Financially uninterested spouse inheriting stock portfolio

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2 yen
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Re: Financially uninterested spouse inheriting stock portfolio

Post by 2 yen »

AltaRed wrote: 04 Apr 2017 10:20 Indeed, the tougher question is who to go to later, and it is tougher because the 'hands on' DIY types here would loathe/cannot comprehend/cannot imagine anyone else who charges fees taking over stewardship of one's 'baby'. Similar to the thought of someone taking over that '65 Mustang one re-built with their own hands.

But one has to accept that most everyone's hand built (take pride in) DIY portfolio will end up in a 'paid' advisor's hands and the best one can do is provide some guidance (1-3 options) on where to go and why. Because if one does not do that, it will likely end up with the local 'brick and mortar' bank advisor..... or the full service arm of the bank in which the surviving spouse does his/her banking.

What do you prefer? A % or AUM advisor? A full service broker? A 22 yr old mutual fund salesperson at the bank? Do some homework, discuss with spouse, potentially interview a few options, and prepare a short 1-1.5 page 'Who to go to for portfolio management' guidance to executor/surviving spouse on that subject. Reference it in your 'Letter to Executor' that you should have already given him/her along with copy of Will.
AUM = what?

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Re: Financially uninterested spouse inheriting stock portfolio

Post by ghariton »

2 yen wrote: 04 Apr 2017 10:50 AUM = what?

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AUM = assets under management

This seems to have become the most popular compensation mechanism for trustees, financial advisers. It is analogous to the real estate agent compensation based on commission.

Never made any sense to me. The work effort is largely independent of the size of the assets or property being handled. I much prefer a fixed fee arrangement or, failing that, a per hour charge.

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Re: Financially uninterested spouse inheriting stock portfolio

Post by Peculiar_Investor »

I would think that the other important piece in this puzzle is having an Investment Policy Statement (IPS) that clearly states the objectives of the portfolio. I would strongly suggest that a minimum this document should a) exist and b) should be reviewed with the 'financially uninterested spouse'.

If the objectives, and caveats, are known and agreed upon, then it's just left to the portfolio manager, current or future, to follow the IPS.

Most of what we discuss here on FWF is implementation details.
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Re: Financially uninterested spouse inheriting stock portfolio

Post by AltaRed »

While the IPS is important for the disinterested spouse to have, the one "you" developed will most likely be quickly abandoned IF it is more than one page in length. No disinterested spouse nor his/her advisor will pay much attention to anything that is more complicated than:

1) simple paragraph on asset allocation and geographical diversification, including a forumla such as 110-age, for example
2) simple statement on ''costs matter'. e.g. the use of low MER broad based ETFs from the 1 or 2 top providers and avoiding churn
3) withdrawal management, e.g. SWR or VPW

I might add that my ex has only been about 80% successful managing her 5 year GIC ladder in her small (relatively speaking) RRSP and TFSA over the past 9 years. She has forgotten when GICs mature and is really still not fully engaged on what the 5 year GIC ladder does for her. I will watch for a few more years and if I still see deficiencies I will recommend complete conversion to MAW104 with no re-invested distributions in her RRSP and MAW104 with re-invested distributoins in her TFSA. It can then go on auto-pilot with minimal damage possible.

As I said earlier, it is a matter of 'lack of interest', not smarts. This woman has started from scratch just a year or so ago running a clothing store... salees, inventory, orders, mostly on her own on behalf of the owners. So form your own conclusions.

Added: After seeing a post on ETF proliferation, I've modified 2) above
Last edited by AltaRed on 04 Apr 2017 11:59, edited 1 time in total.
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Re: Financially uninterested spouse inheriting stock portfolio

Post by Peculiar_Investor »

AltaRed wrote: 04 Apr 2017 11:41 While the IPS is important for the disinterested spouse to have, the one "you" developed will most likely be quickly abandoned IF it is more than one page in length. No disinterested spouse nor his/her advisor will pay much attention to anything that is more complicated than:

1) simple paragraph on asset allocation and geographical diversification, including a forumla such as 110-age, for example
2) simple statement on ''costs matter'. e.g. the use of low MER broad based ETFs and avoiding churn
3) withdrawal management, e.g. SWR or VPW
Our IPS is exactly that, ours, not mine. It reflects our portfolio/investment objectives. I wouldn't want, or advise, that it be any other way.

I concur on your framework for an IPS. Keep it as simple as possible, and no simpler. But make sure you have one that can be followed and implemented.
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Re: Financially uninterested spouse inheriting stock portfolio

Post by kcowan »

I think if I can make it for another 10 years, I can get the portfolio into the model suggested by AR and then just have to document rules for rebalancing.
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Re: Financially uninterested spouse inheriting stock portfolio

Post by planB »

Perhaps the best final gift to a financially uninterested spouse (of retirement age) would be a house/condo and an annuity. Nothing wrong with a trustee and a couch potato portfolio if cost and complexity still put you ahead of an annuity I guess.

I have met a few financially uninterested retirees and the probablility of them becoming financially interested seems pretty low! An annuity plus a cash account for cars and travel would be the way to go for those folks.
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Re: Financially uninterested spouse inheriting stock portfolio

Post by brucecohen »

kcowan wrote: 04 Apr 2017 14:06 I think if I can make it for another 10 years, I can get the portfolio into the model suggested by AR and then just have to document rules for rebalancing.
Before you check out try a test run in which your wife is fully responsible for rebalancing over a year or two. Based on my experience, don't be surprised if she neglects to do it, finds it too confusing or troublesome, or falls prey to the cycle of greed and fear. The widow I helped who inherited a couch potato portfolio only had to rebalance three funds. I gave her a spreadsheet in which all she had to do was once a year enter unit counts and prices. The spreadsheet told her how much of each fund to buy or sell. For a variety of reasons that was too much for her.

I will not be surprised if you conclude that the best option is a balanced mutual or pooled fund run by a firm with longstanding integrity and low fees. Appreciate that such funds are made for auto-pilot investors and I believe that research has found that such people typically do better than active fund investors who trade in and out.
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Re: Financially uninterested spouse inheriting stock portfolio

Post by AltaRed »

:thumbsup: to Bruce.

For the vast majority of surviving spouses, the only rule should be to provide that one page IPS to a potentially pre-selected small group of % of AUM* advisors.

* I agree with George upthread that % of AUM is rather perverse beyond a certain level of assets. It costs no more to manage 3-5 ETFs with a $ 2 million account than a $500k account. I have heard of people trying to squeeze the fees of the Mawer portfolio manager types down a bit for large accounts but am not aware of how much, or whether even successful. The problem for 'fee for service' advisors is whether such advisors would take advantage of a disinterested surviving spouse and bill excessively for all sorts of things and whether the selected advisor will be there for the long haul or whether the account will be shifted to some 'inexpensive' intern, etc.
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Re: Financially uninterested spouse inheriting stock portfolio

Post by amphitryon »

First, let me say ''thank you'' to all who post and share ideas and experiences here. I found this forum to be invaluable over the years, and have adopted many of the best practices I found. I also have learned a lot and still continue to do so.

The recent discussion on ''lowest cost burials'', which was of specific interest, since I acted as an executor of two estates - almost settled except for the CRA (filed but no reply yet) - and the above discussion on ''uninterested spouses'' prompted me to start a document with ''last instructions''. While it will be a work in progress for a few more weeks, I think I'll have it done in a reasonable time, and can then simply update as necessary. It is for my spouse and our son, since in the normal course of events, both will outlive me.

I found AR's comments very fitting for our situation, especially since I had been already working along these lines and had managed to get almost all of our funds into the under 1% MER range. There's a little more work to be done, but nothing radical. I also do not have to consider any balancing, since my better half has always insisted on having lots of cash on hand (hence the many on-line accounts). This is non-negotiable with her, so our RIFs and other investments don't need an additional ''safe component''. Both our RIFs are providing income as per required withdrawal, which is managed by CIBC; so far they have both shown an increase overall, in spite of the monthly withdrawals.

I will not call my spouse ''uninterested'', but she's not as curious as I am, to learn more. I do know she has a good understanding of what we do and why we do it, and I am safe in saying, she will not act on any ''advisers'' say-so; this much I have managed to get across.
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Re: Financially uninterested spouse inheriting stock portfolio

Post by ghariton »

In my case, a one-page IPS would be too demanding for my spouse -- and, I suspect, for my children. The maximum attention span I can get from my spouse on financial matters is well under a minute. The two times I insisted, she became angry and told me that all that was MY job. (It's true that I don't do any of the cooking.)

I gave up on financial education after that. But there has been some progress -- she no longer buys water heaters and service contracts from door-to-door salesmen.

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Re: Financially uninterested spouse inheriting stock portfolio

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I am toying with the idea of leaving instructions and a financial plan spreadsheet that she should follow. The spreadsheet shows her how much and which accounts to withdraw money from each year in December. The financial plan spreadsheet also shows her how the plan will get her to a zero $$ nest egg at age 95. The instructions would not have anything to do with re-balancing. She would be stuck with the asset allocation at my death. She would be free to sell off any asset type when funds are needed. The hope is that if NOT re-balancing makes the process easier this would offset the risk of creating an unbalanced nest egg. This approach also makes sense because she still has a decent DB pension to live off in case the un-balance nest egg does not grow according to plan. If no balancing makes the plan easier and doable then its better than a better plan with balancing that she doesn't want to do. Just thinking out loud here.

p.s It is a couch potato ETF nest egg
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Re: Financially uninterested spouse inheriting stock portfolio

Post by AltaRed »

Depends on how interested she is in finances, how well versed she is in spreadsheets, and whether she cares (or understands) about how you managed finances. If any one of those 3 things are not in her psyche, chances of success are close to zero. IOW, you are dead and life goes on.
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Re: Financially uninterested spouse inheriting stock portfolio

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Thanks all for the very interesting discussion. My even greater concern is: "what to do if I am unable to manage my affairs". Who will pay the bills, handle the investments etc? Common-law spouse not a choice and family out of province, no (younger) friends interested in financial concerns. Any suggestions will be carefully reviewed. Thanks.
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Re: Financially uninterested spouse inheriting stock portfolio

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Like others here, my wife takes no interest in how our finances work, have had a set of written recommendations for when I die or become incapable for a number of years now. I update it regularly and each January print and attach a report from Quicken showing adjusted cost base and a few other features for each holding in each account. I am toying with collapsing each brokerage account into two mutual finds on a 50/50 basis. One fund would be a balanced fund and the second a dividend (likely Canadian) fund. I would use one company so that all of her dealings could likely be done in one phone call and as there is a need for some interaction with a person with some knowledge on the other end, I don't think the banks will be considered.
Mawer and Steadyhand catch my attention, but I have more work to do on this, including talking to the companies myself. I think I can leave short, clear directions on how to manage that money. I could print from the Die Broke calculator to estimate the amount she can afford to withdraw annually.
That leaves two RRSPs and one LIF (hers). I suspect I will do the same with them. Of course, when I die, my RRSP becomes hers, so one less account to deal with. Just in the research and early planning stage thus far.
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Re: Financially uninterested spouse inheriting stock portfolio

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jasdlc wrote: 04 Apr 2017 19:37 Thanks all for the very interesting discussion. My even greater concern is: "what to do if I am unable to manage my affairs". Who will pay the bills, handle the investments etc? Common-law spouse not a choice and family out of province, no (younger) friends interested in financial concerns. Any suggestions will be carefully reviewed. Thanks.
Depending on family dynamics of course, a family member is often the preferred choice. I would check into their ability to act from their province if you would otherwise consider them. Have you ever considered moving closer to family?

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Re: Financially uninterested spouse inheriting stock portfolio

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AltaRed wrote: 03 Apr 2017 20:51 I agree with Bruce that in most cases, the thought that anything/everything will be the same after the driver of the investment portfolio passes, is mostly fantasy. It will be a rare surviving spouse, or family surrogate, that will remotely manage/administer/direct the overall investment portfolio if s/he has not taken significant interest and/or 'hands on' approach to the portfoilo before death of the driver.

It is my understanding a trust may work 'in some fashion' depending on management of same, and it will come at substantial cost, but I'd suggest the best approach is a simple Couch Potato portfoio OR something managed by the likes of Mawer (as commented on by Bruce). Not meant to pick on anyone intentionally, but Canew is fantasizing in technicolor if he thinks anything will be remotely as he describes on his passing. The surviving spouse could go on a spending spree, re-marry, gift to favourite charities or favourite family members, change will, etc, etc, etc.

As I've written elsewhere a number of times, I've provided investment assistance to my ex since our divorce 9 years ago. She's a bright person but just is not likely going to manage her portfoio well on her own. We've simplified it to an all ETF portfolio over the past several years and even then that is going to be a challenge. She is going to need Mawer or Steadyhand or someone like that to provide the necessary guidance over the longer term. A portfolio cannot go without some direction over the longer term.

The best thing the current 'driver' can do is to grossly simplify what is currently being done AND provide some guidance on who to go too at the appropriate time.
Nothing is certain, but as my wife is incapable of handling her own affairs and I've worked with my daughter and son-in-law to handle the transition. He also now invests in the same manner and understands what I've explained. Does that mean they'll do as I've requested? I just have to have faith in them. They don't need our money and are as concerned as I am about my wife's welfare. Choosing between my daughter and husband or an outside advisor, I'll stick with family who I know.
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Re: Financially uninterested spouse inheriting stock portfolio

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cannew wrote: 06 Apr 2017 11:03 Nothing is certain, but as my wife is incapable of handling her own affairs and I've worked with my daughter and son-in-law to handle the transition. He also now invests in the same manner and understands what I've explained. Does that mean they'll do as I've requested? I just have to have faith in them. They don't need our money and are as concerned as I am about my wife's welfare. Choosing between my daughter and husband or an outside advisor, I'll stick with family who I know.
If you have trusted and capable family member(s) like that who can 'carry on', then that is indeed a viable solution. They will clearly modify/change investing methodology/philisophy as they wish after your passing, but you at least have some comfort that they have investing acumen. Not many have that luxury.
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Re: Financially uninterested spouse inheriting stock portfolio

Post by hamor »

But there has been some progress -- she no longer buys water heaters and service contracts from door-to-door salesmen.
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Re: Financially uninterested spouse inheriting stock portfolio

Post by BRIAN5000 »

IMHO almost equally important is you have someone in place as an advocate for health care before death. A spouse who has to handle the grief of someone being sick or incapacitated may need help to maintain finances as well not only in death. The bad part you may be just lucid enough to see financial things not go the way you like, I must remember, just "Let it go".

The hospital was playing what we thought was "silly burger" with my mom with the three of us brothers there to look after her well being we outnumbered them :!: :thumbsup:
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Re: Financially uninterested spouse inheriting stock portfolio

Post by Pickles »

planB wrote: 04 Apr 2017 14:30 Perhaps the best final gift to a financially uninterested spouse (of retirement age) would be a house/condo and an annuity. Nothing wrong with a trustee and a couch potato portfolio if cost and complexity still put you ahead of an annuity I guess.

I have met a few financially uninterested retirees and the probablility of them becoming financially interested seems pretty low! An annuity plus a cash account for cars and travel would be the way to go for those folks.
I agree 100%. All the suggestions I've seen above are too complicated for a disinterested or confused spouse who is grieving your death. IMHO, DIY investors get overly attached to the structure and maintenance of their portfolio and want to see it preserved and increased after they are gone. This is rather like the pharaohs of old squirreling their gold in their tombs in an attempt to control their wealth after death.

Annuity is the way to go. It is a no-care certain source of money that requires no work after set up. If there are children/grandchildren who should also benefit, it is easy to bequeath appropriate amounts or to buy a life insured annuity with the children as beneficiaries. Your spouse will thank you.
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Re: Financially uninterested spouse inheriting stock portfolio

Post by gouthro »

It's been a long time since I have been on this forum. But, I see that you are still discussing relevant and important questions. This seems to be one of the big ones to me. as you get older your time line is certainly shortened and it is quite possible to imagine all sorts of catastrophic situations, if you let your mind wander.

So, transferring to a surviving or salient spouse is a very import question. One of the biggest problems that I see, in my own portfolio, and i imagine with many here, is that we have compiled sizeable capital grains over the years and we are reluctant to crystallize those gains in order to set up an etf portfolio.

I have gone over this one numerous times in my head but have never gotten to the point of doing it. After all, we think, a portfolio of Canadian blue chip stocks cannot be much harder to manage than an etf. Well, I am not sure.

the question becomes even more acute at a time when there is a lot of talk about the government increasing the capital gains tax.
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Re: Financially uninterested spouse inheriting stock portfolio

Post by TomB19 »

We have this problem too. There are some good ideas in this thread that I will onboard but I look at this problem as a philosophical one.

I've stopped worrying about what happens after I'm gone. Now, my goal is to provide a strong opportunity for her to succeed. Whether she succeeds or fails is on her.

I've got a simple strategy and simple instructions that fit on a few pages in total. No 100 page operation manuals. Sell the real estate. Sell the equities, when they are within a very broad parameter or at most 2 years after I'm gone. I've also specified a GIC ladder, so she can make some mistakes and money will come back online in the future.

An opportunity to succeed is all anyone can ask for in life, IMO. The rest is down to the individual.

My instructions are unlikely to be carried out. Most likely, she will go to the bank and have the teller tell her what to do. ... but so what? Smart people deserve to live better than dumb people. If she is smart, she will live like a queen.
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Re: Financially uninterested spouse inheriting stock portfolio

Post by fraser »

My spouse is not interested in finance but she possesses much common sense and is no one's fool. We moved everything to a fee for service advisor. Very pleased with the service and with the five year results. We selected an advisory firm with a good track record and a group with whom my spouse felt comfortable.

If I happen to fall off my perch early the entire world could change in six months, 12 months etc. The investment climate could be completely different. My written guidance could be for naught. Nor do I have any reason to control those assets from the grave as it were.

On our way to the lawyers today to discuss/update our wills. Cannot believe that it has been 10 years since we did the last one. Much has changed. For us a compentent fee for service investment advisor that we can work with and an up to date will are absolute musts in planning for the future.
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Re: Financially uninterested spouse inheriting stock portfolio

Post by OhGreatGuru »

In a way, you are part of the problem, by willingly taking over the management of her money.

Her TFSA and her RRSP are hers - she should be responsible for the investment decisions in them, so she understands them. Insist she take that responsibility. If that means she decides to put them in plain vanilla mutual funds, then so be it. You shouldn't be playing the stock market with them because you find it fun while she isn't interested.

She will not suddenly develop an interest in managing a stock portfolio after you die. She can (and likely will) have your TFSA and RRSP transferred in cash to hers, and invested in what she already has in her own registered funds (which by then she ought to have some clue about). There are no tax implications.

The 2 unregistered accounts are the tricky ones. Someone needs to know how you are keeping track of ACB for these, because of the tax implications. You need to leave clear directions, either for her or for an accountant, or a tax prreparer, on where your files are for tracking this are. (Clearly you must be doing her taxes as well, or at least the part dealing with her investment income. Whose going to it do for her after you are gone?)

Again, in the event you die she is not going to be interested in maintaining the current unregistered stock ortfolios. She will either decide to put them with a financial manager, or liquidate them and put them into something she understands. You could leave some advice and suggestions that are appropriate to the portfolio sizes, for putting the money into something that is easy to manage. But in the end she is one who will have to decide.
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