Reader Len Penzo raised a very good point in response to my post about how your investing might change if you knew when you’d die:
I notice you have taken the perspective of a single man with no kids. But what if you have a family, Investor? That changes the calculus yet again!
For example, if I was single with no kids and knew I had two months to live – or five years, for that matter – then I would make sure the last penny of my savings would be used to pay the mortician who cremates me.
Ah, but with a wife and kids, those thought equations are turned upside down.
I wrote the original post to provoke thought, rather than to cover all the eventualities, but I decided Len’s point was such a good one that it deserved a specific follow-up.
(Sorry to continue with the morbid theme! It’s meant to be life-affirming, sort of!)
If I had a wife but no kids and I knew I only had a few years to live, I’m not sure it would change very much for me, to be honest. I think times have moved on, and I wouldn’t work myself to death, literally, to provide for a woman capable of providing for herself. That said, I would do my best to extricate her from onerous financial commitments that we’d both entered into believing in a longer horizon, and I’d surely spend much of my liquidated horde bringing her with me to necessarily fewer far-flung destinations.
Kids, a whole different ballgame. I imagine just like most parents I’d behave just as you suggest – if they were kids. Again, if they were adults I’d not sit out my last days in miserable penury so they could buy a house with a bigger bedroom after I’d popped my clogs. (My parents know I’m happy for them to spend all their money, too).
Specifically, if in a family situation, I think that depending on your time of death horizon you’d need to look at:
Calling in your life insurance
That’s what it’s there for! (i.e. To help your family, not your bank).
Selling or changing your investments, or putting them into a trust
If your spouse has never taken any interest in investing, it is unrealistic to expect him or her to hold through a bear market, let alone add shares, or to take an interest in corporate actions. If I had a small portfolio I’d sell and put it into a cautious fund, cash and government bonds. If I had a large portfolio which could bear the costs I’d think about setting up some sort of trust to manage it after I’m gone.
Consider tax implications
Hopefully your date with death would give you sufficient time to reshuffle your investments in the most tax efficient manner to minimize inheritance tax and reduce other taxes. Some of this would involve transferring assets to your spouse, and you might also want to liquidate certain assets to buy ones less heavily taxed on death (e.g. forestry and VCTs in the UK). You might again look to set up a trust, though I have no experience with this.
Write a will, sort out your affairs, and plan your funeral
Probably the most thoughtful thing you can do, I suppose. Rather than burdening your family with searching through endless lever arch files or wondering exactly what hymn you’d prefer, you can sort it all out in advance and let them concentrate on the good memories and grieving.
What I like about this thought experiment is it encourages you to think about the bigger picture. If you’ve got any postcards from the summit, please let us know in the comments below.
Image by: Cia de Foto
This is something very near and dear to my heart.
My parents did NOTHING you mentioned and when they died in their 40’s, the four kids were completely and royally screwed.
Even if you “know” you’re not going to die today, plan as if you might.
@Neal, thanks for sharing your experiences. I can’t imagine what it was like, but if one person changes their affairs and stops it happening as a result of our comments here at least we’ve done a good deed today.