Blue Collar Millionaires

People’s Perception of Themselves is Hard to Break

The most common scenario I run into with retired clients is that they have more money than they will ever need. They have earned, saved and lived within their means for so long, they don’t know any different.

But here is the problem with that…  

You Are A Different Person Now

In a meeting with a friend - and fellow advisor - he made the statement that really stuck with me, “people’s perception of themselves is hard to break.” We were discussing a client who had worked his ass off his entire career and was now having problems not only spending the multiple millions he and his wife had accumulated, but also taking the tax consequences of his inaction seriously.

We will call him Stan.

Hey Stan, You’re Rich!

What I, along with my planner friend find, is that clients identify most closely with the version of themselves that started the journey.  Stan is a first generation Canadian who started a construction company. He had no foot up, worked as hard in a week as I probably do in a month; he built it on his own with no help.

Stan is now in his sixties and has a net worth of over $15,000,000; a basket of properties, loads of investable assets, and this beautiful, smooth operation of the business that he has run in Vancouver for the past 35 years.

There is no reasonable scenario that sees Stan lose his money in the fourth quarter of his life - he is rich.

From a financial planning textbook standpoint, Stan should (or should have a while ago) switched his focus to multi-generational wealth - how is he going to pass all of this money on to his kids in as tax efficient manner as possible?

But here’s the thing…he could not be bothered to think about that problem because it doesn’t seem real. Stan sees Stan as the young man who worked 60 hour weeks to keep the heat on, not the West Van resident with the lake front property in Kelowna. 

It Is Going To Go Somewhere 

If you don’t spend or gift your money before you die, it is going to go somewhere.  Stan, along with almost all clients I work with, have a tough time coming to terms that they do actually have more money than they will need.

If you do not plan accordingly, a good chunk of your cash is going to end up in the courts for months or - worst yet - the pockets of a tax-happy government. 

This might mean:

• Updating your will
• Double checking your beneficiaries
• Adding contingent beneficiaries on your accounts
• Gifting what you can afford (and your plan indicates) now
• Buying a life insurance policy.

There is no single better way to avoid taxes on your estate than buying a life insurance policy that pays out tax free; you take taxable money at death and turn it into more non-taxable money.

My Take…

You can’t let up at the finish line.  Building wealth is a marathon and if you are in the enviable position of having more money than you know what to do with, you cannot put your head in the sand and ignore what happens next.

You have created multi-generational wealth and have made your family better off.  You have one final task of making sure that as much of your estate as possible goes to them instead of being taxed or tied up in courts.

Most people will not have estates of $15,000,000 plus, but that does not mean that your $1,500,000 won’t drastically change your family’s lives either.

Financial planning helps you see these things; a good plan will bring to light the fact that you will never be able to spend all of your money, highlight where you can adjust your strategy to pay less estate tax, and provide you with the comfort in knowing that you have done your part…

…you have forever changed your family’s stars.