Showing posts with label estate planning. Show all posts
Showing posts with label estate planning. Show all posts

Tuesday, April 23, 2019

Tips on Guiding Seniors Through the Funeral-Planning Process



The death of a loved one is a difficult time for families to endure. There often is confusion, shock, denial, despair, anger, and almost every other possible human emotion. There can be great financial stress as well due to the expense of the funeral itself and uncertainty about the future if the deceased was the primary income earner.

Because of this stress, many people opt to pre-plan their funerals as part of their routine estate planning. A pre-planned funeral can help your family better deal with your death. Here are some ways to make a funeral and other arrangements less of a burden on you and your family.

The Ins and Outs of Funeral Pre-Planning

When a funeral is pre-planned, every aspect can be considered, from the wording of the obituary, type of service, casket model, and more. People tend to have strong personal opinions on such decisions as to whether to be buried or cremated, whether to have an open-casket service, and even what musical selections will play during their funeral. Pre-planning allows individuals to organize the exact funeral they desire. Again, this is not a morbid thought but a way that you can lessen the burden when you pass away. With pre-planning, families can feel assured that they are following the deceased’s wishes.

The financial aspects of a funeral are addressed with pre-planning as well, from payment in full of an amount sufficient for a funeral. Pre-planning my provide you with the option of pre-paying for your funeral, possibly securing lower rates and avoiding the problem of liquidating estate assets to pay for a burial.

Most funeral homes offer pre-planning services, where they can discuss your wishes and create a roadmap in the event of your death. There are some obvious potential problems with a pre-planned arrangement. For example, you might not be living near the funeral home at the time of your death -- you are likely hoping your funeral plans will be long off in the future, and who knows what life you’ll be living then.

Other arrangements for handling the payment portion of a funeral is to take out an insurance policy with a benefit that would cover funeral expenses or to set up a burial trust fund.

When the Funeral Is Not Pre-Planned

Although many are arranging their funerals in advance, most people don’t like to think about their deaths, so they neglect pre-planning arrangements. In the event that you are guiding someone through the loss of a loved one, there are several ways to provide support and help them make choices in a stressful moment.

People grieve in their own way, so it’s not especially helpful to be intrusive during this time. Offer your support in tangible ways, such as helping with funeral arrangements. Offer to speak with the funeral director yourself so that the grieving family member does not have to be inundated with the death process. However, make sure to include the person in decisions and listen to the funeral director’s advice. Since they deal with grief on a daily basis, they often can provide insight, guidance, and assistance during this time.

Beyond planning for a funeral, a grieving person might need your help in navigating the world after the death. When the funeral is over and the shock begins to subside, this person may need to create a new life. Offer to help address long-term decisions and connect with support services that may be available.

Death will bring shock and stress for families and surviving spouses. Consider how pre-planning can lessen that for your family, and when you know of others going through the stress, be there to provide support.


Hazel Bridges
hazel.bridges@agingwellness.org
www.agingwellness.org



Photo Credit: Unsplash

Monday, February 25, 2019

Buy & Sell Planning for Businesses




Buy-Sell Life Insurance


Planning for the loss of a business owner or partner is crucial to ensuring the continuity of your business and protecting the financial security of your family and the families of each partner or co-owner.
To protect your business, your loved ones and your co-owners or partners, you can implement what is known as a buy sell agreement, which specifies what will happen to the interests of a deceased owner, partner or shareholder. 

Buy sell agreement helps preserves control and value of a business at the death of one of the owners/partners.

These agreements provide that the estate of the deceased owner will be paid a fair value for his/her interest and that the surviving owners will maintain control and ownership of the business. Life Insurance on the owners can be a source of money to fund this agreements.
The structure of the buyout and  Life insurance funding should be tailored to the objectives of the business owners.

There are three main methods to fund these types of agreements:

Criss-Cross Method

Each shareholder purchases a life insurance policy on the life of the other shareholder(s) and names himself or herself as beneficiary. Subsequently, the shareholders and company complete a Buy/Sell Agreement that requires the surviving shareholder(s) to purchase the shares of the deceased shareholder, usually at fair market value.
Upon death of a shareholder, the surviving shareholder(s) uses the insurance proceeds paid from the deceased’s life insurance policy to purchase the shares from the deceased shareholder’s estate.

Promissory Note Method

With this method, the operating company purchases a life insurance policy on the life of each shareholder. The company is named as the beneficiary of the policies and a Buy/Sell Agreement is put in place requiring the surviving shareholder(s) to purchase the shares of the deceased shareholder at fair market value. Upon the death of one of the shareholders, the company receives the insurance benefit and pays the proceeds to the surviving shareholder(s) as a capital dividend, allowing them to honor the promissory note.

Corporate Redemption Method

The operating company purchases a life insurance policy on the life of each shareholder, and the company is named the beneficiary of each of the policies. This method requires the company to purchase and cancel (or redeem) the shares of the deceased shareholder.
No matter what kind of business you are involved in—a corporation, a partnership, an LLC, or even a proprietorship you should strongly consider a buy-sell agreement.

Contact Us for a No Obligation Consultation Today.
T: 416 822 5886
E: contact@moneyvalue.ca
www.moneyvalue.ca

Monday, January 28, 2019

The 3 Things All Investors Need To Achieve Financial Freedom


Summary
All investors dream of financial independence, and the stock market is historically the best means of accomplishing this goal for most people.
But dreams are worthless without a good, long-term plan for success, including three essential things all investors need to become wealthy.
First, you need to set a realistic goal based on a fulfilling life. A frugal lifestyle devoid of flashy consumption can reduce the market returns you need to succeed.
Second, you need a realistic long-term plan that maximizes your returns over time, while still factoring in your personal risk profile.
Most importantly, you need to adjust your asset allocation strategy over time to avoid catastrophic losses. It's not what you make, but what you keep that counts in the end.
(Source: imgflip)
I've been investing since the age of nine (two years earlier than Buffett), and like many investors, when I started out, my main goal was to become rich. When I started out (during the tech bubble), many investors had "champagne wishes and caviar dreams" and extremely unrealistic expectations.
In fact, I remember planning on doubling my money every year and asking my mother "what will I do with my trillions?!" The tech crash of 2000-2003 taught me the critical lesson that stock prices (SPY) (DIA) (QQQ) don't grow to the sky, and that valuations (and fundamentals) always matter.
(Source: Credit Suisse Global Returns Yearbook 2018)
Despite the occasional bear market, stocks have indeed historically been the best way to exponentially grow wealth over time. But the sad truth is that most investors do very poorly at harnessing the awesome wealth-building power of the market.
Over the past two decades, the average retail investor hasn't benefitted from solid market returns, but has managed to underperform pretty much every asset class, and barely stay ahead of historically low inflation.
The goal I have with my writing isn't just in pointing out great, long-term investing ideas that can help you reach your financial goals, but more importantly to also teach you how to invest better.
And when it comes to the ultimate goal of most investors, to achieve financial freedom, my 23 years of experience, not to mention almost half a decade as a professional analyst and scholar of the investing arts, has taught me that three things are essential to achieving that dream I started out with at the tender age of nine.
In fact, without these three things, becoming (and staying) wealthy is virtually impossible. But more importantly, if you can master them, then financial independence is actually far easier than you think, and something you can probably achieve.

1. Live A Lifestyle Where Becoming "Rich" Is Easy

Morgan Housel is one of my favorite authors, and I consider him to be one of the wisest people on earth (on par with Buffett). Mr. Housel recently penned a brilliant article that was actually the inspiration for this commentary.
The gist of that piece was that frugality, not blockbuster returns, is the most powerful way to achieve financial freedom.
"Personal savings and frugality - finance's conservation and efficiency - are parts of the money equation that are largely in your control and have a 100% chance at being as effective in the future as they are today... If we have the same assets and I can earn an 8% annual returns, and you can earn 12% annual returns, but I need half as much money to be happy while your lifestyle compounds as fast as your assets, I'm better off than you are. I'm getting more benefit from my investments despite lower returns." - Morgan Housel (emphasis added)
The most important point Housel makes, and that I agree 100% with, is that "rich" is subjective, and based on your expectations and choice of lifestyle. As Chris Rock famously said, "If Bill Gates woke up with Oprah's money he'd jump out the window."
Or to put it more eloquently, Jack Bogle, founder of Vanguard (and who recently passed away) liked to recount a famous story about author Kurt Vonnegut. At a party held by a hedge fund manager, Mr. Vonnegut's friend told him that their host had made more in a single day than his most famous novel, Catch-22, had made since it was published. To which Vonnegut replied, "Yes, but I have something he will never have...enough."
This is something I've learned the hard way, from years of living in poverty. My poor choice of spouse meant that several years ago my household expenses were far above our relatively strong income (about double the US median household's $60K per year).
My wife's family believed that money should be spent as fast as it was earned because "you could be hit by a bus tomorrow". They were trapped on the "hedonistic treadmill" in which trying to impress friends and family with materialistic one-upmanship was the order of the day, every day of the year.
Thus we lived in a nice house (bigger than we needed), filled with expensive furniture we rarely used, clothes we never wore, and our garage housed a BMW and Volvo SUV. We ate out twice a week, went to the movies frequently (and bought the overpriced concessions), and our savings rate was actually negative.
We lived beyond our means because my wife thought that was the key to happiness (and I foolishly refused to put my foot down over this profligate spending). But guess what? A never-ending and growing pile of debt, and the financial worries that go with it, more than offset any joys we got from fancy cars and expensive restaurant meals.
When job losses struck, our standard of living collapsed, and I literally spent several months starving, sometimes in the dark (our utilities were turned off several times). While I've managed to dig myself out of that financial hole since my divorce, I've never forgotten the most important lessons from those dark days (I call them my five years of financial tribulation).
Financial necessity forced me to live like a monk, and I learned that family, friends, dogs, and Netflix are all that you need to truly live a rich and fulfilling life.
How does this apply to most people? Simply that "being rich" is not important, but rather "feeling rich" is. Here's a good example. I'm proud to say that within three years of my divorce, my net worth has gone from -$50,000 to $200,000.
(Source: Shnugi.com)
If I were to compare myself to the entirety of the US population, then my $200K net worth puts me in the top 37% of Americans. While that's pretty good, for someone as competitive as me that could lead to discontent and unhappiness and a desire to drive that figure higher, like to $1.2 million to crack the top 10%.
But fortunately, my life experiences have taught me that happiness isn't about material things that money can buy, but the financial freedom it provides (to live how you want and on your own terms). What's more my career as an investment analyst and writer has taught me the importance of perspective.
For example, that same $200K net worth might only make me modestly well off compared to all Americans, but compared to 32-year-olds, I'm in the top 15.5%.
What's more my income last year ($173,000 from six different sources) puts me in the top 10.4% of Americans.
(Source: Shnugi.com)
Thanks to my frugal lifestyle, which I learned to love during those same terrible financial years in Alabama, my post-tax savings rate of 95% means that I'm assured to grow my net worth very quickly over time.
But I'm not here to brag about my success, but to point out that even the typical American needs to keep their financial position in perspective. For instance, the median US income in 2017 was $31,786 and the median net worth of Americans today is $97,700.
Few would describe either the median US income or net worth as "wealthy" or "rich". But by global standards? According to globalrichlist.com, the median US income of just under $32,000 per year would mean you are:
  • In the top 1.05% of global income earners, and
  • the 63,036,801st richest person on earth in terms of income.
The US median income amounts to $16.56 per hour, which doesn't sound like much. It's soon going to be less than the starting wage at Target (TGT) and Amazon (AMZN). But here's what that modest wage amounts to globally:
  • It's 207 times larger the average hourly wage in Ghana ($0.08/hr),
  • 31 times the average annual income of workers in Zimbabwe,
  • 60 times more than the average Indonesian worker makes, and
  • it's 138 times more than the average Kyrgyzstani doctor makes.
And what about the "pitiful" $97,700 in net worth the average American has? Well, here's how it compares to the entire world:
  • It puts you in the top 8.29% of people globally,
  • it makes you the 373,121,207th richest person on earth,
  • is enough to feed 100 Ethiopian families for a year, and
  • is 70 times greater than the average wealth of someone in Myanmar.
When you think of your personal finances from a global perspective, then it's not hard to feel rich. Here's how I compare globally:
  • I'm in the top 5.11% of people by net worth (the 230,012,296th richest person on earth and could feed 300 Ethiopian families for a year), and
  • I'm in the top 0.05% of income earners (the 3,022,912th richest person in the world by income).
If you shift your perspective and, more importantly remember the whole point of making money is to put it to good use (not spend it on stupid stuff), then you're well on your way to achieving financial freedom and enduring happiness.
But there are two other vitally important things you have to do first to reach that goal, which ultimately is what we're all after.

2. Pick Long-Term Strategies With The Best Odds Of Success And Then Stick With Them

When I started investing at the peak of the dot-com bubble, it seemed like doubling your money each year was not just easy, but something even a blind monkey throwing darts at a newspaper could achieve.
(Source: Ploutos Research)
If only I had known then what I know now, I'd be a multi-millionaire. That's because while 100% annual returns are crazy (you'd multiply your money 1 billion fold every 30 years), stocks in general, and dividend growth stocks in particular, are indeed a way to grow your money by staggering sums over time.
Stock Returns By Yield Quintile
(Source: Ploutos Research)
Now it's important to point out that while a fat yield is nice to have (and tends to outperform the market), quality must always come first. Ploutos, one of my favorite Seeking Alpha contributors, has crunched the numbers and found that the 10% highest-yielding companies tend to be the worst performing of the dividend growth stocks.
That's because if a stock's yield is too high, it's likely due to weak fundamentals, such as a deteriorating business model in secular decline, horrible management, and a weak balance sheet. In other words, knowing the difference between a yield trap and a good high-yield company (whose fundamentals are strong) is critical. This is what I devote 70 hours per week to studying.
But while dividend growth investing is my personal favorite investing strategy, that doesn't mean it's the only road to riches.
Returns By Investing Strategy
(Source: Ploutos Research)
There are several strategies that have beaten the S&P 500 by a large amount for 20 years. That's pretty impressive given that less than 7% of Wall Street fund managers can even match the S&P 500 over a 15-year period.
(Source: S&P Global)
And note that these alpha factor strategies even have their own index funds in case you want to take a passive investing approach based on ETFs.
Alpha Factor ETF Returns
(Source: Ploutos Research)
The most important thing to remember, no matter what strategy you use, is that you need to be disciplined and patient. The greatest strategy in the world won't mean a darn thing if you have a zero or negative savings rate, and no strategy will outperform all of the time. Nor will any avoid down years or big crashes.
From 1926 to 2017, a 91-year period, low volatility and value stocks, two of the most successful strategies ever discovered, still had many down years, including some with very painful drawdowns.
Probability Of Alpha Strategy Underperforming Market Over Rolling Time Periods
(Source: Advisor Perspectives)
What's more, any investing strategy, even if it does extremely well over time, will go through periods sometimes lasting decades where it underperforms.
This is where diversification comes in handy. I personally build my portfolios using several alpha factors, not just dividends, but also value, low volatility, and small caps. I also own several fast dividend growers, in numerous sectors, to ensure that I don't become mired in a frustrating and long period of underperformance that might shake my confidence and cause me to lose my discipline.
After all, the greatest investor in history, Warren Buffett (26% CAGR returns over his career) considers discipline to be his single greatest advantage.
Part of that discipline is patience because owning stocks means owning parts of a real company. You need to know why you bought it in the first place (the investment thesis) and not sell unless that thesis breaks, which seldom occurs in one quarter or even an entire year. Thus patiently waiting for your companies to execute on the long-term growth plans is one of the most important things great investors do.
But having realistic personal wealth goals, a frugal lifestyle, and the discipline to patiently execute over the long-term on the right combination of investing strategies is just how regular people can build wealth. In order to truly achieve financial freedom, you need one more thing, and it's the most important skill of all.

3. It's Not What You Make, But What You Keep That Counts

Meb Faber, the co-founder and the Chief Investment Officer of Cambria Investment Management, recently wrote a great article that highlights the importance of not just building wealth but also keeping it.
Mr. Faber illustrated the need for a diversified portfolio that uses the right asset allocation for your needs with the example of Brazilian billionaire Eike Batista. Batista was hailed as a financial genius when, in 2012, his net worth hit $35 billion and he was the 7th richest person on earth.
But that business empire was so concentrated in oil and raw material exports and used so much leverage that when commodities crashed in 2014 Batista's fortune crashed with it, from $35 billion to -$1.2 billion. By 2017, he had managed to bring that up to $100 million...but got to enjoy that still substantial fortune while in prison for various crimes including bribery and corruption of Brazilian (and other foreign) officials.
As Faber points out, Batista is merely the most extreme example (the first negative billionaire) of something that many rich families face, the loss of once impressive fortunes.
"Research has shown that 70% of wealthy families lose their wealth by the 2nd generation, and a whopping 90% by the third generation. Granted, some of that is due to high spending, addiction, bad luck, leverage, or just poor decisions. But a lot of it is how people invest their money." - Meb Faber (emphasis added)
According to Mr. Feber, the big mistake many investors make is improper asset allocation. That means their mix of stocks/bonds/cash and other asset classes is improperly structured. So in a bad year, it can result in such frightening losses, they panic, sell near the bottom and lock in large paper losses unnecessarily.
Inflation-Adjusted Total Returns By Asset Class
(Source: Cambria Investment Management)
As his table points out, there is NO asset class in the world that doesn't experience bear markets. Even "risk-free" US Treasuries have managed to lose 61% in inflation-adjusted terms during their worst stretch. And those same risk-free Treasuries have declined as much as 23% in a single year. Mind you that's nothing compared to the bloodbath stocks suffered during the Great Depression or the 85% decline that gold experienced at one point over a multi-year crash.
The point is that while frugality and a disciplined approach to the best investing strategies for your needs/risk profile/temperament is essential to becoming wealthy, asset allocation is the way you stay wealthy.
Unfortunately, the right asset allocation is different for everyone, based on your personality, goals, time horizon, income, savings rate, and a plethora of other factors. What's more, it changes over time as your life's situation and those various factors change.
But a good rule of thumb is that a good asset allocation means having enough cash on hand to pay the bills (say during retirement) to avoid panic selling during a bear market in any particular asset. For stocks, the average bear market has lasted three years (since 1926) from market peak to new record highs.
(Source: Moon Capital Management)
But that's just the average. Stocks can sometimes take as long as six years to fully recover from an especially severe bear market. That's why you should try to plan for three years worth of cash to cover any needed expenses, but also own assets that are generally going up in a stock bear market (like bonds).
That allows you to avoid selling stocks, which appreciate the fastest over time, in order to pay the bills. Now, this is just a rule of thumb, and of course, your individual situation will vary.
Famed Seeking Alpha commenter Buy And Hold 2012 has been diligently saving and investing in dividend growth stocks since 1973. He's managed to invest about $500K so far, and his portfolio now pays him over $600,000 annually in exponentially growing dividends.

Does B&H 2012 need to worry about asset allocation? Should he have 10% of his portfolio in cash in case there's a bear market? Does he need to own bonds, or other non-stock assets to reduce his risk? In his case, he doesn't because his portfolio is nearly entirely (with a few exceptions) made up of low-risk blue-chip dividend growth stocks. These are companies that can be relied on to pay such an enormous amount of dividends each quarter that his standard of living will never be at risk no matter how much the market may crash, or how long it takes to recover.
That's because US companies are famous for not cutting dividends unless absolutely necessary and so a well-diversified blue-chip dividend portfolio can be expected to result in very stable and even growing income, even during a recession.
I personally plan to follow B&H 2012's example and stick to a 100% equity portfolio myself. But that's only because my personal situation is unusual. My high income, very high savings rate, and young age, mean that one day my dividend portfolio will be churning out such generous, safe, and fast-growing income that no matter how much the market might crash my standard of living (which will always be far more frugal than I can afford) will never be at risk. In fact, the excess dividends will be put to great use in a protracted bear market, so my long-term dividend income will only benefit from a long and painful market crash.
(Source: Simply Safe Dividends)
Heck, my retirement portfolio's current dividend stream is nearly $20K per year, which is enough for me to live on today, if I wanted to quit working forever. Factor in my portfolio's fast dividend growth rate and I would never have to invest another dollar again, and so could retire today if I didn't love what I do so much.
(Source: Simply Safe Dividends) - Note 5 Year forward dividend growth (according to Morningstar) is expected to be 13.9%
As to what you should do? Consult a certified financial planner (a fee-only fiduciary) to figure out the right asset allocation for your individual needs, and remember that you'll have to update your investing plan every few years because your risk profile will change over time.

Bottom Line: Achieving Financial Freedom Is Easy...If You Have The Right Mindset And Plan

For 23 years I, like many investors, have struggled to "crack the code" of the markets in a quest to become wealthy and financially independent. Along the way, I've learned what works, and more importantly, through the loss of several fortunes, what doesn't.
Over five years of transforming my greatest passion into my career, I've had the opportunity to study market history, behavioral economics, and the time tested strategies of the greatest investors of all time. And while the truth is that good investing (and good living) requires life-long learning, here's what I've learned is most critical to achieving the dreams investors have of achieving financial freedom.
First, you need to remember that being wealthy is about having income-producing assets, not spending lots of money. The guy driving the Bentley isn't necessarily richer (or happier) than you, but just has the income (and vanity) needed to support ludicrously massive car payments.
The truth is that a frugal lifestyle focused on the things that matter (friends, family, and self-actualization), rather than on consumption is one of the easiest ways to get "rich". Someone who can live comfortably and happily off a portfolio that's $300K in size doesn't need to have a sky-high income, massive savings rate, or go all in on the next Amazon.
That's good because while stocks can generate excellent returns over time, the truth is that the best long-term investment strategies for most people aren't based on hitting grand slams but merely lots of singles and doubles and avoiding striking out a lot.
That's why I've forever abandoned get quick rich strategies like short-term trading, option speculation and the use of dangerous amounts of leverage to boost my returns. Rather my focus is now entirely on quality, low-risk, undervalued dividend growth stocks, which is what I plan to recommend to most of my readers and invest my own money into going forward (my Deep Value Dividend Growth Portfolio is beating the market by 8.4% so far).
While my strategy isn't necessarily right for everyone (there are lots of quality none dividend growth stocks you can buy), the reason I'm personally going with this approach is because of the most essential requirement for achieving financial freedom.
That would be the right asset allocation that's most likely to achieve your long-term goals. History is replete with investors who have made vast fortunes and then lost them even faster.
The most essential truth of investing, or life in general, is that money is merely a tool that must serve a higher purpose. For most of us, that means allowing us to spend as much of our lives doing what we want, with those we care about and maximizing our happiness.
While material things are necessary to some extent, it's easy to fall into the trap of thinking that more money will buy more happiness. Thus many investors take unnecessary risks with assets that have taken a lifetime to accumulate because they are trapped on the hedonistic treadmill in which your lifestyle grows along with your income and wealth over time.
Remember that the reason that getting rich over time works best is that the habits and discipline that allow you to become wealthy in the first place are the same habits that will keep you from going broke over time. The right asset allocation, which is different for everyone and ever-changing, is the best way to avoid the worst regret an investor can have, making a fortune and then losing it.
I have done that several times myself, and hope that articles like this can help others learn from my mistakes. The school of hard knocks has the most expensive tuition on earth and the best investing lessons are the ones you don't have to pay for yourself.
Disclosure: I am/we are long AMZN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Dividend growth investing, master limited partnerships, REITs, long-term horizon

Thursday, September 20, 2018

Financial Peace Today



Sunday, September 16, 2018

Protect Your Family Today.


https://moneyvalue.ca

Friday, August 17, 2018

Family meetings emerging as a new facet of financial planning


Five years ago, when Stephen Tait lost his mother, Muriel, to cancer, the family was left reeling from a loss they weren’t prepared for. Stephen, his sister, Jackie, and their father, Neil, expected that their mother and wife would be able to beat the disease she had spent the previous four years fighting.
“When my mother passed, she had the required will, but she wasn’t ready to go mentally. She had plans that she was going to fight this cancer, like we all did,” said Stephen Tait, a 53-year-old financial services executive in Toronto. “When she did pass, it was a bit of an eye-opener because there were a lot of things that we weren’t necessarily prepared for.”
Now, with his father approaching his 81st birthday, Stephen wasn’t surprised when he and his sister were asked to join his father’s financial adviser to have a family meeting about his father’s financial expectations in case anything were to happen.
“I wanted them to have a thorough understanding of my affairs and to know exactly what my assets were and how they are distributed so there will be no surprises when the time comes,” Neil Tait, a retired bank executive, said. “It wasn’t just a review, but it was an open discussion where if they had any observations or a suggestion that they liked to do things differently or change, then this was an opportunity for them to bring it up.”
Such family meetings are becoming a bigger part of the financial-planning process as Canadians are now living longer and many retirement plans are being extended to the age of 100, says Susan Latremoille, director of wealth management with the Latremoille Begg Group at Richardson GMP in Toronto.
“Those of us who have embraced this holistic perspective can see the linkages and help people with those turning points in their lives," says Ms. Latremoille, who conducted the Tait family meeting. “We provide way more services than we used to. It is no longer just an investment role. Today, there is nothing that is off the table. As people age, cognitive health becomes a bigger issue, educating children about money and leaving an estate, sickness and disease and the implications that come with that. “
And the importance of that role is growing. Canada’s wealth-management industry is in the midst of the biggest intergenerational wealth transfer to date. Approximately $1-trillion will pass from one generation to the next in Canada between 2016 and 2026, according to data from Strategic Insight. Not addressing plans can lead to misunderstandings, unpleasant surprises, possible legal complications and, in turn, family conflict.
Among Canadians with at least $500,000 in investable assets, 58 per cent have not discussed instructions for their estate with their heirs, according to a recent poll conducted by Investment Planning Counsel Inc.
Of those, 46 per cent said they intended to have a discussion at some point in the future, but 12 per cent said they had no intention of ever discussing inheritance plans with their beneficiaries.
“A lot of people don’t want to talk about it because they are afraid to upset family members, but the lack of communication could be leaving inheritors in the dark," says Sam Febbraro, executive vice-president at Investment Planning Council Inc. (IPC). Mr. Febbraro suggests financial advisers be introduced to family members as a first step. “Parents should explain their objectives and make sure there is clarity in the decisions they have made.”
In addition to investment portfolios, supplementary information that should be shared in a family meeting includes physical items, vacation homes and cottages, charitable donations and medical information, he says. Many people also don’t anticipate the size of the digital footprint they will be leaving behind, Mr. Febbraro adds. They need to provide details and passwords for financial, e-mail and social-media accounts and for any professional contacts such as lawyers and accountants.
Family meetings aren’t top of mind until there is a catalyst, says Darren Coleman, a portfolio manager with Raymond James Ltd., who has increased the number of family meetings with his clients.
“They can be tricky to set up because most people want to maintain their privacy, especially around close family,” Mr. Coleman says. “Money for many families is a taboo topic. It’s not something they are used to talking about, and want to keep very private."
“There are many clients who then realize how complicated it can be and they say they didn’t realize what went into it," Mr. Coleman says. “They don’t know how difficult it is for the survivors to cope with things."
For Neil Tait, he didn’t want to leave anything open for interpretation and plans to conduct a family meeting once every five years and will eventually incorporate his grandchildren into the discussion. Neil, who now spends his winters in Florida, has worked with Ms. Latremoille for more than 25 years and is confident that when the times comes, his affairs will run smoothly.
“My children had a pretty good idea of what my total investments were, but I had never broken it all down for them, “ he says. “This is something Susan laid out for them. While the total number wasn’t a surprise, the breakdown allowed them to see what is in the U.S, in Canada and what is held internationally – why we have it there and what the return is in each segment.”
As well, Neil spent a lot of time travelling abroad to Asia during his career and has continued to donate to the Chinese community in Toronto. Both his children know that’s something he holds dear to his heart, as well as the hospital that took such great care of their mother during her illness – Toronto’s Princess Margaret Hospital.
“I appreciated the opportunity – for both my sister and I – to actually be able to listen to my father’s plans for himself and speak with the person who will be executing on those plans,” Stephen Tait said. “The ability to talk about his final wishes and for him to know we will be able to follow through with them."
More Canadians need to start engaging family members in their wealth-transfer conversation, IPC’s Sam Febbraro says. He suggests the following steps to help ensure a smooth transition and prevent family conflicts.
* Introduce your family to your financial adviser: Set up a meeting with your children and your financial adviser – even if your adult children have their own adviser, it will be beneficial for them to have made the connection;
* Make decisions in a low-stress environment: Hold a family meeting when you are healthy and not under pressure to make decisions quickly;
* Explain your objectives: Share the reasons for the decisions you are making, your objectives and how they align with your values;
* Create an estate directory: This directory will detail essential items such as bank accounts, investments, insurance policies, wills and power of attorney and how to access them when needed;
* Include your executors: Introduce your executor to your financial adviser. Inform and educate your executor on your intent and wishes, where to find the will and if they need to contact any third parties;
* Educate your heirs: Educate and prepare your heirs to take over and manage your wealth.

Marta Iwanek/The Globe and Mail

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