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Real Case Study #1: Andrea Thumbnail

Real Case Study #1: Andrea

Here`s the story of Andrea, (not her real name) and the details of her Financial Plan that we had the privilege of helping to create…

Andrea is 71 and single. She wants to ensure that she can live to be 100 and do what she plans without running out of money. And that her hard-earned estate can pass safely and minimally-encumbered into the next generation.

Together, we built her Financial Plan to accomplish this. When we met, she told me that these things were most important to her now:

  1. Making sure everything is ‘under control’
  2. Having a Plan that her only child and heir can know and understand in a Family Meeting
  3. Clarify her insurance portfolio and ensure the policies pay at the time of a critical illness, a long- term care need and ultimately at death to cover substantial estate taxes.

Andrea also said that she’d like a Plan that incorporates the following milestones:

  1. Stress-testing her income and assets for their ability to provide $5,000 after tax every month until age 100
  2. Planning a travel budget of $10,000 every second year through age 85
  3. Contributing to her grandchildren’s education in five years for C$15,000 each
  4. Planning supplementary funds for care of C$1,300 per month from age 85 through 100

Andrea’s net worth is presently C$2.0 million, split between liquid assets and real estate. Her annual income is $85,000.

The Plan was a lot of fun to create. Especially because Andrea is so engaged in its success. She brought two revisions to her original thinking along the way, which we were able to easily test for and incorporate.

In our work for Andrea, we were able to confirm that the things that currently matter most are able to be accomplished to a strong, 95% success rate. What that means is that without a modification, the goals can’t all be accomplished in her 98th through 100th year. She’s prepared to live with that for now.

And, given that every year we re-visit and audit the Plan’s progress, we’ll adjust dynamically and organically.

In Andrea’s Estate and Legacy planning, we quantified a $400,000 at-death income tax liability and, in the event of no valid will or Powers of Attorney, almost $65,000 in legal, probate and public guardian charges. A new will and updated Powers of Attorney for care and property are under way. And the securing of life insurance to pay the estate taxes had been put in place fortunately prior to Andrea’s recent experience with cancer, subsequently making her not insurable. The estate taxes will be eliminated, for much less cost and not by encroaching on her hard-earned lifetime accomplishment.

And, we now have the Plan in place that is easily shareable with her son and only heir. A video conference will be held to share this information with him, located as he is, out of Canada and keep him fully apprised of his mother’s Plan and wishes.

Peter Fraser 

Certified Financial Planner