Last week, I met an 85-year-old gentleman, whose favourite pastime is to speculate in the stock markets. He was absolutely gleeful when he described his successes. He told me how he eagerly looks forward to the markets opening in the morning, and how his little tricks and techniques have made him money.
After a while, we moved on to losses and what he does about trades that fail. He told me that he doesn’t care much for the losses and had learnt over time to take the loss and cut it early. We both laughed heartily at the textbook rule that stock holdings should reduce as one ages. Generalisations must have exceptions too, and rules can’t be blindly applied, he argued.
This gentleman is a retired bureaucrat drawing a decent pension, and living in a house that he owns. His income is adequate to cover his routine expenses and leave a surplus for his speculative pastime. His children live abroad and he stopped visiting them after his wife passed away five years ago. He is quite frail, but manages to take a walk twice a day and practise yoga every morning. His eating habits are simple and he loves the modern India that delivers everything he needs at his doorstep.
Simplify, simplify, simplify
He then asked me if I had a set of rules for someone like him. What should one be doing about personal wealth at this age? My answer was: simplify. Your wealth must last you a lifetime and work for you as if you would live to a hundred years, but your operational arrangements should be such that it is easy to take over should you pass away the next day. How does one operationalise this, he asked. Here is a checklist.
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First, list all your assets and make a table that shows where each one is, what their current market values are, and what the records state about each asset. This must include land, property, bank accounts, demat accounts, mutual fund holdings, bonds and deposits, gold, precious metals and jewellery. Make sure this list is easily available to your children when they inherit it after your time.
Second, complete the paperwork that enables accessing and transmitting the assets after your time. Ensure that the land and property are electronically registered—which is now required in many states—and that ownership is clear in the title documents. Ensure that all investment accounts have the correct address, e-mail and phone numbers, operational process that is easy, and nominations that are in place.
Third, evaluate your assets to ask if you need all of these, or would like to sell and simplify. Your children will benefit from readily available bank deposits and financial assets, rather than having to deal with the hassle of selling property and jewellery. Sell what you do not need while you are alive and alert.
Consider whether you would like to continue living in the house you own, or would like to sell and move into a retirement community or a smaller property, preferably registered in your children’s name.
Wrap up what you can
Fourth, you may not need a long list of investments. Close bank and investment accounts that no longer serve you any purpose. Reduce your stock and mutual fund holdings, and consolidate these. There may be little merit in holding a complex portfolio and trying to monitor and manage it. One equity index fund, one bank account, and fixed deposits linked to that account are adequate for most purposes. Keep it simple.
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Fifth, make a will that lists your assets after the simplification exercise. If your children inherit immovable property, they may need a registered will to claim and register it in their names. Ensure that you have listed all the beneficiaries who may or may not be legal heirs, and that you have completed this process early so that there is no revision and dispute as you age and find your faculties weakening.
Sixth, discuss with your children what you have, where the assets are held, and what they will get after your time. Let them know so that it is easy for them to take action. If you do not foresee a dispute, or the risk of being abandoned in old age, and if your relationship with the children is amicable and cordial, keep what you need and distribute your assets to them while you are alive. Make sure that the tax regime in the countries they and you live in enables such transfer without severe tax implications.
Seventh, ensure you have a living will and that money is not spent on invasive medical treatments for you after a certain age. This is a decision only you can make. Your children will not be able to take a ‘do not resuscitate’ (DNR) decision on your behalf. Choose palliative care while still healthy. Relieve the children of guilt, save your wealth and their wealth from being misallocated to expensive treatments, and save yourself the ignominy of vegetative living, should you fall ill.
Eighth, review your non-financial holdings. These may or may not be valuable, but run the risk of turning worthless once you are no more. The furniture you lovingly bought at your posting abroad; the china ware your wife left behind; the silver service set that you no longer use; the books that line your shelves, and so on. Look around to see if your house holds too many objects that are tough to maintain; they may get tougher to keep when you are not around. Find a buyer or simply give away. Embrace minimalism as a welcome trait as you age.
Our man enjoys his day trading activity because he is privileged to have a generous pension that he can spend as he wishes. Not everyone is as privileged, but being able to use one’s income in the manner one wishes is a right every elderly citizen holds. There is no need to save and build assets till the end. Everyone’s circumstances may be different, but simplifying one’s personal finances after the age of 80 might be helpful.
The Author is Chairperson, Centre For Investment Education and Learning
