Karma Taken to a Whole New Level.

This month, I’m going to tell you a story I’ve been waiting to tell for almost two decades.

Early on in my career, I met an amazing lady who was well in her 80’s who we’ll call Anna. I worked with her for a number of years as her financial planner. Anna was a delight to work with – bright, articulate, very informed and opinionated. She was also worth a whole heck of a lot of money.

If you met Anna, she seemed like many seniors – very concerned about spending money, as she was worried she might run out. Her biggest concern in her late 80’s was that she was in great shape and planned to live a long time. That probably doesn’t surprise you, what might surprise you is why.

Anna planned to live a long time because she wanted to tick off “the greedy little buggers” (her words not mine).

See, Anna was worth nearly $10,000,000. She was a testament to a lifetime of chronic saving, and she had invested over the years in a wide variety of things. But the real growth area had been real estate and she’d been hanging onto some properties for a very long time.

Anna had some very greedy descendants, who had a good suspicion of just how much she was worth. They would try any number of tactics swindle her out of her money. She had seen everything from them trying to get her to sign deeds of properties, to elaborate tales as to why someone needed large sums of money in a hurry.

Being a sharp, strategic and crafty gal, her ultimate plan was to outlive most of them. But, just in case, she asked me to do some very creative planning work. And boy, did we ever have fun!

Making private transactions by bypassing the estate

Anna had one niece who had always been kind to her, and had no idea of Anna’s net worth.  Anna’s main goal was to make sure that the kind niece (we’ll call her Josie) was taken care of properly. Her other planning goal was to ensure that the Greedy Little Buggers (GLBs) got what they wanted, but in the most inconvenient way. All of this, of course, was the backup plan to Anna’s master plan of outliving her greedy family.

After some research, and coordination with Anna’s lawyer, we determined our best way forward was to move Anna’s cash holdings into the insurance-company version of GICs, as well as segregated funds. Both of these options come with a named beneficiary, which meant that she could have the funds completely bypass her estate and go directly to Josie. Unlike a will, which may be a public document, the insurance beneficiary designation is usually a private transaction and in most provinces not subject to public knowledge or scrutiny. This allowed her to quietly pass her cash to Josie, and leave the estate solely to the GLBs with little more than her extensive real estate holdings and the very significant capital gains tax consequences that would occur at her death.

How to create a cash crunch in the estate.

With the majority of her estate subject to capital gains, and most of the cash re-directed to Josie via insurance, her plan was to leave all the GLBs as joint executors with wording that they must all be in 100% agreement in order to sign off on any distributions. In her opinion, the most likely outcome was that they would bicker and argue with one another. They would ultimately have to sell or mortgage many of the desired properties in order to pay the tax bill and that it would take a long time for the estate to settle. She was just fine with that – the one and only time I have had a client who actually wanted to drag out their estate’s settlement period! As many of the GLBs were then in their 60’s and 70’s, she was hoping that by the time they received their “just due,” they wouldn’t be in any shape to enjoy the fruits of their many years of scheming.

The ultimate realization of her plans

Anna lived a long life, long enough to celebrate her 100th birthday in full control of her faculties.  Unfortunately, I didn’t get to remain her advisor as I took a promotion a few years after we structured her holdings and had to pass her accounts on to a colleague. My colleague did let me know several years later, however, when Anna passed away that she had outlived 2/3rds of the GLBs, and that the Josie had been stunned to receive a quiet but very significant inheritance when she expected and wanted nothing at all from her aunt.

As for me, I’m always going to remember with great fondness, a very kind, sweet, insanely smart and funny lady who took the time to knit my newborn son a sweater, all the  while reminding me of the truly important things in life.

Sometimes, Karma is sweeter than honey.

Do you have a great story about someone with character in your life and how you remember them?  If so, we would love to hear about them for a future newsletter.  Feel free to email us at ryan@quietlegacy.com if you do.

This newsletter should not be taken or relied upon as providing legal, estate planning, accounting or tax advice.  Clients should obtain advice from independent, professional advisors.