Almost exactly a year ago my friend David died, struck down by a heart attack just before his 60th birthday.
Within a particular part of my social circle, where David played a significant role, I and others still mourn his absence. Things just aren’t the same.
But as I wrote at the time, David’s sudden death also prompted something of a re-think here at Greybeard Towers.
Specifically, the realisation that my wife – who has never really been very interested in our investing – needed to be a lot closer to the management of our investments than she had been previously.
Because if I suddenly went the same way as David, she’ll be left on her own to manage not just her pension pot and ISA, but my own – somewhat larger – investments as well.
Hitherto, I’d been the one doing the wealth management for both of us.
Making a start
We began almost immediately.Progress has been good, although there’s still a considerable journey ahead.
The file for her pension now resides in her study, and not in my office. She has the login details, and she – not me – logs in to obtain valuations and make purchases.
Does she like and enjoy it? No. But I’m left with a sense of comfort that should I suddenly expire, the management of her pension won’t quite be the alien territory it once was.
Even so, I’m very aware that all our other investments are still under my care, spread across four other investment platforms. While the journey has begun, there’s still some distance to cover.
That said, it’s a journey that has been given a little extra impetus from three distinct sources.
Income as a carrot
The first was the fact that I had begun positioning our pension portfolios towards a more income-centric stance.
And while it’s fair to say that my wife isn’t especially excited by capital gains made by index trackers, income-focused investment trusts (and index trackers’ income units) are a different matter.
Particularly with interest rates still obstinately stuck at a historic low.
With the investment platform in question handily displaying annual dividend income at the click of a mouse, my wife can readily see how once-abstract investment decisions are contributing to her future standard of living in a manner that could hardly be more concrete.
Hello, retirement
Which leads us nicely to the second source of impetus.
For that future standard of living has itself acquired a certain immediacy.
Last summer my wife was offered and took early retirement, receiving a lump sum redundancy payment on top of her lump sum local government pension payment.
And so, at the beginning of August, she became a lady of leisure.
A lady of leisure with both the time to take more of an interest in her financial affairs, and (thanks to those two lump sums), some active investment choices to make, too.
Choices that, to her credit, she has been making.
Will power
The third source of impetus is a little more sombre.
Back in 1986, we each made wills, written for us by my bank, and with the bank nominated as the executor.
The bank in question has recently made some changes to its probate service, prompting us to re-think whether we wished to use it as an executor.
Particularly since we now have two more-or-less grown-up children, who hadn’t even been born when the wills were drawn up.
The result: A serious family discussion with the kids, on the subject of them taking over the role of executors. In the course of which, it became apparent just how much our investments had grown over the years.
So the wills are now in the process of being updated, with the kids appointed as executors.
Somehow, the whole investment management business now seems a little more serious.
What we’re managing isn’t just our retirement, but the kids’ inheritance.
Don’t fear the reaper
Where next? The journey continues, in short. Our investments need to become precisely that – our investments – and in due course, see the kids involved as well.
That said, I’m still several years short of the state pension age, and intend carrying on working long after it.
But should the Grim Reaper call, we’re rather more prepared than we were last year.
And going forward, I intend that statement to be true every year.
Do check out the rest of The Greybeard’s articles on the changing nature of pension investing and retirement in the UK.
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Good thinking Greybeard.
My wife is far more interested in gardening than finances!
Nevertheless continue to discuss all aspects of the finances and possible changes.
Feel it is important to have a written Investment Plan (Investment Policy Statement) and to share that Plan with the rest of the family, which I do on an annual basis.
Our Plan includes a section suggesting how heirs might allocate investments, in a very simple allocation with a four year rebalance! Whether they consider the more complicated allocations and methods presently in use, is then up to them. At least they are all now aware of how the finances are currently being run.
This is a sorry subject! Let us hope for better days and better things!
I’ve been thinking about this more and more of late as our family grows.
Generally I take care of managing our finances at my wife’s request. She knows I’m fairly savvy and isn’t overly interested in the ins-and-outs of it, so for the most part I look after our family’s assets (although our investments are fairly catatonic at this point).
It has occurred to me recently though that although we’re still in our early 30’s, I could get hit by a bus tomorrow and she’d be stuck with trying to parse her finances let alone my own. So she’s been learning eagerly, and taking more active control of her own positions lately (including reading this blog!). This helps me sleep a little better at night, knowing that if something should happen to me, she’ll be well equipped with the knowledge needed to take over the reigns.
A word of warning on your plans there, Greybeard: you may need to investigate further whether or not your own children can legally be executors of your will. Presumably there is a trust involved, and if so then I would also assume that your children are named as beneficiaries on said trust, which would prevent them from being trustees (executors) in that circumstance. Something to think about and plan around, as we’ve had to address this quite recently ourselves.
No doubt there’s a post for another blog in the probate services these institutions up-sell their clients for this very catch 22, as I imagine there’s quite a racket involved.
Bravo Greybeard!
It is the grown up thing to plan for the inevitable. He’s going to get us all one day. But be happy: it won’t be today*.
* this prediction is usually right.: Indeed, I have as much personal evidence for it as I do for the existence of the force of gravity**.
** believers in Minkowski space will appreciate the irony.
A good point worth raising/considering.
I’m currently trying to simplify things (for my own sanity rather than anything else) but because I manage all the household finances this is something always at the back of my mind too.
Definitely a point that FI folks need to take to heart. Money is a tool, and someone gets to pick it up after we put it down. How little injury can we do with the handoff?
headmelted: correct on the broad point that no one should try to create a trust without legal advice, but otherwise wrong: there is nothing in general to prevent someone being both a trustee and a beneficiary of the same trust. Perhaps you are thinking of the rule that witnesses to a will cannot take under it?
R Lee: I guess you learn something new everyday. It would appear that the advice I’ve been given isn’t correct, so kudos for putting me right on this. A quick Google has just confirmed what you’ve said.
Thankfully, we have not yet sent in the papers for this, which is a relief!
A friend of mine died suddenly & totally unexpectedly at only 27 from a rare heart condition. So while you just don’t think it can happen in a relatively medically advanced country these days, that goes to show that it does. The experience of observing the traumatised friends and relatives trying to sort out the mess of her affairs prompted me to sort out my business asap so that if it happened to me, my people wouldn’t be left with such a hard task when least able to carry it out. (Even though I was still quite young)
Simply giving (a) loved one(s) a sealed envelope via an instructed independent third party [lawyer for example] with all the up-to-date codes/passwords, including to your electronic life is very neat, doesn’t have to be expensive and would be incredibly helpful.
As you note, everyone who is a stakeholder in the situation should be prepared to an acceptable level of competence, so as to not be left vulnerable if disaster strikes. I have a relative currently going through a divorce and her husband is as helpless as a newborn child with respect to anything financial despite actually not being stupid. Had she been the type, she could have destroyed him given this weakness, so everyone should educate themselves as a matter of survival, remembering that luck is where preparation meets circumstance.
I was advised though that it’s not a good idea to make your lawyers handling your will/financial affairs also the executors because it puts them in a position to be able to abuse that trust. Apparently, they then have the option of managing your finances in such a way that they can keep changing things around. (supposedly for the benefit of the estate) But as they get paid for their time, if so inclined, then can then whittle away the funds via commissions for the resulting churn activity.
Always look forward to your articles Mr Greybeard.
And this is an often untouched facet of personal finance, just like wills and inheritance planning in general, it’s touch to consider ones own death. (IHT is another subject, one which I agree with TI on) It’s ok for me though, I’m immortal, but you lot aren’t.
Despite both the Mrs and I being (bad ass rock and roll) accountants, I tend to deal with the finances and investing. Simply because I find it more interesting. Possibly a bad habit to have got into…
Good that you took action to make your wife and kids more involved in the whole investment journey.
It is actually we also should do. We only have a list of banks and account numbers. I am not even sure that my wife knows the login details of these accounts, let alone what I do in there. Maybe make it a 2016 goal?
Pardon my relief, but it’s refreshing to find so many other spouses not interested in finances. I thought I was the only one. I recently asked my wife which chair would she sit in if there was a dentist’s chair in the dining room ready for pulling teeth, or a chair next to me to discuss finances (spreadsheets optional).
She did smile and said she would choose the dentist’s chair. Not sure what that says about me or if it’s the finances!
Next question: is there anything sensible that can be done in advance to help avoid your widow being defrauded, stolen from, and so forth?
Ideally you’d want your money to be for her and then the children and grandchildren not, say, some gold-digger.
dearieme: I would imagine the best thing you can do is have the conversation with your spouse and bring her up-to-speed as best you can.
If you have assets in trust, by way of an insurance policy or a will, you can provide a Letter of Intent that gives guidance on what you believe is the right approach in your absence. The trustee would not be legally compelled to follow it of course, but I would hope that scrawling the words “NO ACTIVE MANAGEMENT PARASITES” should remove a lot of wiggle room for creative interpretation.
Also a good idea to specify in a will how you would like the “waste disposal” aspect to be handled. I have said that my children have carte blanche to decide everything in that domain when the time comes (I am now single), with the eldest having a casting vote if there is a tie. After all, they will be doing the ongoing remembering, so it seems right that they should choose the environment in which to do it.
All that said, Joyeuses Pâques everyone and let’s hope that most if not all of us are still here this time next year! 🙂
An afterthought.
I would think it especially important for readers here that they give consideration to putting a Power of Attorney in place, if they have not already done so.
@Mathmo
“It is the grown up thing to plan for the inevitable. He’s going to get us all one day. But be happy: it won’t be today*.
* this prediction is usually right.: Indeed, I have as much personal evidence for it as I do for the existence of the force of gravity”
Some theories of the Multiverse indicate that any universes in which you die, you cease to be aware of, and so you are only aware of universes in which you continue to live. Hence you are ‘immortal’ (execpt presumably for the maximum possilble live span of a human body). To your perception, nothing will kill you.
@Kraggash — I don’t mean this pettily, but I independently came up with that theory when I was about eight. I’m not sure it’s comforting.
I’m often amused by how closely super-advanced physics approximates religion — though of course I appreciate all the ways it doesn’t, too, and why that statement might annoy some people (so apols if it did!)
@Investor – yes ditto, although I think Max Tegmarks ‘Our Mathematical Universe’ puts the theory a little better than either of us could have done age 8-ish.
Hah, I’m certain you’re right in my case Kraggash!