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When life changes, so do financial plans

Life is what happens to you while you’re making other plans, the saying goes. We just never know when the unexpected may happen. Here are four scenarios that look at various life changes and how financial plans adapt to evolving needs.

Tara launches a business

After 20 years in management, Tara lost her job in a reorganization. Her friends, who loved Tara’s home-baked scones, often told her to open her own shop. So she took the plunge and opened Tara’s Tea & Scones.

With no track record as an entrepreneur, Tara’s start-up capital came largely from her Tax-Free Savings Account (TFSA), which she plans to replenish. Tara worked with her advisor to develop a new financial plan. This includes the purchase of disability and critical illness insurance that would help pay for a contract person if an illness or injury prevents Tara from working. She also made her investment portfolio more conservative, as she was assuming enough risk launching the business.

Denis and his blended family

Denis had been divorced for three years, paying spousal and child support. He didn’t expect to remarry and become a stepdad to two young boys.

Denis and his wife Gina have found that communication and fairness go hand-in-hand with financial planning. Denis discussed the challenge of providing his stepsons with the same level of financial support for education savings, summer camp and vacations that he has committed to his daughter, Natalie. They determined that Denis would focus on education savings, which had been lacking for the boys. Denis and his advisor developed a plan that includes catching up on missed grant money for the boys’ Registered Education Savings Plan (RESP).

For his estate plan, Denis and his advisor are leaning toward a spousal trust to be funded by estate assets. Gina would receive lifetime income from the trust and, after her passing, trust assets would go in installments to his daughter.

Geoffrey is now alone

Geoffrey’s wife recently passed away. She managed all of the finances and now Geoffrey, in his late 60s, is getting help from his late wife’s advisor. Geoffrey’s son administered the estate and oversaw the registered plan transfers and rollovers.

Geoffrey is overwhelmed by the task of managing the Registered Retirement Savings Plan (RRSP), TFSA, non-registered account and Registered Retirement Income Fund (RRIF) his wife opened for the pension credit. His advisor learns that Geoffrey has two main worries – handling all the logistics and being at the mercy of the markets. His wife had chosen balanced portfolios, whereas Geoffrey is more comfortable with conservative investments.

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