Test Your Plan

Can you define “congruent”?  It is a word that most people can use, but sometimes they overlook the nuance.

Congruent is simple.  It means that a process or people or solutions are in agreement with each other.  Harmonious.  Ideally, but not necessarily adding to any other, but certainly not detracting.  The opposite of discordant.  Each participant fits with the plan.

Many well-prepared financial plans are not congruent with the objectives and resources and the time of all the people who are or will be influenced by it.  Most people are happy just to have the plan done.  They are not about to look for problems.  With a competent review and revise process that may not matter all that much.  Plans are usually directional rather than absolute.

Except for one.  Your will!  There is no do-over if you don’t like the outcome.  You should test it in all respects but for the dying.

If you own complex assets like a business, then it may require professional help.  The tax options are arcane at best.  So is the liquidity aspect and the time it would take to distribute.  You could do it all yourself but you will certainly see what you meant and that is not often exactly what is there.

Here are some things that show up more often that people would like.

  1. I leave the business to my son John and all my other assets to my daughter, Mary.  Who pays all the taxes due on the disposition of the business?  Mary, that’s who!
  2. I leave the cottage to John and the house to Mary and everything else divides equally.  But I sold the cottage couple of years ago.  Now what?
  3. I instruct my trustees to pay my debts including any taxes due, but I did not leave them any cash assets.  They will sell something but likely not for full value.  “Estate sale” normally means bargain.  There could be tax issues if it takes more than one year from death to closing the sale.  Time pressure.
  4. Divide my personal property among the children.  They both want great-grandfather’s family bible or the Picasso in the fifth best bedroom or whatever.  There is no explaining what they will want.  You must ask.
  5. One of the heirs has become a hard drug addict.  Do you still want the trustees to write a check?
  6. One of the heirs has become disabled.  Is equal still the best choice?

There are dozens more, but you get the idea.  A will must satisfy several different constituencies.  Consider how your will affects your estate trustees, your heirs, their spouses, the government, and your other creditors.  The will is not congruent unless it meets all the needs.  For those it cannot meet you must, while living, provide a way.

It isn’t easy, but it is worth a little time and study.  Even if only to get the latent liability, tax, liquidity and sibling squabbles under control.

Forewarned and appropriate mitigation efforts, should permit congruent outcomes.

Don Shaughnessy is a retired partner in an international public accounting firm and is presently with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario. Contact: don@moneyfyi.com  

This entry was posted in estate plans, Personal Finance and tagged , , . Bookmark the permalink.

One Response to Test Your Plan

  1. Steve Jones says:

    Excellent Article Some great takeaways here

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