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A debt of gratitude
“I hate debt.”
Art Kelm’s jaw sets and his voice takes on an uncharacteristically hard edge. Then he shakes his head, and laughs.
“I guess that's the accountant in me. But it's also a product of my upbringing.”
Two instances of debt have shaped Kelm’s life. The first was when he was a young boy in Winnipeg in the 1930s...
“My father was an immigrant. He came to Canada from Poland with nothing, and started to build a life here.... I guess the lowest point in our lives as a family came when, for a while my father couldn't find work. So my mother worked in a laundry cleaning hospital sheets. And then she lost her job. We had nothing.
“So my father had to go to the city of Winnipeg welfare to get a truckload of coal delivered to our house. That just about broke his spirit, having to do that. He later discovered there was a lien against his house for the welfare. As soon as he was able to, he discharged the debt.”
Kelm never forgot that. Even welfare was a debt that had to be repaid.
The memory of those tough times is still strong, almost 70 years later.
The second instance was when he was 22. It was 1954, and Kelm had just graduated from university as a chartered accountant. He and two friends had a dream to travel for a year and see the world.
But he also wanted to buy a car, and open his own accounting practice.
The cost of the dream trip proved too high -- the new car, and a chance to open his own business, won out.
The grand tour would have to wait. Instead, Kelm borrowed money from his father, and opened a small accounting practice. He eventually merged with partners and the firm grew steadily over the years. He soon repaid his father, and also started dabbling in investments – bonds at first, government bonds, compound bonds. Nothing fancy. Then equities and bank stocks.
“I was fairly entrepreneurial -- must've inherited that from my father -- and I discovered the power of compounding interest. In those days, with compound interest as high as 13% on government bonds, you didn't have to be very smart to make money. I just kept reinvesting the money, trying different things, taking a chance here and there.”
Soon he was investing money for his parents, his sisters, and for his own family. Year after year, his portfolio grew, like his merged accounting practice. The only trouble he got into was when he named one of the holding companies for the stocks “All in the Family Holdings”. A letter from a Los Angeles television lawyer strongly discouraged him from going public with the name.
Kelm started his personal stock purchases with a fairly moderate investment in one bank stock in 1991 and another in 1997, and then “just kind of forgot about them.”
Before this recent correction, with re-invested dividends, those stocks were worth eight times his original investment.
Kelm is now 76, and still dabbling in the markets. He's decided he wants to put the money in those two stocks to good use, by donating them to charity.
“It just turned out very well, and I thought charity should get some of this,” he says. “Fortunately the accumulated value of the stock was enough to help the four or five charities Mary and I already donate to, but do it in perpetuity.
“I was thinking how am I going to do this? And that's when I found out about Vancouver Foundation.”
Kelm and his wife spoke with Lisa Pullan, Vice President of Donor and Development Services at Vancouver Foundation. Pullan suggested a number of options for donating, but none of them quite fit the bill. With his usual entrepreneurial streak, Kelm wanted something different.
Pullan offered a regular endowment fund. Kelm didn't have the minimum $10,000 in cash right now to start one.
So Pullan suggested a “start-up fund”, where a donor can start with an initial donation of $1,000, and then has 10 years to contribute the remaining $9,000.
Kelm responded, “I don’t like that either. Who knows if I'll be here in 10 years to finish it?”
What about a bequest – a type of donation that would take effect upon the donor’s death? Kelm wanted something more concrete, and more flexible. He wanted to set things up in advance so that his exact wishes would be carried out after his death.
“Why don't I just give you $1,000 now, you set it up, and then upon my death it becomes like a regular bequest?”
Vancouver Foundation didn't have such an option. But the more Pullan thought about it, the more the idea grew on her. What Mary and Art were asking for made a lot of sense, from both sides.
“It was a very smart idea,” says Pullan. So we started a brand-new kind of fund at Vancouver Foundation. We called it a “legacy” fund. And the Art Kelm and Mary Lewis Endowment Fund is the very first one.”
By making an investment of $1,000 now and putting down their wishes in a letter to Vancouver Foundation about exactly where they want the money from those securities to go, Art and Mary are essentially putting a fund on hold. According to Pullan, a legacy fund allows you to discuss and shape the terms of your future gift during your lifetime. It formalizes a relationship with the Foundation, and still offers a lot of flexibility.
Should Art and Mary’s wishes change in a year or two, or 10, all that’s required is a new letter of intent to the Foundation. If they'd written the same instructions in their wills, the changes would have to be made by a lawyer, which would take time and money.
“I feel more comfortable, that it’s set up now. This gets rid of such a lot of uncertainty and such a lot of paperwork. It seemed to be the ideal situation, for Mary and me anyway. I'm very happy with that. And my solicitor is happy too.”
In the meantime, Art Kelm is enjoying working the stock portfolio. Though he’s not so happy about the recent economic downturn, which has cut into the value of the stocks he is donating. But he’s hopeful they will recover to what he originally intended.
“I’ve been through market corrections before, but this is going to take some time to get over.”
Kelm feels strongly that donors should support their community. He and Mary believe that, through their legacy fund, and by donating to unrestricted funds at Vancouver Foundation, they will help the charities of their choice, as well as others chosen by the Foundation.
They already give to the Salvation Army, the United Way, St. Paul’s Hospital Foundation, and Christ Church Cathedral.
And it will give them the chance to discharge even more debt. Art and Mary are both active members of Christ Church Cathedral, which recently underwent an extensive restoration and renewal. “They did a beautiful job of fixing it up,” says Kelm. “But we wound up $1 million short. That debt still bothers me.”
Kelm has designated a portion of his legacy fund to go specifically toward the retirement of that debt. A debt of gratitude is often the sweetest to pay off.
“My dream of taking that trip round the world when I was 22 … that’s one of the few regrets in my life.”
Art Kelm did finally make his trip around the world, though not all in one go. And he had to wait 36 years to do it. But then he and his wife – retired physician Mary Lewis -- did it in style, and without going into debt.
“When Mary and I retired, we both decided we would do all the adventurous trips while we still could. We would go for five or six weeks at a time. We went on safari in Africa. We went to South America and toured Patagonia. We went to the Far East, Thailand. We went to the UK and Europe.
“We had a great time. But it would’ve been a lot of fun to go when I was 22.”
(Story written: 2008)