Financially uninterested spouse inheriting stock portfolio

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Financially uninterested spouse inheriting stock portfolio

Post by 2 yen »

If I kick off before my spouse, I foresee a major problem. There are 6 investment accounts that will become 4 (my RRSP and TFSA would be rolled over to her). Right now I look after all of this - transferring dividends for spending, checking on the stocks in the portfolio, all taxes, calculating ACB, all record keeping, etc. How do others see dealing with the issue of the spouse not being particularly interested in all of this, but wanting to maintain a nice income?

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Re: Financially uninterested spouse inheriting stock portfolio

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We have identified several ETFs that she should evolve to. And we have identified an adviser that she likes in case she needs one. My life insurance should easily cover any fees that she decides to pay. She will get her taxes done as well. Since all our friends use advisors and tax preparers, she will have lots of choice.
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Re: Financially uninterested spouse inheriting stock portfolio

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2 yen wrote: 02 Apr 2017 09:03 How do others see dealing with the issue of the spouse not being particularly interested in all of this, but wanting to maintain a nice income?
As a challenging problem, one that I'm trying to wrap my head around for a solution. It's on my "Things I might do"™ list of issues that should be addressed in our investment policy statement. There have been some previous discussions of the topic here on FWF (search should turn them up).

Part of it is simplifying what I'm already doing so that someone else could take over. In the Canadian/US markets I'm a stock researcher and picker. My style is a blend of many based on Graham/Buffett (and yielder for those that remember that name). It works for me (and us) because I'm interested in the intellectual effort involved, but I'd have a hard time recommending other follow the same approach, including my spouse or adult children.

Part of it is trying to ensure a smooth-ish transition from the existing investments and providing some guidance on how to move forward.

Part of it is trying not to rule things from the grave. I'll be dead, so I won't have or need control. But I know the past mistakes and the things to avoid, such as full service brokerages and high commissions/fees, so some guidance of previous pitfalls is part something to consider and recommend.
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Re: Financially uninterested spouse inheriting stock portfolio

Post by 2 yen »

The portfolio is essentially a 100% dividend producing one. Assuming spouse would want to leave the full capital as a legacy, can a paid advisor, fee only, be trusted to watch over a portfolio and, say, once a quarter have a look and recommend any adjustments? Would a separate tax person look after things like ACB when doing taxes?

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Re: Financially uninterested spouse inheriting stock portfolio

Post by cannew »

As with 2 yen, we are 100% DG equities. I've outlined options for our Executor (son in law) on how manage the portfolio and which stocks or accounts to draw funds from, if needed. Ours will go from five accounts to three with other holdings at Computershare where the dividends get paid directly.
The only decisions needed will be which stocks to transfer out of the RRIF's to the joint and tfsa and if she needs any of that in cash (which is unlikely). The other question is if she wants more regular income than some of the joint shares can be transferred to Computershare or CST and have the dividends paid directly.
I have recommended an accounting firm if our son in law feels he needs help with taxes, but again unlikely as the income is only RRIF, Gov't pension and dividends.
Pretty simple and not likely to cause difficulties.
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Re: Financially uninterested spouse inheriting stock portfolio

Post by brucecohen »

I've been involved in three such cases over the past 10 years. The husband's carefully structured plan quickly went awry. Widows who have no interest in, and knowledge of, investing quickly throw up their hands and also become easy marks. One woman was left a seemingly idiot-proof couch potato portfolio and found it too confusing. All three women suffered big losses on hot tips from friends, family and venal "full service" advisors. All wound up happily ensconced in balanced funds at Mawer, PH&N and Beutal Goodman. IIRC, Mawer reduces its mgmt fee for $2 million+ accounts lodged directly with them and I think the others have similar policies. All offer handholding at no extra cost. Newish Steadyhand might also merit a look. It was founded and is run by Tom Bradley who was formerly CEO at PH&N.
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Re: Financially uninterested spouse inheriting stock portfolio

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Another eventuality is that she will remarry and the new guy will take it over. I agree with Bruce. You cannot rule from the grave no matter how much you document, ergo my pragmatic approach. She will receive $500k to compensate for inefficiency. The only downside is that my kids might suffer a loss in inheritance. But that will not be my problem.
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Re: Financially uninterested spouse inheriting stock portfolio

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If your spouse is really uninterested in money (except for spending it), like my wife, one option is to leave your financial assets in trust, with the spouse as beneficiary for their lifetime, then to be distributed to the ultimate heirs. If the heirs are also completely uninterested, the trust can continue past your spouse's death.

My arrangement will cost some $6,000 a year, indexed to inflation. plus disbursements. By contrast, TD wanted around 1 % of assets, plus (expensive) disbursements.

I have seen too many widows taken to the cleaners. It happened to my grandmother (by adoption). It took her new gigolo eighteen months to clean her out.

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Re: Financially uninterested spouse inheriting stock portfolio

Post by Peculiar_Investor »

ghariton wrote: 02 Apr 2017 19:21 If the heirs are also completely uninterested, the trust can continue past your spouse's death.

My arrangement will cost some $6,000 a year, indexed to inflation. plus disbursements.
If you don't mind me asking, can you breakdown the trust costs a bit further. I'm thinking accounting fees for annual T3 filing, and some level of management fees? Is the amount a function of the size of the trust's assets under management?
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Re: Financially uninterested spouse inheriting stock portfolio

Post by Flaccidsteele »

ghariton wrote: 02 Apr 2017 19:21 If your spouse is really uninterested in money (except for spending it), like my wife, one option is to leave your financial assets in trust, with the spouse as beneficiary for their lifetime, then to be distributed to the ultimate heirs. If the heirs are also completely uninterested, the trust can continue past your spouse's death.

My arrangement will cost some $6,000 a year, indexed to inflation. plus disbursements. By contrast, TD wanted around 1 % of assets, plus (expensive) disbursements.
Thanks for this. How is the $6000 annual cost broken down? I had (wrongly) assumed that a trust is a one-time-set-up kind of thing.
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Re: Financially uninterested spouse inheriting stock portfolio

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Flaccidsteele wrote: 02 Apr 2017 21:48
ghariton wrote: 02 Apr 2017 19:21 If your spouse is really uninterested in money (except for spending it), like my wife, one option is to leave your financial assets in trust, with the spouse as beneficiary for their lifetime, then to be distributed to the ultimate heirs. If the heirs are also completely uninterested, the trust can continue past your spouse's death.

My arrangement will cost some $6,000 a year, indexed to inflation. plus disbursements. By contrast, TD wanted around 1 % of assets, plus (expensive) disbursements.
Thanks for this. How is the $6000 annual cost broken down? I had (wrongly) assumed that a trust is a one-time-set-up kind of thing.
I don't have a breakdown for the $6,000. It is an annual fee that covers trusteeship, management, and investment (couch potato approach). It doesn't include tax preparation and other miscellaneous services.

A trustee charges annually for his/her services. There is a one-time charge for setting up a trust in the first place, but that's a separate matter.

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Re: Financially uninterested spouse inheriting stock portfolio

Post by twa2w »

If you don't mind me asking, what company did you find that would manage a trust for 6 k a year.

I would assume you know the risks of having an individual do this, and what happens if that individual dies or becomes incompetent before the trust is terminated.?
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Re: Financially uninterested spouse inheriting stock portfolio

Post by Flaccidsteele »

twa2w wrote: 03 Apr 2017 00:21 If you don't mind me asking, what company did you find that would manage a trust for 6 k a year.

I would assume you know the risks of having an individual do this, and what happens if that individual dies or becomes incompetent before the trust is terminated.?
I was wondering about this as well.
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Re: Financially uninterested spouse inheriting stock portfolio

Post by kcowan »

We had a trust set up in our wills and we eliminated on the advice of our lawyer. I am open to further dialog from experienced participants here. Especially any who have actually experienced how it worked out after death of the spouse. We have heard horror stories about people without one.

We had named our two heirs as joint trustees.
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Re: Financially uninterested spouse inheriting stock portfolio

Post by izzy »

There used to be tax advantages to testamentary trusts which more than covered the costs in most situations. Now, I believe that only continues to apply if the beneficiary qualifies for a disability tax credit.
The problem as I see it is that accurate information is often only available from interested parties who see themselves as potential trustees.It's a bit like advance funeral planning in that respect.
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Re: Financially uninterested spouse inheriting stock portfolio

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I guess there are two basic approaches to this. You can structure things via trusts, etc that can "lock in" an investment/income strategy. Or you can try to educate your spouse/ heir along with simplifying things. Obviously your approach will depend on the capacity and interest of spouse/heirs. Luckily for me my spouse/heirs are interested and capable so the choice seems obvious. Our financial affairs are incredibly simple as well.

I am always a little surprised that so much effort goes into the first approach when less effort might be more effective at educating your spouse/heirs and simplifying your affairs?
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Re: Financially uninterested spouse inheriting stock portfolio

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I suspect the biggest problems will arise where potential heirs are either ailing or located in other provinces/countries and the estate is significant in size.
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Re: Financially uninterested spouse inheriting stock portfolio

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izzy wrote: 03 Apr 2017 10:31 I suspect the biggest problems will arise where potential heirs are either ailing or located in other provinces/countries and the estate is significant in size.
Yes, agree, although my estate will be quite large. If they are capable, and interested the size of estate shouldnt matter. My situation is a little unusual in that both my spouse and son in law are CPA's and very interested. .
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Re: Financially uninterested spouse inheriting stock portfolio

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Interesting question, so I asked it:

The reply from my spouse a minute ago to my question, "so what would you do if I died tomorrow with our accounts?" was, "I' guess I'd call TD and say I have all these accounts that my husband used to look after, what should I do with them? Or maybe I'd just cash them all in?" :shock: :shock:

Currently we are executors of each other's will. All joint accs and/or beneficiary designated RRSP's, TSFA's.

Time to print out our Investment & Retirement Income Plan and have a longer sit down. It is only 1 1/2 pages but fairly detailed about account and income intentions, pre and post RRIF. Working this year to divest of 2 houses and simplify things. Planning to gift about half around 70, then CPP, RRIF's and TSFA's should then suffice for one or both of us.

We have a son who is smart enough and has taken on his own investing with some gusto (couch potato) that I would consider for guidance, but she didn't mention him. He's a bit less frugal spending habits than his sister, and has a bit of a tendency to start putting the Ikea item together before reading the instructions, "how hard can it be?"
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Re: Financially uninterested spouse inheriting stock portfolio

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twa2w wrote: 03 Apr 2017 00:21 If you don't mind me asking, what company did you find that would manage a trust for 6 k a year.

I would assume you know the risks of having an individual do this, and what happens if that individual dies or becomes incompetent before the trust is terminated.?
A sole practitioner lawyer. She has arrangements with two other lawyers in case anything happens to her.

As stated above, TD wanted 20K a year.

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Re: Financially uninterested spouse inheriting stock portfolio

Post by AltaRed »

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.
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Re: Financially uninterested spouse inheriting stock portfolio

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AltaRed wrote: 03 Apr 2017 20:51 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.
The simplifying I can do easily. The 'who to go to at the appropriate time' is the much bigger question.

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Re: Financially uninterested spouse inheriting stock portfolio

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I posted this question a few years ago and coincidently, just yesterday, revisited the discussion with my spouse. I wanted her to visit our financial adviser so she has some familiarity with him and the company. Her response was not printable! She has not changed in the last few year and will not change in the future. Not interested and never will be.

So the decision I made a few years ago to find a good group for our situation was the right one and I am comfortable that she will be in good hands during her lifetime. She will have to determine what to do with her estate later but, as I am quite a bit older, I won't be involved.

We are with Burgundy.

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Re: Financially uninterested spouse inheriting stock portfolio

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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.
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Re: Financially uninterested spouse inheriting stock portfolio

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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.
Good post. Good advice.
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