LifePower

Expectations and Estate Beneficiaries

Just recently I met with an experienced wills and estates lawyer and asked him to tell me about the most common mistakes people make in planning and processing family estates. His answer... expectations of beneficiaries of what was and what was not.

Now I know expectations of all kinds play an important role in our lives and it comes as no surprise that when our individual expectations are not met we are inclined to be confused, disappointed and perhaps even angry. To avoid these emotions, expectations need to be clearly communicated by others and accepted by the other party. It is the way it is.

Expectations of beneficiaries is also about trust. Unfortunately a family can have many trust issues that have built up over the years and when it comes to the day of settlement these emotional trust issues come to the fore and are difficult for some to keep in perspective. When you mix personal grief, disappointment, trust issues and more in together, it will impact all stakeholders.

My lawyer friend told me that when an estate involving several beneficiaries is being settled by a family executor it is not uncommon for one party to question the monetary amounts involved. If during the will planning process this comes up as a possibility it might be best to appoint a more neutral executor or professional. Yes, this might increase overall expenses of settlement but it may also save time and additional family angst.

Another often mis-construed expectation is how long an estate will normally take to be settled. Different juristrictions have different requirements and may take longer than others. If the executor has to negotiate around other family concerns/questions these will only prolong the process.

I asked... could these not all be avoided by holding family meetings? He explained that different generations have different values. While boomers, for example, might be more open to holding family meetings, older generations may prefer to maintain their privacy, holding their cards close in, so to speak. 

Finally we discussed probate. While he does encourage self-help in many respects he pointed out that probate can be complex particulary in navigating income tax guidelines. While self-help can reduce legal fees, the complexity of tax issues and resulting delays and penalties may well wipe-out any potential professional fee savings and could well increase amounts payable, thereby reducing the net value of the estate. 

Some interesting comments that remind me that things are not always as simple as they appear to be. Remember, you won't be present when your estate is being settled so consider your approach carefully during the planning stages.

 

Falling Retirement Income

Very soon the 2011 national election will be over and the results known to all. In the process I have been listening intently to hear of any real commitments/policies to be made by either of the involved parties towards the "improved well-being" of elder Canadians... and I haven't heard very much.

Research shows that middle-class Canadians are facing a sharper decline in their retirement incomes than experts had previously predicted, and any current pension reform proposals do little to fix the problem. So now we not only have lower-income groups challenged but also those fortunate enough to be in a higher income bracket.

The 2009 Mintz study commissioned by the current federal government remarkably found that the pension system is working well and said "80 per cent of households are saving enough to replace 90% of their working income in retirement." I believe a much larger proportion of Canada's elderly is likely to face a substantial reduction in living standards.

This fact will impact not just one generation but several, services and health care standards as they scramble to maintain levels of care and dignity.

The leading cohort of boomers who turn age 65 this year have a life expectancy of 16 years while the youngest born in 1964 have a life expectancy of 28 years. These are significant. Inadequate funding for these years, whether from the state or personally will cause great difficulty.

Read more.

 

 

Boomers' Biggest Fears

Recently I have been reading excerpts from the book Never Say Die and listening to author Susan Jacoby discuss her contrarian opinions to the popular culture on aging.

Boomers have always defined marketing strategies in every decade they have lived and so far they are doing the same as the leading cohort turns 65. “Living longer better” is one popular tag-line that resonates strongly throughout many marketing empires. You will notice I use a similar one in some of my materials!

It is attached to everything from skin creams, health supplements, financial services, lifestyles and even bathtubs. Buy this and you will live longer, better. Use this and life will be oh so much sweeter.

But will that same tag-line hold up once the boomers turn 80 and 90? For it to do so there are many individual and societal challenges to be overcome. There are two that might change the tint on those rose coloured glasses pretty quickly.

First are the real statistics for dementia. Research shows that boomers are more concerned about dementia than they are cancer. There are now known treatments for cancer and some people are fortunate enough to experience permanent remission enabling them to live quite well thank you.

The same is not true for dementia and if current statistics are not alarming, future statistics are as the boomers enter real old age (80) in 2026.

 Alzheimer’s “Rising Tide” report provides an insight for 2038… more than 2.8% of the population (1.125m) will suffer from dementia. It suggests there will be one new diagnosis every two minutes.

Dementia will cost money, lots of money ($153 billion by 2038) not only for families but also the public purse and it seems all levels of government are too confused and likely too scared to address the coming burden sincerely. Where will the funding be found? Which sacrosanct policies will be sacrificed and at what cost? And imagine… Canadian governments have yet to address or plan for a national strategy.  

Secondly, individuals have not done that greater job saving for retirement. True, some might argue there have not been the incentives to do so. Personally I think the financial services industry has done a great disservice to the general public for a long time in not building the “knowledge banks” of soon to be retired people. Regardless, I sense there are few individuals who have truly calculated their savings needs to ensure they live longer better through and into their 90’s and perhaps even as centenarians. If they have, few have reconciled the need to save more now to meet their targets later.

Much of the marketing media for ageless living is targeted towards those earning what I might term as “higher” incomes. While some of these folks will fare well economically (especially if they are fortunate to inherit money) there is a larger and entirely different group who will live on far less money. Will they be living longer better? I doubt it.

Susan Jacoby makes a good point. Looking at the often unrealistic rosy picture of aging being dished out by many marketing companies in fact impedes boomers from facing the realities of real old age into the 80’s and 90’s. For many these years will not be as rosy especially for women who are too often left holding an emptier pot.

Steps to take now to hedge your otherwise rosy bets?

• Recognise the likely challenge - you are going to live longer
• Engage a financial advisor who believes the same philosophy and has the tools to massage the real outcomes
• Start saving sooner than later – the sacrifices necessary will be smaller
• Assume there will be hiccups along the way
• Factor in the possibility of a personal status change
• Consider you might become a morbidity statistic before a mortality statistic
•  Memo to professional women: Overall research shows women need to become more knowledgeable about the gaps in their future financial security

Hey… planning is not an exact art and spreadsheets often turn out differently than when they are first presented. Yes, we should all live in the present but more of us perhaps need to find a little time to consider a range of possibilites and not just the rosy ones. Running out of money is no joy ride.

Susan's book Never Say Die is worth the read.