# Succession planning, personal finance



## Jungle (Feb 17, 2010)

How do we, "DIY investors," do a succession plan for spouse or family, if something happens? Is your spouse ready and capable to handle the finances on their own, without guidance? 

Usually there is one head of the household doing the investing, paying bills etc.; the other half has no interest or knowledge to DIY investing, or financial planning, taxes etc. 

My concern is building a fair size nest egg, only to have your spouse take it to some commission based advisor and be sold unnecessary and underperforming products. But if you are dead, does this matter anymore?

I thought about making a "Fee Only Advisor" succession plan, to guide the spouse with financial planning. But how do we implement this now, when we don't know when it will be used?


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## pwm (Jan 19, 2012)

I've been pondering the same issue Jungle. Glad you opened this thread. My wife pays no attention to our investment accounts. She quit work to raise the kids and took care of that very well I must say. I earned the money and invested it. Every family is different, that's just how it worked for us. Now that we are 63 and 65 and our net worth is over $2 million and climbing, I'm asking myself the exact same questions.

We have two adult children, both doing very well. Our will says they each get half but the question is what would happen if I die first. I've thought of a Testamentary Trust managed by an Investment Council after the last one of us goes, but I'm not sure how much money one needs to have to make that worthwhile and what would happen in the mean time? My son is an investor, but is it fair to burden him with the responsibility of handling our money on behalf of him and his sister? I hope I have lots of time to think about this but I certainly am thinking about it. I welcome any comments from high net worth retirees on CMF.


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## kcowan (Jul 1, 2010)

First of all, the odds of you outliving your spouses is long. By the time I am 80, I will have our portfolio on automatic pilot. In the meantime, I have a large life policy (currently worth $850k if I die) that should more than compensate for any inefficiency that will result from her handling the portfolio. Third, she may remarry and screw up any plan my sons have to spend my money (they are currently in line to receive half our residual estate, the other half going to charity). To compensate, I am giving them substantial moneys now: RESPs for all the grandkids, substantial cash gifts at birthdays and Christmas.

It is not perfect but the alternative is just too complex to construct. (At one time, we had the estate going into a trust with my sons as trustees. Then we decided that directing from the grave was complex and unfair.) YMMV


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## pwm (Jan 19, 2012)

Thanks for the update kcowan. I also plan to gift some of our savings to our children in the future. I already have done so with part of the inheritance I received from my mother in 2010. It's always been my belief that money in the hands of young people is much more effective than it would otherwise be for an older person. Also you get to enjoy seeing them put it to good use like paying off their mortgages etc. It just seems wrong to me when I see an 85 year old die and leave a substantial estate to a 60 year old child. The grandkids are the ones who need and can better use the money.

As for setting up a trust, I agree that it would be complex to setup and administer. Hopefully I will have many years to plan for my succession but you never know. In the mean time, my son knows about my accounts and I trust that he would do the right thing.


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## OptsyEagle (Nov 29, 2009)

Just write up a plan for a "couch potatoe" type portfolio, trying to keep in mind their needs for living and lifestyle, and insert it into the will package (doesn't hurt to go over some of the details beforehand). This plan cannot be too specific since many specific things will change over time, but as we know, most of the important things rarely do.

Remember, a non-interested spouse will have a much better ability make a success out of a couch potatoe type portfolio then any of us ever could. We have a nasty habit of getting too cute with our investment plans, when simple would be 99% as good...and sometimes, many times, a simple plan ends up working out much better.


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## kcowan (Jul 1, 2010)

OptsyEagle
That approach is exactly what we moved away from.

When you really think it through, how can you dictate the "right" strategy after you are gone? Imagine a will drawn up in the 80s or 90s and how relevant it would be today!

You think the couch is the best. How long have you thought that? What do your kids think?
Keith


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## fraser (May 15, 2010)

This was one of the key reasons why we moved to a fee for service advisor two years ago and also did a fair amount of consolidation. It was important to me that we selected an advisor whom my spouse was very comfortable with. I also ensure that she attends at least every second review meeting. Best thing we ever did. Extremely pleased with the results and with the peace of mind. I still take care of the bills but spouse is aware of what gets paid and how. On line banking and automatic debits have simplified this.

It started when we did a proper will. I had to list out the assets,where they were,etc. It made me realize how time consuming it would be to find them in my messed up filing system let alone follow up on all of them. The list is much smaller now and we update it every year with investment details, contacts, options info, and DB pension details. It is also one of our accountant's check off items every year when we review our taxes.


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## OptsyEagle (Nov 29, 2009)

If you can get your spouse interested, then great. The way I saw the question is, "how much can I logically expect to teach a person, that is not overly interested"? Some people are just not. 

For the investing part, I cannot really find anything more simple then the couch potatoe, and if left alone, will do better then half of all the investors in the world, that literally beat this game to death with their strategies and knowledge. As for the other financial skills, like tax strategies and a few others, if you don't want them to seek advice, you can pretty much forget about them getting too sophisticated with those.


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## humble_pie (Jun 7, 2009)

dogleg you've written about this issue before, i know you've done quite a lot of research & your thoughtfulness & concern for your family are always evident.

i don't have a solution but ottomh the problem i see with a professional trustee for one son's inheritance half is the cost. Keep in mind such a trust would only come into being after certain events would occur, ie the time of inheritance by the sons could be many years in the future.

your spouse would have to predecease you, because otherwise, if she survives you - assuming you leave all to wife in the first instance - it is her will that is going to govern distribution to the boys, not yours.

it's traditional for couple's wills to mirror each other. However, with the number of widowed spice these days who are up & marrying new partners, the risk then arises that former-wife-now-remarried will bequeath everything to the new husband, thus disinheriting her children of the first marriage. So this is also an issue to consider.

(btw most folks in this thread don't seem to be dealing with the issue of widowed-spouse-who-inherits-all-but-remarries. Folks seem to be much more worried the widow might pay $$ to some evil financial advisor ... however i for one believe that the delicate issues of remarriage & what'll-happen-to-the-family-house-etc are far more significant.)

turning back to the concept of a trust for the other son, theoretically speaking the trustee could be his responsible older brother. The problem here, as i see it, is that you might be setting up a lifetime of conflict & grief for the older brother. There would be nothing to stop younger brother from frequently hounding older brother for money, especially if the trust deed or the will includes a provision for encroachment on the capital.

just as a tentative suggestion, totally ottomh, maybe not suitable, but have you thought about an annuity or annuities for the other son.


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## Nemo2 (Mar 1, 2012)

humble_pie said:


> i for one believe that the delicate issues of remarriage & what'll-happen-to-the-family-house-etc are far more significant.


I second your sentiments, and have heard/read about remarried widows/widowers who have subsequently died and left everything to the new spouse to the (unintended) exclusion of the original offspring..............something to be careful of.


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## MoneyGal (Apr 24, 2009)

This is one rationale for trusts.


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## humble_pie (Jun 7, 2009)

MoneyGal said:


> This is one rationale for trusts.



it might be a rationale but it's a rationale that is too simplistic imho.

if many middle-class people really do have potential widowed-spouse-remarriage problems, what are they to do ?

putting one's estate in trust for a spouse in case she might stray following remarriage does prevent her from being able to bequeath the estate herself. It also largely prevents her from losing the money. But this step triggers gigantic problems for all but the very rich.

specifically the cost. Most middle-class estates can't support the high cost of professional trustees over possibly many long years. One should keep in mind that a trustee is obligated also to maintain conservative prudent-man investments, so the return or income yield of an estate under professional trustee management in our low-interest enviro is going to be on the slim side.

nor are volunteer no-fee trustees from within a family a good idea, necessarily. In many cases there will be conflicts over money among the various heirs, so asking a son or daughter to handle these conflicts over many years is a serious issue that could become a heavy burden.

an objection i personally have to a spousal trust in a will is the infantilization of the widowed spouse. What the late husband is telling his widow - via his will - is that he doesn't trust her, never trusted her, wants to treat her like an irresponsible child. I honestly believe that if such a thing were to happen to me (it won't) i'd be so offended that i'd renounce to the will, grab the children of the marriage, dump the old boy in a pauper's grave & set out to build a whole new life.

long-term a solution would be that young people are taught from an early age, boy & girl alike, how to build their own financial independence. Early age as in start with the teens. Not all parents can teach, so basic notions should be built into the high school curriculums.

2 positive items:

1) some extraordinarily capable young people have joined this forum; hopefully they are the advance runners who are going to spread the get-finance word a bit among their cohorts;

2) kcowan upthread seems to have wrestled with ideas of complex survivorship & has got - as one might expect from kcowan - some good suggestions.


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## MoneyGal (Apr 24, 2009)

I meant trusts for the kids, not for the spouse. 

(Although I don't personally like this solution; however, it is [undeservedly] popular. My kids are beneficiaries of trusts.)


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## humble_pie (Jun 7, 2009)

well, we were talking about spice just now.

most folks have trusts for minor children & young adult children in their wills, these are standard provisions.

in dogleg's case, assuming his estate passes to his wife first, there would be no distribution to his sons at that point in time.

so there is the theoretical issue of how long such a spouse might survive herself (ie still no distrib to the boys, therefore no trustee) plus what if such a spouse were to remarry & write a new will to new beneficiaries, something that is surprising but does happen.

& finally, dogleg had the additional challenge of wanting to provide in a sustainable way for an adult child who was said to be financially reckless.

none of these situations have anything to do with standard testamentary trusts for minor children imho ...


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## MoneyGal (Apr 24, 2009)

OK, I should not have brought my (minor) children into the discussion. What I said earlier was that trusts can be used to provide for adult children. I don't necessarily like this solution, but it is relatively popular. Much more popular than testamentary annuities, which are subject to their own problems.


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## humble_pie (Jun 7, 2009)

MoneyGal said:


> ... [trusts are] more popular than testamentary annuities, which are subject to their own problems


please tell me about probs w testamentary annuities ? i didn't know.

there are big probs with trust for RS (reckless son) in dogleg's case. Numero uno is inability to predict cost of trustee since trust will not commence upon dogleg's passing but only upon that of the spouse which might be another 20 years later ... not to speak of high cost of trustee even by today's terms ...

now we're into the generic problem of how to provide for an adult child who has a handicap ...


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## MoneyGal (Apr 24, 2009)

Well, much like the (somewhat generic) concerns about having the surviving spouse move the accounts to a high-cost advisor, by specifying that funds will be used to purchase an annuity (with no intermediary such as a trustee who could, for example, DCA into annuities over time), you are compelling the estate to purchase an annuity even if it is not financially advantageous (low interest rate environment and relatively young annuitant). Plus annuities are also "high-cost" products if the definition = "high" commissions paid to an advisor.


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## sags (May 15, 2010)

It should be noted that courts are increasingly becoming involved in estate issues, especially when it pertains to "excluded" beneficiaries and trust funds.

Some decisions have set aside the will and awarded amounts to children who have been excluded, unless there is an overwhelming reason for their exclusion.

Trusts can be challenged in the future.

The courts respect the intentions of people...........and try to safeguard those intentions..........but legal advice from a competent "estate and trust" lawyer would be the best advice.


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## humble_pie (Jun 7, 2009)

MoneyGal said:


> Well, much like the (somewhat generic) concerns about having the surviving spouse move the accounts to a high-cost advisor, by specifying that funds will be used to purchase an annuity (with no intermediary such as a trustee who could, for example, DCA into annuities over time), you are compelling the estate to purchase an annuity even if it is not financially advantageous (low interest rate environment and relatively young annuitant). Plus annuities are also "high-cost" products if the definition = "high" commissions paid to an advisor.




thanks, i see, i'd thought of these points esp the timing of an annuity purchase which should not really be pegged to an unpredictable date of death. But they take on more weight when i see them printed out here in your message.

although one has to wonder whether a professional trustee would know or even care to DCA a beneficiary into better annuities over time. And what if trustee's timing turned out to be wrong.

it seems there's no perfect solution except a) don't die, or b) if one insists on dying, then at least don't have kids, or c) die broke.

one takeaway i received from kcowan's post upthread is that a workable plan can be created by viewing an estate as a collection of assets earmarked individually for each heir. In some cases, even custom-built for each heir. Sort of a vertical waterfall.

this is counter to conventional estate planning which sees the assets of an estate moving in a succession of horizontal waves, from one generation to the next.

in dogleg's case there may be some merit to considering this approach. It could mean the purchase of an annuity or annuities during the testator's lifetime, whenever the timing of such purchase would be appropriate. Then the only item to be bequeathed to RS (reckless son) might be the house, or a partial interest in ownership of the house.

yes it would mean the future estate would be diminished by the annuity purchase. However satisfaction would be gained by seeing reckless son stabilized during the testator's lifetime & adapting well to what will surely be his future circumstances. It would also lessen the eventual burden upon ES (elder son.)


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## fraser (May 15, 2010)

Have to agree with sags about engaging professional counsel. The other issue is setting up the assets to avoid the high probate fees/tax that just about every province with the exception of Alberta levy on estates.


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## humble_pie (Jun 7, 2009)

of course one goes to lawyers in the end. But here's the thread topic:



> *Succession planning, personal finance*


this is followed by opening sentence:



> How do we, 'DIY investors,' do a succession plan for spouse or family, if something happens?


nothing wrong with spontaneous discussion & exchange of ideas imho.

would the parties on here who are recommending no discussion but instead seek lawyers immediately also recommend no DIY investing but instead seek financial advisors immediately ?


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## fraser (May 15, 2010)

My spouse has absolutely NO interest in DIY investing. The fear is always that some schmuck will come along and churn the thing to death, fee it into the ground, or worse. So my job was to find a professional ahead of time in order to have a very smooth transition/succession. And to ensure that the equity components are structured in such a way so that succession taxes/fees are kept to a minimum. I want the assets to work for her and my children instead of working for the Government.


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## sags (May 15, 2010)

Wise to look ahead to avoid potential problems..........fraser.

I am currently the executor for my dad's estate, and the will was simple and straightforward. He had distributed most of his assets before he passed away, and the bank didn't require the will to be probated. It will all be settled within 9 months.

My spouse is also currently a beneficiary in a large farm estate, with an estate plan that was poorly structured and left many questions as to running the farm business, and who was responsible for the operating loan , funeral expenses, probate fees, capital gains taxes and legal costs, given that some land and farm equipment assets had a joint survivor status and was distributed immediately, while other lands were solely owned, willed to beneficiaries and are still awaiting final distribution.

We are now into the 3rd year and the estate might be settled sometime this year...........or not.

The early involvement of experts in the complicated legal realm of estates and succession planning, would be of benefit. A simple thing........such as naming a person as the beneficiary to life insurance, rather than naming the estate as the beneficiary, can become very important regarding the distribution of the life insurance proceeds and how it relates to income needed by survivors during the time the will takes to complete probate. 

The woman at the bank who deals with their handling of estate matters, told me if people would get proper advice on how to properly structure estates, it would save her a lot of work and the beneficiaries a lot of waiting time and legal fees.

The major banks usually have an estate branch..........perhaps it would be an option to hire them to deal with all matters from structuring the estate to administering it.

It may be worth the cost, given they have the resources, fiduciary duty, and a reputation to uphold.


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## fraser (May 15, 2010)

I am not a fan of buying any services from the banks. My experience is that the services are overpriced, the advice underwhelming, and they seem to always want to attach it to other unrelated services.


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## kcowan (Jul 1, 2010)

I also had a bad experience with TD estate services. They seemed to be more interested in fees than in my father. Get a good lawyer instead.


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## sags (May 15, 2010)

I also read that RRSP and RRIF can be designated to a beneficiary, rather than an estate where they could be held up for years before distribution takes place.

A friend of ours had her husband pass away, and although she had a "net worth" of 600,000 when all was finished........she had to borrow money from her son to pay the bills for a few months before the bank would "release" some money until the estate was settled.

With all the other stresses involved, it is a bad time to be wondering how you can pay the bills.

In my dad's simple estate...........the bank paid the funeral expenses......but refused to issue a money order for the reception afterwards. Fortunately, my dad had some cash stashed away to use for such things.


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## fraser (May 15, 2010)

Our experience is that once the death certificate hits the bank, they will freeze all monies over 10k that are in the deceased name only. They release the funds on proof of probate. This is to protect the bank from lawsuits. The bank advisor told us the largest disputes that she sees are between siblings and it is not uncommon for one of them to try and get the funds to the exclusion of the others. The probate certificate clears the bank of liability and moves it to the executor. Cannot blame the banks.


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## OptsyEagle (Nov 29, 2009)

what's worse is that once a dispute is allowed to go forward, all legal expenses are paid by the estate. So even if a person does not have a legitimate claim to the estate, once they start legal proceedings (and remember those proceedings are free to them), the executors will want to settle quickly, since they realize that by fighting a rediculous claim, will wittle down their inheritance considerably more. This process allows for too much legal extortion, in my opinion.


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## Plugging Along (Jan 3, 2011)

^its actually for this reason our lawyer had advised us not to list anyone on the will other than who is absolutely required. We were advised to NOT list charities as some of the larger new have people on payroll just to contest wills. They have nothing to lose so there have been many cases where they will fight and take the money out of the family members. Instead, we were told to make sure our executor and family listed understood the full intent on what to do with the money.


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## Karen (Jul 24, 2010)

> We were advised to to list charities as some of the larger new have people on payroll just to contest wills...


PA, did you mean to say you were advised NOT to list charities?

Years ago there was a case in Vancouver where a very elderly person had originally had a clause in her will leaving a substantial part of her estate to a large, well-known charity and the residual to her children. Later she changed her mind and simply crossed out that clause of the will and initialled it, not realizing that was not a valid change. The children sued on the grounds that it was obvious that their mother intended the whole estate to go to them, but they lost, although the judge commented that he was sorry to be unable to respect the mother's obvious wishes. But the case got so much media attention and so much bad publicity for the charity that someone organized a boycott of the charity; it affected their incoming donations so drastically that the charity eventually backed down and the children received the whole amount. I loved that story - I was horrified to learn from the media stories that the charity had an employee whose job it was to check the obituary notices every day to see if people they considered potential donors had died and then to follow up and collect from the estate even in cases like this one.


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## OhGreatGuru (May 24, 2009)

Jungle said:


> How do we, "DIY investors," do a succession plan for spouse or family, if something happens? Is your spouse ready and capable to handle the finances on their own, without guidance?
> 
> Usually there is one head of the household doing the investing, paying bills etc.; the other half has no interest or knowledge to DIY investing, or financial planning, taxes etc.
> 
> ...


Once you are gone, it is your spouse's money, not yours. You shouldn't try to control how your spouse invests it from your grave. They have to invest it in a manner that they understand and are comfortable with, not the manner in which you would invest it if still alive. If that means paying an advisor; or selling all your stocks and putting it in GIC's, that's their decision.

This is a discussion you need to have with your spouse, to see what your spouse would feel comfortable with. If your spouse insists on remaining absolutely ignorant about investment, then you need to ask yourself "What should an ignorant investor do, not what would I do?" You could then leave your spouse some written recommendations/suggestions based on your discussions. But short of putting it into a trust you can't control it; trust management costs money; and a formal trust is bound by law to invest in a "prudent" manner, which may not agree with your personal risk tolerance.


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## Plugging Along (Jan 3, 2011)

Karen said:


> PA, did you mean to say you were advised NOT to list charities?
> 
> Years ago there was a case in Vancouver where a very elderly person had originally had a clause in her will leaving a substantial part of her estate to a large, well-known charity and the residual to her children. Later she changed her mind and simply crossed out that clause of the will and initialled it, not realizing that was not a valid change. The children sued on the grounds that it was obvious that their mother intended the whole estate to go to them, but they lost, although the judge commented that he was sorry to be unable to respect the mother's obvious wishes. But the case got so much media attention and so much bad publicity for the charity that someone organized a boycott of the charity; it affected their incoming donations so drastically that the charity eventually backed down and the children received the whole amount. I loved that story - I was horrified to learn from the media stories that the charity had an employee whose job it was to check the obituary notices every day to see if people they considered potential donors had died and then to follow up and collect from the estate even in cases like this one.



Yes, I meant NOT to list any charities or any one else that we absolutely didnt for sure want to have the money. That was the advice from the lawyers. There have been bigger cases in the US where a charity has been given a small amount, and then they have fought the rest of the beneficiaries for a bigger chunk to the estate at the expense of the estate. They really don't have anything to lose. It really is horrible to think when you are trying to be kind that people o charities will take advantage of it.


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## sags (May 15, 2010)

Inheritances can bring out the worst in people.

A rogue executor can be as problematic as fighting beneficiaries.

Maybe having two executors, to keep an eye on each other, isn't a bad idea either.


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## Charlie (May 20, 2011)

I have to agree with OGG here. If your spouse isn't a DIY investor, she/he should get help. You need to accept that they will have to pay for advice. I would find a trusted adviser, however, to recommend so she/he doesn't wander into the nearest Edward Jones office and get fleeced.

If the nest egg is relatively large, you should have some options that make sense. You can make those connections now....


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## RBull (Jan 20, 2013)

^ this is precisely how I see it and what we have done.


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