We all lose things—socks, glasses, keys and (occasionally) pets. Usually, we notice right away and take action. But what if we didn’t know they existed in the first place?
For families with broad holdings, complex financial structures and multiple family groups, surprisingly large and important assets—even property—can go astray, often without anyone noticing, for a generation or more. (On the flip side of that, however, are misplaced liabilities—watch for that article in this space tomorrow.)
It happens more often than most families realize, says Elke Rubach, president of Rubach Wealth in Toronto.
“Over time, assets shift, properties are inherited, accounts change institutions, or shares are held in companies no one actively manages. Without a clear inventory or central point of oversight, things fall through the cracks,” she says.
“Families often assume ‘someone else is taking care of it,’ but that someone has usually moved on, retired or passed away.”
She recalls the family who discovered an inactive safety deposit box a year after the death of their mother. It contained valuable jewellery and paper stock certificates. “No one had known the box existed; she’d opened it decades earlier,” Rubach says.
Another family thought they had completed their father’s estate settlement, only to discover another insurance policy. “The premiums had been paid automatically for decades,” she says. “No one, not even his executor, knew the policy existed.”
Then there was the client who often worked abroad and had received a signing bonus that was deposited into a foreign account. It was forgotten until a random statement was found. Retrieving it required “all sorts of filings and paperwork—not to mention tax consequences,” Rubach says. “And it was a lot of money.”
Even property can be forgotten
Private investing opens the doors to opportunities but can lead to forgotten investments, says Tina Di Vito, head of Family Office Services with First Affiliated Holdings Inc. in Toronto. She describes a scenario in which one person has an investment opportunity and then asks close friends to go into the deal with them. A spouse or children may not know all the particulars. (And sometimes secrets are kept.)
Because there is no statement from a bank or a business manager, and often no shareholder agreement, these assets may not be uncovered by the executor, she points out. “It is easier to find assets held in a financial institution of some sort, but you still need to know the financial institution’s name and the account number.”
At one time, an executor could compile information stored in the home and office, then wait a month or two for outstanding documents to arrive in the mail.
“We don’t get anything in the mail anymore; we do everything electronically,” Di Vito says. “I can’t even estimate the amount of wealth that’s going to go unfound and untracked.”
If you can’t call someone in your family office and get a detailed inventory of everything down to the final widget, then there’s something wrong, says Eric Gilboord, CEO and founder of Warren Business Development Center Inc. (WarrenBDC) in Toronto, who recently launched the podcast “Sell Your Business 4 Millions.”
One asset group that is often missed is paper certificates for shares acquired a long time ago that don’t show up in online brokerage accounts.
Scott Binns, partner, Richter
“That doesn’t mean you can’t take that definitive list and hire a forensic person who goes out and finds a registered property that you didn’t know about, especially in other countries,” he says.
Business owners may acquire offices, warehouses and other properties that family members who aren’t involved in the company aren’t aware of, Gilboord says. For instance, “if somebody did business regularly in India or Thailand and travelled there several times a year, maybe they bought a property and never mentioned it. There were a few bills that got paid monthly, and the bookkeeper paid for it forever.”
Hard-to-track income
Intellectual property is also easy to lose track of, he adds, whether that means royalties on a book published decades ago or proprietary business information such as manufacturing methods.
Michael Louie of D+H Group LLP, who is based in Vancouver, has firsthand experience of an elusive inheritance. His father was an actor, and after his death, residuals were directed to a bank account that the family, unaware, had closed.
Louie noticed the payments while sorting tax slips and was able to retrieve the misdirected revenue. However, he says, “older people still believe in splitting all their cash between several banks, and banks have stopped submitting statements.”
A related set of problems arises, he says, when beneficiaries of an estate know property exists but they can’t access it, like the widow who had statements from her husband’s Swiss bank account but was unable to withdraw the funds because she didn’t know the hexadecimal code that unlocked it.
We don’t get anything in the mail anymore. I can’t even estimate the amount of wealth that’s going to go unfound and untracked.”
Tina Di Vito, head of Family Office Services, First Affiliated Holdings Inc.
Louie notes the dangers of loading a crypto-wallet on a thumb drive, a practice that some people use to transport wealth across borders. Likewise, safety deposit boxes may pose a barrier to the executor and beneficiaries, especially if the will is stored there. He recalls one family who learned of the existence of a safety deposit box only when they received a payment notice.
“They discovered unknown treasures two or three years after the passing: jewellery, share certificates, Second World War memorabilia—things that were not dollar-valuable but just as valuable for the memories,” he says.
Confidence, at first
When he meets with business families, Scott Binns, a partner with Richter in Montreal, starts with a simple question: “If I asked you to list every asset you own and where each one is held, could you do it right now?”
They are usually confident at first. “However, as we delve into the details of bank accounts, corporate and personal investment portfolios, registered plans, life insurance, real estate and digital wallets, the certainty starts to fade,” he says. And it’s far preferable to create an asset list early rather than wait until the family is grieving the loss of a founding patriarch or matriarch.
“One asset group that is often missed is paper certificates for shares acquired a long time ago that don’t show up in online brokerage accounts,” says Binns. “To avoid these mishaps, business family advisors should work closely with business families from the outset of their relationship to understand their balance sheet and key points of contact.”
He recommends that members of the older generation share information with their heirs rather than waiting for secrets to be revealed after their death. If in doubt, heirs can leverage modern asset-search technology to mitigate the risk of missing assets.
“That’s one of the key things that a family office can do: keep records of everything a person owns and owes,” says Di Vito. “They‘ve got to know them over the years; they know the will, the asset structures and possibly the beneficiaries, and with that knowledge, they’ll help them arrange everything.”
Sarah B. Hood is a Toronto-based writer and book author. She has served as editor of three national magazines and written weekly columns for the National Post. She also serves on the editorial board of Spacing magazine. She writes frequently on business, urban affairs and culture. As a food writer, her work has been translated into Japanese and Arabic. She has taught writing at George Brown College for more than 20 years.
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