Retirement planning? Arranging your affairs before death? Getting your estate in order? Thinking about making a will? Preparing a will? Interested in protecting principal or preserving capital? If so, you might want to know that there’s another kind of principal protection and capital preservation. And I wrote a series of articles on just that!
Cherchez-vous un avocat? Seeking an attorney? If a small business owner, I understand what it took to start an enterprise and make it successful. I also know that a generational transfer is difficult to navigate especially taking into account the tensions arising from the family dynamic. Seeking one of the family law lawyers or family lawyers Montreal, dealing with the elderly? My law firm is located in Montreal and I believe that it’s the one for you or your family. I practice in the civil law area – one of my specialties is civil-elder law. And I have represented the senior or a family member. Indeed, I wrote the book (Please visit www.practitionerspress.com) – two in fact, notably
Elder Law in Canada**ELIC**” Estate Document Professor** EDP**
Vol. 11, #16.2 – Dec. 9, 2019–ALLAN GOLD’S BLOG
Ever thought about your money, going …going… gone, once you’ve passed?
If not, maybe you should! (Part #2)
As you know, my current subject is money. More precisely, it’s on “capital preservation.” This is defined as “a strategy for protecting the money you have available to invest by choosing insured accounts or fixed-income investments that promise return of principal.” (Source: https://financial-dictionary.thefreedictionary.com/Capital+preservation).
However, I’m using this notion differently – not from the perspective of the investor, but rather, from that of the will-maker (known as a Testator, if male or Testatrix, if female); and this, with a view, following decease, to preserving some or all of the principal arising from his/her estate. (Of course, such raises the primordial question as to whether or not one should now try to do that. But I shall let each of my readers to answer that very good question for himself or herself.) Since I introduced my topic last time, I’ll go straight away to stating my thesis and beginning my argument to prove the same.
B. THESIS & ARGUMENT.
Ready or not, here we go!
B.1 Thesis statement.
- KEEP in mind, when retirement planning and getting one’s estate in order, the need of and/or the benefit from pursuing a capital preservation strategy; and
- CONSIDER, when estate planning, the putting into place of such measures, etc. and/or on making a will, the addition of certain provisions/clauses, contributing to on-going (post death) capital preservation.
B.2 Initial Argument.
To explain the reasoning underpinning my said thesis, I shall expand on these two actions, by giving you the large strokes of my proposition
KEEP in mind, when retirement planning and getting one’s estate in order, the need of and/or the benefit from pursuing a capital preservation strategy
In broad terms, to answer the question why capital preservation is generally needed here and why it’s beneficial, I do assert:
- That if you want to retire from an occupation or job, you need income from other sources on which to live.
- That to get that revenue, you must save and let these savings grow by earning interest/dividends and increasing in value through appreciation.
- That in order to retire better, you’re typically intent on building wealth. To this end, you would be desirous of preserving capital. In other words, you would want to safeguard your retirement savings, keeping it whole as much as possible. And to do this, you might choose insured accounts or fixed-income investments that promise the return of principal. This often would take the form of a Principal Protected Note (PPN), defined as, “an investment contract with a guaranteed rate of return of at least the amount invested, and a possible gain. … That means, regardless of market conditions, investors receive back all money they invested.” (Source: https://en.wikipedia.org/wiki/Principal_protected_note) The wish for capital preservation will probably get even more pronounced as you get older. And once you actually retire and/or if elderly, you’ll likely do everything possible to ensure that you don’t outlive your money.
CONSIDER, when estate planning, the putting into place of such measures, etc. and/or on making a will, the addition of certain provisions/clauses, contributing to on-going (post death) capital preservation
In broad terms, to answer the question why capital preservation (with effect after you die), might be prudent and why it could be beneficial, I do declare as follows:
- That when it comes to planning your estate and making a will, there’s another kind of capital preservation, which may or may not be warranted. First off, let me say that in any eventuality, it wouldn’t be worthwhile when the sums involved are too small. But it might make sense should the amounts be larger. And in my mind, it shouldn’t be considered, when the Testator/Testatrix expects a future legatee (heir under the will), to stay grounded on receiving a legacy (i.e., inheritance) and furthermore, to be responsible, inter alia, seeking proper advice, investing the funds conservatively and at low risk, also providing for the payment of taxes, etc.
- That however, should the Testator/Testatrix fear that one or more of such prospective legatees (heirs) could fall short in that regard, this kind of capital preservation might be warranted. To be clear, I’m speaking about legatees (heirs) who aren’t particularly good with money. You see, they might lack financial knowledge and experience. And maybe, they’re too gullible for their own good. Perhaps they’re at higher risk, living an alternative lifestyle, having addictions and/or hanging with people at the fringe. This is particularly dangerous because predators are lurking everywhere. And of course, there are those who are undisciplined and impulsive, spending ‘willy nilly.’ Indeed, they could be labeled as incorrigible spendthrifts! In the alternative, there are others who ‘live in the now’ and don’t think about tomorrow. This means that they ‘don’t give a fig’ about savings. I’m certain that we have all come across someone like this.
- That should there be such a person amongst your prospective legatees (heirs under a will), I think that you’ll agree with me if I say that it might be risky to do the bequest, leaving him or her all sorts of funds and be done with it and hope for the best. In my opinion, that’s a bad idea. I submit:
- That when it comes to individuals, having some of these characteristics, more money in their jeans could exacerbate their plight.
- That if wondering how things could go south and what could happen to them, I will offer up cases of lottery winners, who didn’t do well after winning big time. While such don’t equate perfectly to the subject situation, some of the circumstances are sufficiently similar to merit review by us here and now. Indeed, these stories do illustrate how people end up badly when a bunch of money lands in their laps and they’re unequipped to deal with such an eventuality.
B.3 Pleading By Citing instances of Lottery Winners, Who Weren’t So Lucky After All!
Believe it or not, I see some winners of lotteries or sweepstakes as being so very unlucky and unfortunate. At first blush, this statement may seem contradictory and idiotic to you. But I assure you that it works by framing the stories of certain people who were left, after their win, supremely unhappy, indeed, sour and sorry. Of course, it’s very sad to see what did happen to them. But there’s a positive, silver lining as we all can learn important lessons from their experiences.
B.3.1 Billie Bob Harrell Jr. Doubting my assertion, then please do consider the case of Billie Bob Harrell Jr. In 1997, Harrel won a $31 million Texas Lottery jackpot. With his $1.2 million annual payments, he paid his bills. And as did many others in his situation, he purchased new cars and homes for family. In addition, he was a do-gooder, buying nearly 500 turkeys for the poor. But apparently, he was deluged with requests from strangers for financial aid. It got so bad that he even had to change his home phone number. Eventually, he and his wife separated. And after nearly two years of misery, Harrell committed suicide. Attorney Rhoades was quoted as saying, “After you win the lottery, one of the first things to do is put together a list of people you trust and make one of them a buffer — someone who will deal with those who come out of the woodwork, because you now have a target on your wallet.”
So there you have my thesis statement and the broad strokes of my reasoning, In a nutshell, I’m urging will makers to be defensive when faced with legatees (heirs) who are aren’t good with money. I’m encouraging such a Testator/Testatrix to think about the possibility of putting in place measures, effective immediately and/or after your demise, contributing to on-going (post death) capital preservation. And I’ve started to prove my case by giving my first real-life example of someone newly in funds who took his own life before the 2nd anniversary of his winning draw. Unfortunately, believe it or not, you’ve seen nothing yet! There’s much more to come!
D. PREVIEW OF NEXT IN THE ELDER LAW BLOG SERIES.
I believe that with this blog series, I may have started you along the way to being more aware of elder law. I will continue on with the subject of retirement planning and more particularly, principal protection and/or capital preservation after you’ve passed on. In the third installment, I will recount a lot more stories in order to build my case. Interested? Want to get more information about the current topic, retirement planning, or other areas of elder law written by an “avocat,” one of the family law lawyers, family lawyers Montreal, practicing in the elder law field? See you next time. It won’t take too much time. Remember my byline – it’s “Gold’s Legal Minute*GLM*!” And please don’t forget to join my professional community by entering your e-mail at the prompt. *
E. NOTICE – CAUTION –DISCLAIMER.
The material provided herein is of a general nature, strictly for informational purposes. The interpretation and analysis is not to be misapplied to a personal situation with a particular set of facts. Under no circumstances, are the herein suggestions and tips, intended to bring a reader to the point of acting or not acting, but instead, the hope is that they are to be a cause for pause and reflection. It is specifically declared that this content is not to be a replacement of, or a substitution for, legal or any other appropriate advice. To the contrary, for more information on these presents, related subjects or any other questions, it is the express recommendation of the author that everyone seek out and consult a qualified professional or competent adviser.
* ©/TM 2019, 2015-2018, Allan Gold, Practitioners’ Press Inc. – ALL RIGHTS RESERVED
** ©/TM 2006, 2008, 2018 Allan Gold, Practitioners’ Press Inc. – ALL RIGHTS RESERVED