieves and heists that money, jewels and other luxury items are, so protect your pieces by having them authenticated if they are already and make sure to have a purchase history, certification and any appropriate documentation coming with certain mediums of fine art.

Paul Mascard, How to Talk to Your Kids about Their Inheritance

Paul Mascard, How to Talk to Your Kids about Their Inheritance

The inheritance conversation can feel a little awkward. This subject matter brings up uncomfortable feelings for both parties. Your children don’t want to think about a time coming where they will be without you, and neither do you. Nor do you want to set them up to think they are set for life, and no longer need to focus on building a successful career of their own.

But, having this conversation is important.

Here are a few ways to ensure the conversation goes as smoothly as possible.

Talk to each child individually.

Your oldest child may be better prepared to handle the conversation than your youngest. Your youngest may still be in high school and unfamiliar with inheritance or financial related topics, while your oldest child may already be financially successful in their own right. You may have different plans for each child, so it’s a good idea to talk to them on their own first, to explain what your plans are for that member of your family.

Talk to the family as a group.

After you have everything set up and you’ve talked to everyone one-on-one, this is a good time to get the family together to discuss what the plans are, so no one feels duped or out of the loop.

The last thing you want to do is let one child find out after your death that you left them with very little, while you left almost everything to the more responsible child. A time like this will already be stressful and the last thing your children need is in-fighting and resentment about the inheritance. Getting everything out in the open is the best strategy to ensure things are easier for your family to handle when the time comes.

Ask them what they want.

While you might have planned for one child to inherit your family home, and the other your family business – this might not be what they want. This is why having the conversation is so important in the first place. You don’t want to leave any child with an undue burden, and the sooner you know who wants what, the easier it will be to set the inheritance up in a way that makes the most sense for everyone.

Do it when the time is right.

As they always say, timing is everything. Having the talk gradually over the years may be easier than waiting until your children have families of their own.  With that said, it is different for everyone. You will know when the time is right.  It’s important for you to be ready to have this conversation, and at the same time, you also have to make the oftentimes difficult decision of knowing when your children are ready for the conversation, and how much detail should be included in said conversation.

Weigh the age and maturity of each of your children, as this will determine how much they need to know. A dependent child might not be ready to hear about these financial responsibilities, but a child in their 30s will need to know what to expect. 

For further information on how to talk about inheritance related topics to your children, feel free to visit Northland Wealth Management’s The Artisan newsletter from Summer 2014.

Financial Elder Abuse – Protecting Oneself

Financial Elder Abuse – Protecting Oneself

There has been much discussion over the past several years concerning the biggest demographic shift that Canada is experiencing and how this shift will inevitably change the numerous programs and services offered to Canadians, in particular those offered to seniors. By the year 2030 it is estimated that 23.6% of Canadians will be over the age of 65 compared to 15.3% in 2013, and by 2063 over five million Canadians will be 80 years of age and over. While this has spurred conversations around the increased need for long-term care, retirement residences and various social services, awareness surrounding elder abuse, is still in its infancy.

Financial abuse is the illegal or unauthorized use of another individual’s money or property with seniors being the most common victim. While this definition is pretty clear it is often difficult to recognize given that it usually occurs over a period of time and is not limited to a single event. In addition statistics on this form of abuse are often difficult to analyze given that the majority of the data is grouped together with all forms of elder abuse (physical, verbal and sexual abuse), coupled with the fact that most instances go unreported, either because of embarrassment, or simply because the victim is not even aware it has taken place. One thing that our government has noted is financial abuse is the most common form of elder abuse in Canada and predominately impacts those that have experienced a major life event, such as the loss of a family member, or those suffering from dementia or a cognitive impairment, typically with the abuser being someone close to the victim, such as a family member or care taker. The risk of dementia doubles every five years after the age of 60, with 20% of seniors over 80 being afflicted. Another 30% suffer from cognitive impairment, not dementia (CNID), which means half of people over the age of 80 have lost their ability to make significant financial decisions (according to an article published from the Canadian Foundation for Advancement of Investor Rights (FAIR) newsletter in July 2014).

As the change in demographics noted above continues to unfold we understand that this problem will only propagate amongst seniors. While there are initiatives and programs being developed to detect, identify and mitigate elder financial abuse, there are many preventative measures that can be implemented to protect yourself immediately.

Financial literacy and ongoing education are very important first steps. While I was working in a previous role at a bank, I encountered a couple of situations where I recognized that one of the parties was not fully aware of what they were signing – both situations involved children and their elderly parents. Recognizing their confusion and lack of financial knowledge, I went through the paperwork in a way that encouraged them to ask questions, educate themselves, and would not allow them to sign until they fully understood the information. It may seem embarrassing to ask questions but remember there is no bad question when it comes to YOUR money. If you are unsure ask a professional such as your financial advisor or attorney for help. Also, make sure that your financial and personal information is kept in a safe place together with a record of any monies given away as either a gift or a loan. This can be a very simple, yet devastating, transaction when one party believes the funds are a gift and the other a loan.

Another safeguard that is often overlooked is ensuring that you have the proper legal documents in place before you are no longer able to make sound financial decisions. Having an enduring or continuing power of attorney prepared and appointing someone that you can trust is very important, so if you are ill or unable to make your financial decisions your finances will be protected from anyone who may try and take advantage. I would highlight that this should also be done in tandem with the creation of your Will, as a Power of Attorney (POA) is no longer valid upon death and documenting your wishes for your estate is just as important as doing so while you are alive. There are many different ways one can construct a POA or a Will and we at Northland Wealth encourage the discussion of ensuring that these are in place for all of our clients.

Paul Mascard – Preserving Loving Connection

Paul Mascard – Preserving Loving Connection

Unfortunately at some point we all have lost, or will lose, someone near and dear to our heart.  This is the precipitous to Estate Planning, which ensures the effective and efficient transition of wealth from one person to another.  However, this planning process often ignores or even forgets about the salient points that we only realize long after the planning and passing has occurred.  By nature we all focus on the dollars and cents.  There is a strong argument to not only focus on the financial well-being of those left behind, but also the emotional toll it can take on those who have lost.

A recent survey published by Beyond Estate Planning highlighted the need for us to not only ensure we have proper legal documents in place, but also to make sure we convey our thoughts to our loved ones in a personalized manner.

More than half of respondents were not looking for a response from one specific person.

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This makes sense as we usually have multiple people in our lives that hold significant importance. The pie chart shows the distribution from those who did indicate a specific person.

Most People were hoping for a letter written directly to them

People emphasized the importance and meaning of having specific messages sent their way via a hand written letter or letters.

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Messages that are targeted as opposed to general are much more likely to engage with the interpersonal connection that would have lied dormant in that person’s absence. The fact that people were asking for this speaks to the attachment nature of grief and loss.

The Relationship was the most important topic of conversation

Survivors were interested in knowing about history and life experiences. However, the most striking and consistent message received from respondents was that they wanted to have evidence speaking to the importance of the relationship. They also wanted to hear expressions of love from the deceased towards them. It was touchingly reiterated over and over again by many respondents that the simplest and most important written content they could receive from a loved one was, “I love you, I always have, I always will.” Statements such as this, as simple as they are, as obvious as they may seem, as unnecessary to write as they may appear, are of the utmost importance in the absence of physical life, when such utterings can no longer occur.

People suggested that they wanted to know that the life of the deceased was enriched by their presence. They wanted to know that they contributed to the growth and happiness – to feel as though they played an import role in their loved ones life.

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Our memories cannot be fully trusted as accurate. However, written work can act as that more reliable witness to what existed then, so that it may in some way continue to exist today.

Some People Already Have Written Keepsakes

Many people spoke about how their loved ones’ journals or letters brought them comfort, a sense of connection, and wisdom. Every single respondent spoke of how these items were amongst the most treasured of all things they had.

A few moments of your time may provide an eternity of comfort to someone you love.

Paul Mascard, Sudden Wealth Management

There is nothing like the feeling of sudden wealth infusion. That euphoria is accentuated when the amounts are six, seven, eight digits or more. Of course, every coin has two sides and, typically, the greater the amount you receive, the greater your stress. In fact, there is even a stress-related disorder called “Sudden Wealth Syndrome.” Stress can lead the recipients to do things that ultimately threaten their good fortune and may leave them worse off than before they received the money.

We have all heard stories about the lottery winners who went broke, or the former professional athletes or entertainers who struggle to pay rent. For those that have the luxury of time to plan for the wealth infusion that may result from the sale of a company or property, or perhaps a retirement payout, taking the time to plan will help ensure an ideal outcome for your family’s future, and tax, estate and succession matters.

Know the Details

Someone can hold a lot of wealth on paper, but until you can convert that into cash, the opportunities differ in how you can use that wealth. What may appear to be sudden wealth require a closer look to truly understand the economics of the transaction. Take the time to dissect the transaction. Sit down with your significant other and read carefully, every piece of paper associated with the windfall. Highlight areas that you don’t understand. By doing this, you will be better prepared for the next step.

New Lifestyle Balancing Act

On the home-front, consider the transaction’s likely effect on income, benefits, disability and life insurance, retirement savings, dividends and taxes. Ideally you will have a good understanding of your current situation, as it is best to plan ahead and devise strategies for managing sudden wealth. Regardless of the details around the sudden wealth opportunity, few elements should be a complete surprise, if you have allowed for a range of possibilities and aligned your goals and strategies.

Develop a Comprehensive Wealth Plan

An in-depth plan that is customized to your unique situation will ensure that all facets of your financial future, including preservation and transition of wealth, are identified. However, it should not be forgotten that your needs come first. The factors are more than just financial measures. You will need to be clear on the amount of income you would like, but also the type of life you wait to enjoy and, if applicable, the inheritance or charities you hope to impact. Depending on the amount of wealth, you move from sufficiency thinking to stewardship of the assets.

If you have a solid understanding of your current financial situation, family and goals, and understand potential event outcomes through what-if scenarios you have considered through the Wealth Planning process, then you can respond quickly when such an event occurs.

Avoid Large Expenditures

Do not make big expenditures until you are satisfied with the advice you have obtained with your new financial position. Take care of taxes on the gain, pay down debts, take a small vacation, but don’t make too many changes at once. Consult with your professional team. If the amount you have received is substantial relative to your prior situation, take the time to consider your good fortune.