Few situations are more difficult for an advisor than when a client loses a cherished partner. In their new book, Managing Alone, advisors Jennifer Black and Janet Baccarani share their experience with widowed spouses in a series of narratives based on real situations. The book is aimed at lay readers, but professionals will also benefit from its lessons. Here are a few of them:
Ensure assets have joint ownership
In one of the book’s case studies, Andrew is in his early 70s when he learns he has a serious heart condition. As he and his wife Kathleen put their affairs in order their advisor notices several assets are registered in Andrew’s name only. That would cause unnecessary problems if Andrew were to die first.
If one spouse is the sole owner of a couple’s home, the property becomes part of the estate and may be subject to probate fees. Meanwhile, non-registered investment accounts in the deceased’s name are frozen until the beneficiary is identified. By ensuring these assets are jointly held, all of these problems can be avoided: the assets would pass to the survivor immediately, with no probate fees and immediate access to the accounts.
Keep beneficiaries up to date
A similar problem can arise when no beneficiary is named for an RRSP or pension. In another case study, Kayla is widowed when her husband dies in a hunting accident. She discovers his RRSP had no beneficiary, so it is temporarily frozen instead of being available to pay last expenses or meet other obligatons. This can easily happen with young clients, in particular, since they may have opened their RRSP before meeting their current partner and simply forgotten to update the paperwork.
Consider a testamentary trust
To return to our first case study, Kathleen and Andrew want to leave part of their estate to their 10 grandchildren. However, they want this money to skip a generation: they don’t want their grandchildren to wait until their own parents die before they receive it. But neither do they want their grandkids to inherit a lot of money before they are mature enough to use it wisely.
One solution is a testamentary trust that would release the money in two stages: part when each child turns 18, and the rest at age 24. The couple wisely avoids trying to manage their money from the grave; they put no restrictions on how their grandchildren decide to spend the money.
Having these discussions won’t be easy. Chances are your older clients would rather chat about the markets, their travel plans and their golf games. Few bring the same enthusiasm to estate planning. But it’s a good advisor’s job to make sure everything is in order so you’ll be ready to support your clients when they need you most.