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Senior Living, Retirement Planning, and Making a Will Part 2

SENIOR LIVING, RETIREMENT PLANNING, MAKING A WILL, SENIORS AND MONEY: Afraid of running out of money? Ever thought about your money, going …going… gone, once you’ve passed? If so, maybe you should!*

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Arranging your affairs before death? Getting your estate in order? Preparing a will? Want to protect principal or preserve capital? If so, you might want to know that there’s another kind of principal protection and capital preservation.* (Blog #6 of this series)

Vol. 12, #16.6 – Feb.4, 2020– ALLAN GOLD’S BLOG

  1. OPENING

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.))

Ladies & gentlemen, may I have your attention please. What follows could be quite significant to both you and your family.

THESIS & ARGUMENT.

B.5 COMMENTARY:

If you’re thinking about making or remaking a will and have concerns, worrying about the loss of capital after your demise, you may want to take a few precautions. If you desire principal protection, extending post death, here is strategy #2 of my 3-fold approach.

Strategy #2 – Create a Program of “Structured Giving

In essence, I propose a program of making a series of gifts to the subject adult child. As long as the Testator/Testatrix can afford it and provided the future heir knows the basics about managing/investing money, it might be expedient for the former to afford the latter, a chance of gaining some direct, firsthand experience actually making investments. Simply put, the means is through one or more gift(s) inter vivos. For your information, “Inter vivos (Latin, between the living) is a legal term referring to a transfer or gift made during one’s lifetime, as opposed to a testamentary transfer (a gift that takes effect on death) under the subject of trust.” (Source: https://en.wikipedia.org/wiki/Inter_vivos)

In order to go beyond the broad strokes of the concept and provide much needed details, I have come up with a few Q + A (Questions & Answers), which are hereinafter written as follows.

1. Who is involved?” It’s you as the Testator/Testatrix and the subject adult child (as a probable heir in the future). It’s likely that your adult child will participate in the exercise because it’s a veritable ‘short cut’ to his/her inheritance, albeit a limited sum opportunity.

2. “What is to happen?” In essence, you will provide funds to such adult child. This is the time and place for this future heir to acclimatize self on becoming someone with a little money.

3. “When will it happen?” In other words, why now? First, it frames the ‘far out’ idea, of putting one or more of your future heirs into funds earlier than usual, that is to say, before you’re dead and buried – indeed, while you’re still alive and kicking. Second, the timing makes it possible for your adult child to have a great learning experience and permits you to have a teaching opportunity. Whether your future heir will admit it or not, he or she will probably appreciate the guidance while you’re still here. Now how crazy is that?

4. “Where will it happen?” It can be done right in your home. Indeed, it’s as easy as writing a check!

5 “Why will it happen?” “I have four responses. First, it’s better for your future heir to transition gradually into a person, who is a bit more ‘liquid’ than he/she was previously. I agree with Nicole Lyons, who said, “Dip your toes into unusual waters.” It’s also best to slowly ease this heir into the role of an investor, Of course, slow but sure is best. Indeed, Aesop’s fable of “The Tortoise and The Hare” applies to novice portfolio managers. Second, I see this strategy not just as an investor ‘test drive,’ but rather, in terms of an investor ‘driving test.’ Just like the test examiner, you will be going along for the ride, watching how the future heir does at the controls. Third, your disbursal of several installments shall add up and cumulatively will comprise a tidy sum. With enough money in play, your future heir, as the player whose turn has come, will likely take the game seriously and this will then constitute a good test of discipline, knowledge and skills. And these results will help you in making up your mind in the end. Fourth, the side benefit is that you can see the happiness of your adult child on receiving the money.

6. “How will it happen?” I have four responses. First, I don’t suggest just one gift. Instead, I recommend a few, this in order to ensure that the heir not show himself or herself as just a ‘one-hit wonder,’ but rather, someone who can go the distance, doing the job over time. Second, I propose that it be done in increments of $5,000-$10,000. (N.B. The sum needs to be small enough to reduce the risk, but still big enough in order to surpass a rent or mortgage payment.) Third, it shouldn’t be ‘willy nilly!’ Indeed, I characterize this program as one of “Structured Giving,” This is a phrase, ordinarily used in philanthropic circles, when making a number of donations to a charity. However, I used it because it fits an organized ‘gifting’ plan. Fourth, I encourage you to give your adult child room to maneuver. Let’s be clear, I’m not speaking about giving money with ‘strings attached.’ Instead, I suggest that the money be earmarked for deposit into the account bearing the sole name of your adult child, such for investment in his/her absolute discretion. You see you want to see how he or she will do. And I believe that your adult child could very well surprise you and rise to the occasion. Indeed, Nishan Panwar said, “Until you stand on your own two feet and take responsibility for your own life, you will never truly know how strong you really are.”

7. “Anything else that I should know about this?” I have four points. First, in order that you not get too disappointed too quickly, recognize before you start, that an adult child with a younger family typically needs more and more money just to manage the current bills; and as a result, he/she may have to dip into this investment fund more than you would like. Second, there’s no “gift tax” in Canada. This means that any resident of Canada, receiving a gift or inheritance of any amount from almost any source (except from an employer) will not have to include the amount thereof in their income. Third, when actually disbursing the funds, it’s best NOT to use an e-transfer. Instead, do it by check and make the notation “gift” on the front of the check! The reason for this is that you want to clearly document that the money isn’t revenue, but rather, a gift. It’s not much of an issue for you as much as it is for your adult child as the recipient, who may have to prove to the taxing authority that it wasn’t income. Fourth, tax wise for your adult child, you could suggest that it would be beneficial for him or her to invest the funds through a self-directed Registered Retirement Savings Plan (RRSP) or Tax-Free Savings Account (TFSA) account. (N.B. There will be more on this topic in upcoming blogs.)

C. CLOSING.

Interested in senior living, retirement planning, making a will, seniors and money? I remind you of my questions at the beginning, which bear repeating: Afraid of running out of money? Ever thought about your money, going …going… gone, once you’ve passed?

Arranging your affairs before death? Getting your estate in order? Preparing a will? Want to protect principal or preserve capital?” If so, I think that it’s appropriate to declare that this is a BIG IDEA, which deserves some careful consideration. Indeed, there are some very good reasons to have this ‘trial run’ type exercise. It has many benefits and could be a route forward for many families.

However, it’s not just a method of smiles and kisses. Indeed, I have a word of caution here. As mentioned above, there’s a good chance that your adult child may use the funds to pay debts and not make any investments. And if such should come to pass, not only do you not get what you want, you also get something that you don’t want. You see, this may also feed your adult child’s dependence upon you and then create great unhappiness down the road on both sides, should there be subsequent demands for more money.

So there you have it. But I think that you’d agree with me if I say that this strategy is a perfect example of a course of action with cross-pressures and risks, such with a near balanced “on the one hand” side and an “on the other hand” side. That’s why I’ll end by saying, “You know best – you decide!”

P.S. Just so you know, I saved the KEY strategy for last!*

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, more particularly, estate planning and even more precisely, principal protection and/or capital preservation after you’ve passed on. While teaching and gifting to your adult children might be helpful, it’s not the full answer. Come back next time- I will relate my last strategy. 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 2020, 2019, 2015-2018, Allan Gold, Practitioners’ Press Inc. – ALL RIGHTS RESERVED

** ©/TM 2006, 2008, 2018 Allan Gold, Practitioners’ Press Inc. – ALL RIGHTS RESERVED

 

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