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Gifts with a warm hand, not a cold one

Elaine Froese for Progressive Dairyman Published on 30 November 2018

It was great delight to hear Meir Statman speak to at the Canadian Institute of Financial Planners 2018 national conference in Halifax, Nova Scotia. He talked about normal financial behaviours and why culture matters in how we transition our money to the next generation.

I clapped when he said, “I believe it is wise to give gifts with a warm hand, not a cold one,” as I have said this many times to farm families in transition. Here are some gleanings from the other speakers at the event.

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Jack Mintz, a public policy specialist, said the aging population should be aware of the very large expenses typical of the last year of life. As a farm family, have you considered long-term healthcare insurance or critical illness insurance?

Do you know what the expertise of a financial planner can do for you to create certainty for your future? I do. I have used CAFA colleagues to create plans based on our incomes from the farm and off-farm to give us insights until we are 102.

There is great power in knowing how your team of advisers can help you be ready for possibilities in life, personal and business. Go to CAFA to seek out an adviser close to you or ask for a referral.

Mark Venning of changerangers has a blog that invites people to think of longevity financing. He does not use the word “retirement,” which is why I think farmers would resonate with Venning.

He wants people to create portfolios of different ways of living at different stages of life. People who saw a computer image of how their faces aged over time were more likely to save more money when they had the reality check they truly are aging.

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What reality check do you have? Was it harder for you to climb the combine ladder this fall? Is there more hair in the comb? Are the words fuzzy if you are reading this without your reading glasses?

Venning encouraged us to plan for situational flux, to be social enterprisers who can create different income streams or ways to be involved in community that bring meaning and purpose to our lives as we age.

ROC stands for “retirees on call,” and we are grateful for “retired” farmers who help us harvest. The labour gap in agriculture creates many opportunities for seasonal help on busy farms.

We pay our employees very well because we value them. They are also clear on the total number of hours they want to give to our operation. Maybe it’s time to up your pay scale and have a chat with employees as to their goals and needs.

What options are you creating for yourself as you age so new work patterns can continue to energize you? I am using zoom to work via video conferencing with families. This gives me more time with my granddaughter and my spouse.

“Uber yourself” is a new term from Venning where you provide a service for hire. Making field meals, child care, cleaning, office administration and yard care are potential farm “Uber “options.

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Venning asked us to start changing the culture by changing the language we use.

It’s not “financing retirement” – it is now financing longevity as people are growing older.

It’s not “senior” – it is older adult.

It’s not “lifestyle” – it is life course. Not linear but with lots of curves and options.

It’s not “retirement” – it is the portfolio of life.

Carolyn Fallis, a tax specialist, said to break up your planning for years after 65 into three segments because each segment has different strategies.

Stage one, age 65 to 75, is when you are likely traveling, cutting back on farm labour and possibly moving to a new residence.

Stage two, age 75 to 85, is when you are sticking closer to home, attending funerals of friends and finding more delight in the simpler pleasures of life.

Stage three, age 85 to 95, is when you have your name on a list for long-term care and your family is carrying a heavy load of your medical care.

Fallis spoke about being very clear about your net income in your aging years and maxing out your tax-free savings accounts.

You might also want to consider at what age to turn on the tap of your RRSP, not full-bore but start to move funds.

She also wanted very detailed medical care bills to take full advantage of non-taxable benefits like medical expenses, and these credits were likened to “coupons” you need to use up.

Statman has written a book, Finance for Normal People. He said money is for well-being with three benefits: emotions, expressive and utilitarian.

The emotional benefits are “How does it make me feel?” Would you give your wife a rose for your anniversary or a $10 bill? (Better pick the rose.)

The expressive benefits are “What does it say about me?” John Deere has this benefit nailed when farmers love green paint, or red or blue, depending on the farmer’s values.

The utilitarian benefits are “What does it do for my pocketbook?” This is one of my quirks and why I use cloth rags and cloth napkins.

Would it hurt your pocketbook to start giving gifts of farm assets or cash to the next generation on your farm? How would it make them feel? What would it say about you?

That you have enough to live well, that you have a generous spirit, that you bask in their words and actions of gratitude for helping them build equity?

Your financial planner and accountant can guide you in what amounts are tax-efficient for you to transfer.

Don’t you want to nurture your adult children and give them an opportunity to help your grandchildren build the legacy of the family farm?

How thrilled would your non-farm heir feel with a financial gift to help with a house mortgage or student loan or leg up to help them be successful?

Statman also said risk tolerance is higher when you expect support from others.

This makes the decision to buy land or invest in farm growth a collective decision when you know you have a strong safety net of support from others in the farm business. Communication of expectations and timelines is key.  end mark

Elaine Froese, CSP, CAFA, CHICoach, was an invited speaker at the Canadian Institute of Financial Planners in Halifax. Visit Elaine's website to see when she’s speaking near you this winter.

Elaine Froese
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