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Secrets of Successful Wealth Management: 9 steps to the life you've always wanted, before and after retirement.

Topic: Wealth Management

Smart planning for your heirs will include these key steps

planning for heirs

When planning for your heirs, it’s as important to anticipate the small conflicts that often arise between family members as it is to focus on maximizing the value of your investments

Our work with stock portfolio management clients sometimes gives us a window into problems that can arise with the death of parents and the distribution of their personal belongings and financial assets.

For instance, siblings may assume they were supposed to get particular items of jewelry or furniture. When they learn that somebody else asked first, they can harbour a grudge that can last for decades.

Invest in your Financial Future for FREE

Learn everything you need to know in '9 Secrets of Successful Wealth Management' for FREE from The Successful Investor.

Secrets of Successful Wealth Management: 9 steps to the life you've always wanted, before and after retirement.

Planning for your heirs: Head off sibling conflict with frank discussions

The best way to spare your family this problem is to head it off while you’re still alive. Tell your kids that you want to be fair to everybody. Ask them to send you a note or an email to express interest in any particular article. But don’t put too much emphasis on who asked first, and don’t feel you need to rush into making a list of who gets what. Some of your children may be slow to think of what items matter most to them. Or they may feel shy about asking for them.

Everybody should understand that if one child gets valuable household items from the estate, they may wind up receiving less cash.

Unpaid loans from parents can also cause dissension. Sometimes adult children run into money problems and wind up having to sell their home, for instance. Later, they may want to borrow the down payment to buy another home. If you grant that request, don’t simply write a cheque.

Instead, have a lawyer register a mortgage on the new home for the full amount of the loan. Explain to your child that this protects the money from attachment by creditors if new money problems come along, and keeps it in the family. You should also be aware (no need to mention it to your child) that this step also keeps the money in the family in the event of divorce.

Dissension can also arise when a child stays in the family home long after his or her siblings have moved out. Living at home and taking care of a parent can hold a child back from career advancement, and may get in the way of the child’s social or romantic life. But siblings may see it as simply taking advantage of free room and board. If you think it’s appropriate, you may want to add a line or two in your will that acknowledges the personal contribution of the stay-at-home child.

It’s hard to avoid all tension that grows out of these all-too-human conflicts. But if you think about them and talk about them with your children, things will go much more smoothly than if you leave them for the kids to sort out on their own.

Planning for your heirs: Invest based on your heirs’ timelines

If you have substantially more money than you’ll need for the rest of your life, and you plan to leave the excess to your heirs as part of your retirement planning, it makes sense to invest at least part of your legacy on their behalf. That is, invest based on their time horizon, not yours. And above all, choose investments with our Successful Investor philosophy in mind.

For instance, if your heirs are in their 40s, your retirement planning should involve holding at least part of your portfolio in a selection of investments that would suit investors in their 40s—and that follow our Successful Investor approach. Of course, you’d still want to invest conservatively. But you’d want to take advantage of the many years that 40-somethings have till they reach retirement age.

If your retirement planning involves holding your money in T-bills for the last few years of your life, it will generate a minimal return after taxes—you may actually lose money after accounting for taxes and inflation.

After your death, it may take months or longer to settle your estate. After that, your 40-something heirs may need time to put your legacy to work, especially if they are inexperienced as investors. They may have passed 50 by the time they get around to investing in an age-appropriate fashion. Missing out on, say, three years of even moderate returns can take a big bite out of the funds they’ll have a couple of decades later, in retirement.

Planning for your heirs: Make sure your heirs don’t grow complacent about your retirement planning

One reason why so many family fortunes are lost over the long term is that the prospect of an inheritance can undermine the career ambitions of heirs. Many young people find it difficult to put their best efforts into low-paid, low-status entry-level jobs. If they expect to receive inheritance money, it may undermine their motivation all the more.

You may even consider having such a discussion with your heirs as part of your retirement planning.

What steps have you taken to prepare your portfolio for your heirs?

Planning to distribute your portfolio to your heirs can sometimes strain family relationships. How do you plan for the future without creating discord?


  • Bill 

    Two problems left out [experienced by people whom I know ] What happens after a second marriage especially when the second wife has sold a previous house after marriage and then moved into the husband`s home who also has adult children ? Second problem –What happens if a supposedly adult child becomes involved with a socially destructive cult which isolates the parents from the adult child ?

  • Ruth 

    Very good advice in this article Pat. Our family is currently experiencing the stress associated with estate litigation and it is now almost 3 years since our step-mother passed away. I have taken some of the steps Pat mentions in this article (previously before reading this article) but its great to have my choices rubber stamped by another professional. :-). This is so important – believe me especially when you consider mental health issues that can develop later in life….. Ruth

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