Bob and Mavis, a retired couple in their mid-70s residing in Eastern Canada, are seeking guidance on financial and estate planning as they prepare for the later stages of their lives. The couple, both 75 years old with no children and no family in Canada, enjoy substantial incomes from defined benefit pensions, receiving $114,096 and $72,228 annually, respectively, both indexed to inflation. They also have a duplex valued at approximately $1 million and investments totaling about $5.5 million.
With modest personal expenses, Bob and Mavis have committed to donating roughly $300,000 annually to various charities, a practice they plan to continue while adjusting their financial management to suit their advancing age. Their annual retirement spending goal, excluding charitable contributions and mortgage payments on an investment loan, is set at $72,000 after tax.
Given their lack of immediate family nearby and the expectation that their church can only provide short-term support, the couple is exploring long-term strategies for medical and physical care as well as estate administration. They express a specific interest in appointing trustworthy individuals or organizations to serve as powers of attorney and executors to manage their affairs if they become unable to do so themselves. They also want to simplify their intricate investment portfolio, which currently includes nine separate accounts and over 100 investment positions.
Financial planner Warren MacKenzie, a chartered professional accountant based in Nova Scotia, reviewed their situation and praised their disciplined investment approach and generous charitable giving. He estimates that, maintaining their current lifestyle and donation levels—with a projected 5% annual return and 2% inflation—they could leave an estate worth about $8 million in today’s dollars.
MacKenzie recommends they consult an estate lawyer and tax professional to help establish appropriate powers of attorney, potentially appointing a trusted younger friend, a professional such as their lawyer or accountant, or a trust company. To safeguard against mismanagement, they might consider setting up an alter ego or joint partner trust, which would allow them to transfer assets while retaining control. Updating wills to specify charitable beneficiaries and appoint corporate executors is also advised. Including a trusted adviser from the charities they support could provide oversight of decisions made by their appointed representatives.
On the investment front, MacKenzie suggests condensing their holdings into fewer accounts with a focus on asset allocation exchange-traded funds (ETFs) to improve diversification and simplify management. He notes that Mavis is not involved in the investment process, so engaging professional portfolio management to provide a hands-off option, and to prepare contingency plans should Bob become incapacitated, would be prudent.
The couple currently carries a $395,000 mortgage taken to fund investments, with the proceeds placed in a guaranteed investment certificate yielding 5%, while the mortgage interest rate stands at 3.97%. MacKenzie points out this adds complexity with limited return benefits. Bob and Mavis have been shifting their asset allocation to hold more cash and fixed-income investments amid concerns over a potential stock market downturn. Their portfolio is approximately 40% cash and GICs and 60% mostly Canadian stocks.
MacKenzie advises setting a clear charitable target first, then determining the necessary investment return to support that goal, even assuming a lifespan to age 100. Their indexed pensions provide a strong baseline income to sustain their lifestyle, even if market losses erode their investment principal, though in such a scenario, charitable donations would need to be reduced.
Bob employs a strategy of donating securities directly to charity to benefit from tax credits and avoid capital gains tax. MacKenzie notes that tax receipts from such donations can be carried forward for up to five years, offering flexibility for larger gifts in years when market exposure reduction is preferred.
For 2027, the couple’s projected income includes pensions, Canada Pension Plan payments, annuity income, rental income, RRIF withdrawals, and trust distributions, totaling approximately $399,800. Their cash outflows—covering lifestyle expenses, charitable donations, income tax, and tax-free savings account contributions—are estimated at around $399,500, illustrating a carefully balanced financial plan aligned with their priorities.