Friday, October 16, 2009

Tough Questions Part III - Advantages and disadvantages of prepaying your funeral & other options

From my CBC Radioactive column with Peter Brown - October 15, 2009:

For the last few weeks, as Radioactive's personal finance columnist, we've been talking about the tough conversations you NEED to have with your loved ones and some of the tough financial decisions you have to make.

Last week we looked at the cost of funerals. Today, we're looking at the "how" you pay for a funeral and what your options exist.

Let's say you're relying on CPP to pay for a funeral. How much will it cover?

What we need to keep in mind is that if a person didn't pay into CPP (the Canada Pension Plan) their entire working career, the might receive less than the $2,500 maximum death benefit. From last week, we know that a funeral can average around $4,000 - 10,000, so even with the max benefit, there's a possible shortage.

Can you talk to the funeral home about a payment plan?

With many, yes, you can talk to the funeral home about a payment plan. They don't advertise it, but most will wait to receive the $2,500 after all the final tax returns and probate's been done if it is a matter of just not having liquid funds (i.e. there's a house left but it takes time to get the money from assets).

A lot of people look at pre-paid and pre-arranged funerals. First of all, what are the important differences between pre-paid and pre-arranged?

Prearranged is just that - you've met with a home and documented what you'd like but not necessarily paid for it. Pre-paid is where you've made the arrangements and pre-paid via life insurance, other payment forms, etc.

What are the advantages of a Prepaid Funeral?

1. Growth isn't taxable - As long as the expenses incurred are for eligible funeral expenses as defined by section 148.1 of the Canada Tax Act, the growth is non-taxable.

2. It's obviously much easier to think rationally when not grieving. It's difficult to think clearly while making so many decisions within days of losing someone. Being frugal is often the furthest thing on someones mind in the aftermath of death. It's simply easier to make those difficult decisions while not under so much stress.

3. Your wishes are honoured.

4. It's easy to get. Buying life insurance for someone in their 80s for example with major health issues is a challenge. Prepaid funerals, either as an insurance vehicle or as a trust fund don't require a health screening or age limit to qualify.

What are the drawbacks of a Prepaid Funeral?

1. They aren't a good investment. The interest they generate is minimal. The plan contributor has little control over where or how the money is invested.

2. There are scams out there. You will need to:

- Ensure the funds are held either in an income trust or as a part of an insurance policy at a recognized Canadian Financial Institution covered under the CDIC (Canada Deposit Insurance Corporation).
- Ensure the funeral home is a licensed funeral provider and is licensed under the Prearranged Funeral Act. In Alberta, check out
- Confirm with the funeral home that you can transfer your prepaid arrangement anywhere in Canada.
- Keep track of the policy and let your family know where it is.

Overall, is prepaying a good idea?

I don't think so. If you're looking for tax free growth and think you have a few years, the money would best be put in a TFSA (Tax Free Savings Account). At least that way, you still have the control over how the money is invested and it's there when needed. You can still prearrange your funeral so that your wishes are carried out how you'd like.

Before we leave the difficult, but important subject of funerals.. anything else we should bear in mind?

Lastly, if you have a loved one in assisted living of any type, you need to let that facility know your wishes well in advance. You must be aware that these facilities do NOT have a morgue, so if you were out of town or unreachable during a death, obviously the costs would go up for transportation to a storage facility.

Next week, we'll tackle the dollars and cents of long-term care, the financial issues of when a spouse has to move out, OAS, AB seniors benefit and more.

Tough Questions Part II - Funeral planning and end of life costs

From my CBC Radioactive column with Peter Brown - October 8, 2009:

Continuing from last week, this month, as Radioactive's personal finance columnist, we're helping listeners look at some of the hard financial questions you need to ask your spouse or parents about funeral planning.

How tough is this discussion for most families?

Obviously, it's extremely emotional. Most individuals will only go through it once or very few times in their life and that's what the industry is counting on. There are some great folks out there in the biz, but the industry is counting on you not knowing what you're doing, feeling guilty to over spend and since it's such a quick process - usually just a few days after death - and so stressful, people don't always make the best decisions.

That's why we wanted to cover it in this week's tough questions. Remember too, funeral directors are not clergy, even though some people trust them implicitly. They're in the business to make money. You do not have to buy the whole bundle of services.

What does the average funeral cost?

I went to three different places in town for pricing and info. I was told that the average is $4,000 - $6,000 - but that number can vary widely. It all depends on the service, open casket or not (which costs much more), cremation, burial and more. According to AARP, funeral and burial costs can easily reach as much as $10,000. The average cost of a traditional adult funeral in 1999 was $5,020 without any extras. Flowers, obituary notices, burial liners or vaults, limousines, acknowledgement cards -- they all add up to a major expenditure.
and if you choose burial, the costs continue to rise.

What's the cost difference for burial?

A wood casket for example might run $250 and the Cadillac as high as $35,000. The average is around $3,500-$5,500. You can also rent one as well for cremation or viewing. The price for the actual plot and all that's required there will also add to the bill -- from about $1,700 at a city cemetery and upwards. That's not factoring in the head stone of course.

A funeral provider may not refuse or charge a fee to handle a casket you bought elsewhere.
And with burial comes embalming, something that is encouraged, but actually not a necessity in all cases.

Embalming is rarely required when the person will be buried within 24 to 48 hours.
Another thing to know is sealed caskets cannot preserve a body. Sealed caskets cost hundreds of dollars more than unsealed caskets It actually costs the casket manufacturers only about $12.00."

What kind of cost comes with cremation?

It's quite a bit less and if there's no viewing, even less. Cremation with pick-up and no service will run about $1,500 - $2,000. But you may still have costs like an obituary which averages $300 - $500 per day in Edmonton for example.

What are the questions we should be asking now?

First, that you can negotiate. And with a little advance thinking about it, hopefully we make better and less emotional decisions. After all, it can be an extremely costly event. Funeral services are one of the largest purchases consumers will make, right up there with a car and a house.

Second, if a parent for example is in long-term care at a non hospital facility, you need to make plans ahead. I know it's terribly morbid, but if the family is on vacation for example, these places don't have a morgue and need to address deaths quickly. If they have to make the decision, it might cost you hundreds of extra dollars.

Tune in next week and we'll discuss the "how" to be pay for a funeral, pre-planning and more.

Sunday, October 4, 2009

Avoiding identity theft

From my CBC radio national column, September 24, 2009:

The story earlier this week about a BC couple on the hook for $20,000 in loans after their identity was stolen should have all consumers on high alert. And that’s not just because of the money that Mark Gorst and Shannon Werry say was stolen from them. As they try to dig themselves out of their mess, they’ve lost their credit rating along with peace of mind.

Let's talk about identify theft. How do you define it?

This is where someone applies for credit in your name, and starts racking up charges without your knowledge. Sometimes this goes on for months or even years before you learn of the situation.

When it comes down to it, identity theft is a form of fraud…with someone pretending to be you for personal gain.

According to a piece I saw this week on, more than 12,000 people fell victim to identity theft in 2008, with losses close to $10 million. Now nationwide that does represent a huge amount of money, but if it happens to you, your life can be turned upside down.

What if anything can I do to protect myself?

First of all you need to take small precautions, like checking your credit card and bank statements regularly. You can do this either on-line or making sure you pay attention to when your credit card statements are expected to show up in the mail. If they’re late, you should call your bank or department store to check on their status.

You want to make sure somebody hasn't redirected the bills to another address, which they can use as a base to start the process of stealing money - or assuming your identity.

Plus, if you don’t have one, invest in a shredder and use it for everything from phone bills to credit card statements. Basically, if a document has your name, address, an account number or more on it, it should be shredded not tossed.

Keep your passwords private and your phone calls about your finances behind closed doors. Your bank tells you this – to NEVER share your PIN or secret passwords with even a spouse – but I know, it’s hard to do when you live with someone.

Also, don’t make calls to your bank or credit card company from your office or in front of anyone in your home such as a room mate or a spouse. If someone you know intimately, such as a co-worker, ex-spouse or roommate, they might easily be able to access your SIN, date of birth and if they know your secret password, they have the ingredients for identity theft.

So those are some small steps.

But I recommend taking another critical one, and that's regularly checking your own credit report.

How would I go about doing that?

You can do that at or It will cost you about $24 each time for the instant online report, but it’s well worth it for the peace of mind. That way, if someone applied for credit in your name for example, your credit report would show that new account or it would show that some institution pulled your report therefore tipping you off that someone was seeking new credit.

If you check your report regularly, at least there would be minimal damage done.

Lastly, if you’re a known or highly potential identify theft candidate, alert both Equifax and Transunion in writing to document your potential situation to set up something called a fraud alert.

I've heard about credit monitoring services. What are they exactly?

These services - such as with Equifax and Transunion Canada--will alert you via email if there's suspicious activity on your account. Because these two services are also offered by the agencies that collect, report and keep track of your credit, are the best ones in my opinion, will alert you if credit is being opened in your name, offers some insurance if you are a victim of fraud and also offer access to your credit report and real people to talk to if you have a problem. They'll set you back $12 - $20 bucks a month.

Now I haven't signed up for a credit monitoring service. I'm quite happy to check in on my own credit rating. It's cheaper, and once every 3 to 6 months is more than frequently enough for me. But if you know you wouldn't keep up with checking your own as often, the monthly services might make sense for you.

What's to prevent someone from impersonating me to check out my credit score?

That’s a great question, but I’m not sure how much of an issue that is. If a would-be thief has all the info you’d need to access your account, why would they want to check your credit – they’d just go ahead and apply for some type of credit.

Just so you know, when you sign up for the first time with Equifax or Transunion, they’ll ask you for all your personal info such as your SIN, date of birth, address and then they’ll ask you for past credit info that only you should know…such as an old 10 year loan and payment and such to try and securely identify you. Once you’ve done this, you don’t have to do it again.

So if I do learn of suspicious activity in my accounts, what do I do next?

Call your financial institution and the police if you think it's warranted. Part of the problem with the B.C. couple is that by the time they had noticed the money was missing it was too late to proceed with charges. According to a local police officer, if more than a year had passed since the initial crime, it becomes harder to get charges approved by the Crown. So the sooner you know about the problem the better.

Is it time to invest in the stock market or stay on the sidelines?

From my CBC radio national column, September 24, 2009:

When G20 leaders meet in Pittsburgh today, they’ll be weighing whether or not to start scale back the stimulus packages that were announced after last year’s financial crash. But many experts are warning against throwing caution to the wind.
The advice could apply to individual investors as well as the world’s treasurers

With the stock markets performing so well recently, investors could be forgiven for thinking that good times are back. What are the people you pay attention to saying?

Here’s one person I pay attention to--David Rosenberg. He’s recently returned to Canada as chief economist and strategist at investment firm Gluskin Sheff after several years at Merrill Lynch in New York, where he was chief economist. Rosenberg was been credited with predicting the U.S. housing a time when many of his contemporaries were saying that the effects of the sub-prime crisis could be contained. At the time he was seen as being perhaps overly bearish, but events have vindicated him. .

So his forecasts command attention from the media and investors. And in the financial post this week, Rosenberg states that he thinks the market is overvalued

What’s his reasoning?

Equity prices are up something like 60 per cent from their lows in March, and that has Rosenberg concerned. He looks at something called the price-earnings ratio…this is something that looks at stock price and relates it to the amount of money companies are making. When you compare the prices some stocks are commanding right now to the amount companies are earning per share, he feels the increases just aren’t justified. In a recent note to clients, he’s quoted as saying that “there is too much growth and too much risk embedded in the equity market right now."

Markets generally increase (or decrease for that matter) for two reasons:

-The companies that make up the stock market are growing - people are buying their products/services or they’ve cut expenses.
-The second reason is that investors “think” the stock is a good deal. That’s when we get stocks increasing because of hype, fear and a bunch of other non-fundamental emotions.

When you look at the history of markets you realize that things don’t go up forever.
And so that’s why the cautions he raises make sense for me.

You really have to step back when you hear about double-digit gains and wonder if the time to get in is when everyone else is getting in or when everyone is getting out. That was the environment this spring. It’s quite the opposite now.

Any other insights from history?

This market, like many others, should be a reminder of the huge swings markets can take.

We just have to look back to the tech bubble which burst in the year 2000 and how many years of flat or negative numbers it took to finally get a profit on your investment. That market wasn’t even as bad as this one according to the experts and it still took a great deal of time to get your money back if you had invested right before the bubble burst.

Investors waiting on the sidelines might want to cool off and see this market for the erratic beast that it is. Just keep in mind that for most people a dollar lost is more important than two dollars earned.

And there’s one other historical event I want to remind everyone of….Any idea what happened 140 years ago today.?

Today is the 140th anniversary of the gold market crash of 1869, which led to a major stock market crash and became known as Black Friday.

The date is another good reminder of the boom-bust nature of markets, and the dangers of trying to chase big profits.

Unfortunately, when markets are exuberant, we as investors feel that they’ll be that way forever. On the flip side, when there’s nothing but bad news, like earlier this year, we think they’ll never go up. It’s a good reminder that investing in the stock market requires not only a strong stomach, but a great deal of caution.

Any final words of advice?

Yes, even the pro’s can’t successfully time the market. Just look at the poor performance of many mutual funds over the past year. So if they can't predict the markets, how can the average investor be expected to get it right?

Step back and keep in mind that a prudent, balanced approach to saving and investment is the best way to gain long term. That means looking beyond stocks. Adding other investments to your portfolio such as good old bonds, fixed income and even real estate are what you need if you're going to be able to weather financial storms in the long term.

Tough Questions Part I - End of life questions

From my CBC Radioactive segment with Peter Brown - October 1, 2009:

For the month of October, as Radioactive's personal finance columnist, I'm going to walk listeners through some of the toughest questions we need to ask ourselves and our loved ones when it comes to finance.

This week, we are going to ask the tough questions about end of life issues: 10 tough questions to ask yourself, your spouse, parent and siblings. There is no good time to really ask these questions, but they've got to be asked - and ideally when someone is in good health.

What's the first tough question I need to ask?

I think the first important question for your parents, spouse etc., What do you want done with your remains.

Is it cremation? If so, where would you like your ashes, fully intact in one container or, most places offer the large urn and a little one for the fireplace.

Is it Burial? If so, where? Do you have a plot already purchased?

And the other thing we need to take into account is religion - would you like a minister, what kind, a certain denomination, prayer service, wake, non religious, other?

What about when it comes to health care?

You need to look at living wills and personal directives. If there is one in place, people need to know where to find it and know which hospital to deal with, who's the family doctor? It's amazing how many adult children don't know this about their own parents.

What are some of the tough questions that come with personal directives?

Basically, what type of care and when would you like administered during a time of illness. Do you want to be resuscitated for example? If the answer is no, that needs to be known by all family members. If 911 is called for example, the ambulance drivers will always try to resuscitate. So if that isn't a wish, a document should be posted on the fridge in plane site.

While it seems that living wills and personal directives are more of a seniors issue, you never know what can happen and when. These are issues for every age group.

And people should talk to their loved ones about things like organ donation too. Your family should know what you want, and you should know what family members would like to do.

There are also Last rights, anointing, prayer - at a time of sickness, would you like someone called for prayer and if so, what type (denomination, minister, anyone?)

What about legal issues....what questions should we be asking there?

Everyone should have an enduring power of attorney. This is different from a regular power of attorney - say, you travel a great deal and have someone look after your financial affairs while you're away. In the event of mental incapacity, even if only for a short while, a regular power of attorney would cease to be legal. This is where an "enduring" power of attorney is needed. It only springs into effect during a mental incapacity. Please secure your own legal advice as each province and situation may be different.

Who would you like to make these decisions (financial and otherwise) in the event of incapacity?
And then you need to know if there is a will and if there is one, where it's kept? That leads us to the safety deposit box. If there is one where are the keys kept and where is the box itself.

Lastly, you'll want to consider special gifts. Do you have any that are essential to pass out? Where are your pictures, for final planning and more?

Here's a link to my top 10 tough questions. Ensure that loved ones know where it's kept -

Tune in next week for part two of four in our tough questions series. Each Thursday at about 4:10 on Radioactie Edmonton - 93.9fm and 740am. And be sure to send us your tough questions.