Disagrees with planner

We suspect our financial planner is using scare tactics to try to get my husband and me to switch some of our money into annuities.

He disagrees with my husband’s will. We didn’t think planners had to know what is in our wills, only that we needed to have them.

My husband (79) has a son of 47 and a daughter of 45 from a previous marriage. I’m 64, retired and financially secure. The daughter is married and doing well financially but the son, who is estranged from us, is not.

The children will get the proceeds from his two RRIFs (segregated funds) as well as his non-registered account (approximately $400,000). I get his share of the house we co-own. We’re aware of the tax implications and have tried to find ways around it, but feel that in our situation, this is the fairest way to do it and have advised our planner that he is not responsible for our decision. However, he maintains that estate planning is the biggest part of his job and that the children, because of the high taxes, could hire a lawyer and try to sue him if he doesn’t suggest alternatives to lessen their tax burden. Could this possibly be true?

His alternatives are that my husband should buy $50,000 to $75,000 insured annuity from his RRIFs with the children as beneficiaries plus we should each put in $100,000 from our non-registered accounts (which are with another planner) to purchase a joint life annuity.

So, if my husband passes on first (which is more likely given our age difference) then, the children will have to wait until I die to get the money. I’m not comfortable with this idea and I doubt they would be. I have made them the beneficiaries in my will.

We’ve already lost a fair amount of money because of bad advice from the two previous planners, so we don’t want to make more costly mistakes at this stage of our lives. We’d appreciate your comments. – E.B.

Gordon’s answer: Let me start with a couple of general observations. First, your financial planner should certainly be aware of the terms of your wills. He is quite correct in saying that estate planning is a big part of his job and there is no way he can perform it properly without that knowledge. It is therefore quite appropriate for him to make recommendations based on that.

However, that’s where his responsibility ends. You take the recommendations, discuss them, and then make your decisions based on what you feel comfortable doing. I have never heard of a financial planner being sued because clients did not act on a recommendation and I suspect any such case would be thrown out of court. His files would clearly show that he gave his advice based on his knowledge of the situation and that you chose to go another route. The ultimate decision is yours.

If you want to move some of the money into the children’s hands sooner, and possibly with less tax, there are other options worth exploring. For example, we have no gift tax in Canada. Depending on your husband’s income level, it might make sense to take more money out of the RRIFs each year (assuming he is not paying tax at the top marginal rate) and gift it to the children.

I suggest that you seek a second opinion at this stage, perhaps from an accounting firm that has an estate practice or a fee-for-service planner with no vested interest in selling you anything.