Couples who both have an equal interest in managing their investments are not as common as you might think. The best case scenario is, of course, that both are working with a financial advisor to ensure continuity and an easier transition when one spouse passes away. But that doesn’t always happen. Even the simplest of investment approaches can be quite overwhelming and confusing to the surviving spouse who has never manager their financial affairs.
Although the spouse who has handled the finances may feel they are taking car of their spouse, it may actually do more harm than good. The obvious pitfalls are failure to manage risk, getting too emotionally attached, missing out on opportunities and spending a good part of their spare time in order to avoid paying an advisor commissions for trades. They can easily miss a big picture item that can cost dearly later on. A good financial planning tip can often cover years of fees for an advisor. Ensuring your spouse has a good adviser after you’re gone is more valuable than trying to save a few dollars today.
There are a few basic suggestions to simplify your finances and hope both you and your spouse.
■ Consolidating accounts is almost always a good move, regardless of your age. By closing unnecessary bank and investment accounts you reduce the amount of work considerably. You will have fewer tax slips, and have a much clearer picture of your situation. The more financial institutions you deal with the more phone calls and paper work that will be left for your spouse and executor after you are gone.
■ Having all monthly registered pension plan payments (employer pensions, Old Age Security, and Canada Pension Plan) automatically deposited into one bank account will make it easier to budget. This one bank account should be linked electronically to your non-registered investment account. RRIF payments can be set up for monthly payments to be transferred from your investment account to your bank account. Having all transactions flow in and out of one account makes it easier to track income and expenses.
■ Organizing your financial papers will be helpful for you and your spouse. Check with your advisor and Canada Revenue Agency regarding what documents can be destroyed and shredded. We recommend cancelling charge cards you no longer use. If you do owe anyone money that is not registered (i.e. mortgage), we recommend you inform your spouse of these amounts. Insurance policies that have been cancelled should be clearly labelled. Any valid insurance policies should be organized with your spouse knowing where they are stored.
■ Old share certificate that have value should be deposited into an investment account. Old share certificates with no value should either be shredded or clearly marked as having no value. An advisor can search old share certificates to provide assurance whether an investment is defunct.
■ We recommend having one easy to access list of professionals you work with (banking contact, accountant, lawyer, investment advisor, insurance company), including all their contact information. This list should provide key information, such as where your will is stored and the name of your executor. It is quite common for couples to name their spouse as their primary executor. Your advisor can provide a list of some of the main responsibilities of being an executor. Obtaining an understanding of your duties should be done while you’re updating wills, power of attorney, representation agreements, and other legal documents. Your spouse should know where your will is located and who is the executor (if your spouse is not the executor).
■ Ensure that you have the correct beneficiary designated on each registered account. In the majority of cases it is advantageous to name your spouse. If you are naming anyone other than your spouse then we recommend that you obtain advice to ensure it is appropriate and you understand the consequences.
■ Obtain financial and accounting advice for any non-registered investment and bank accounts that are solely in your name. There are many benefits for opening joint with right of survivorship accounts with your spouse. Changing ownerships on accounts should only be done after an informed discussion with your advisor.
Nearly every couple has additional steps they should follow that are unique to their individual needs. We encourage couples to come in to investment and planning meetings together. These meetings help your financial advisor formulate a plan that helps both of you. The best way you can take care of your spouse is to ensure that all is in order today and that a trusted advisor will be available to help after you’re gone.