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 adviser 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 managed their financial matters.
Although the spouse who has handled the finances may feel they are taking care 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 then trying to save a few dollars today.
There are a few basic suggestions to simplify your finances and help 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. One bank account should be linked electronically to your non-registered investment account. Registered Retirement Income Fund 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 adviser and Canada Revenue Agency regarding what documents can be destroyed and shredded. We recommend cancelling credit cards you no longer use. If you do owe any money that is not registered, such as a 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 certificates that have value should be deposited into an investment account. Those with no value should be shredded. An adviser 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 adviser, insurance company. 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 adviser 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 are updating wills, power of attorney, representation agreements and other legal documents.
? 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 else, we recommend 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 accounts with right of survivorship with your spouse. Changing ownerships on accounts should only be done after an informed discussion with your adviser.
? Nearly every couple has additional steps they should follow that are unique to their individual needs. We encourage couples attend investment and planning meetings together.
Kevin Greenard CA FMA CFP CIM is an associate portfolio manager with The Greenard Group at ScotiaMcLeod in Victoria. His column appears every second week. Call 250-389-2138.