if someone were to leave estate to their kids or donate money to charity upon their death, does that add an additional stage to the time horizon??
I think so buddy. I read Schweser note, saying that in this case the attention should be put to the heir.
So would the IPS in this case address before and after death scenario? I don’t think so.
I think you would address that as a distinct time horizon with the euphamism “post-retirement”.
Doesn’t an individual’s IPS end at his/her death?
Sort of, I think, it is really just a matter of identifying the “post-retirement” as a time horizon if the questions says something about leaving funds to children or a charity, or something to that effect. Maybe then, preservation of capital would be more of a concern. If the question says that the individual just wants to maintain some time of lifestyle spendinng requirements in retirement and does not mentoin leaving anything to anyone, which is my plan, I don’t think you have to address “post retirement” as a distinct time horizon. Chime in if anyone thinks I am off on this. Thanks
I dunno - I am probing because I am myself confused on this.
Leaving to kids definitely lengthens the time horizon. Leaving to charity doesn’t. There was an question in Reading 42 where the solution talked about short term considerations, then change focus of IPS once the old lady “post-retired”.
Joey D, you were a grader weren’t you? Little help?
Joey stop looking at pictures of the blue wave softball team in the paper and answer our questions
It would not be an additional time horizon. You would state something like, The 3rd stage is from years 20 to the end of Mr. Smith’s life upon which he will leave all his money to BigWilly with which JoeyD will manage and make millions more for BigWilly. It is not an extra time horizon stage.
TooOld4This Wrote: ------------------------------------------------------- > Leaving to kids definitely lengthens the time > horizon. Leaving to charity doesn’t. > > There was an question in Reading 42 where the > solution talked about short term considerations, > then change focus of IPS once the old lady > “post-retired”. which question is this?
IF thats the question I’m thinking of there were 2 beneficiares fo the trust, an old Aunt or Grandma or something and a young kid. There were very specific parts in teh reading as the old lady now only has 3 years to live but must cover her expenses until then…this was the shorter time horizon, so when she died and it was just the 23 year old kid now it went to a Long term horizon.
If it’s question 4 that you are talking about then the time horizon changes when the owner of a trust dies as the time horizon changes to that of the beneficiaries.
You guys got the right question – Javier/Campbell, but it wasn’t simple as trust beneficiary dies and there’s a new beneficiary. They were both beneficiaries, and one of them is going to die soon. I answered simplistically – grandma’s on her last legs, let’s switch to longer time horizon for the kid now. But the solution clearly talked about thinking about grandma until she’s gone, then switching gears at that time. Now that I think about it, it’s different from the original post here, which was simply about leaving money to kids. But I dinstinctly remember CFAI text saying something about lengthening horizons when you have to think about intergenerational estate planning.
Based upon the 05, 06 and 07 exams, there is only consideration up until the time of death in all cases. For instance one was taking care of a kid’s education for 4 years (2 time frames (A) 1st 4 yr and until death), another was a retired couple (1 timeframe) and the other was a retired soccer player with a kid he had to support (2 timeframes; until 18 yrs of age for the kid and until death for the player) as per the CFAI guidelines.
TooOld4This, I recall something similar to what you said about intergenerational estate planning as well but can’t find the pages anymore. However I would go with what jamespucyk said for the exam.
I think what tool and bill are referring to is that when you have a large capital gain and the person is getting up there in age it doesn’t make sense to recognize it anymore and instead focus on the dependents time horizon due to tax consequences… i.e. the base reseting… in any event for the exam I don’t think death is it’s own time horizon.
I think that time horizon might be a little different than simply “time to next stage” where the next stage might be death. If someone is wealthy and at a point where life expectancy is low-ish, you first make sure that living necessities and potential health expenses are covered in a low risk way. Then, with whatever is left over for heirs should be managed in a way that takes advantage of the fact that they may have a longer time horizon, subject of course to the client’s willingness to accept that level of risk. So if one heir is in an early stage of life, you might treat that portion as having a longer time horizon than simply “years to current owner’s death.” If another heir is also in a late stage of life, that portion might be invested more conservatively with respect to risk.