Estate planning advice for Mindy Lahiri

This new Advisor to Client series helps clients learn about the elements of financial planning through the examples of their favourite fictional characters.

Subject: Dr. Mindy Lahiri, The Mindy Project

Problems:

• Custody and child support (Part 1)
• Estate planning (Part 2, this post)
• Cash flow and education savings (Part 3)

Premiere: Thursdays at 8ET/PT starting October 27 on City.

Scenario: New York gynecologist Mindy Lahiri (created and played by Mindy Kaling) passes several major milestones during the fifth season of The Mindy Project. She gives birth to a son, Leo, but splits up with her fiancé and colleague Danny after it’s clear they’re incompatible parents. She also opens a fertility clinic with another doctor from the practice, which requires a great deal of Mindy’s time and money — mainly because she’s a notoriously poor budgeter.

With Leo’s birth, Mindy realizes she’s neglected her finances and hands a box of paperwork over to a friend in the financial business. To her relief, she learns she’s living within her means.

Concern: As a single mother, what plans should Mindy have in place to protect and provide for Leo in case she gets sick or dies? How should she budget and save for Leo’s future as well as her own?

In this series, we assume Canadian tax and estate laws apply to our fictional clients.

Estate plan

When creating an estate plan to protect Leo, lawyer Sandra Jackson says Mindy’s biggest concerns should be life insurance and a will. “She has this clinic, and needs to lay out where her estate assets will go and how she wants them to be left for Leo.”

Portfolio manager Jolene Laing from Scotia Wealth Management in White Rock, B.C., agrees life insurance is vital. “The entire idea is trying to maintain the lifestyle the kid would be accustomed to. If [Mindy or Danny] passed away you’d want to make sure there was something to replace the income that would be coming from child support.”

Make sure there’s insurance in place on both parents with each as the other’s beneficiary “so that if one of them were to pass away unexpectedly, the other would be taken care of,” says Laing.

For example, if Danny died and Mindy gained sole custody, that might mean she needs to shorten her work day, stop working altogether or hire a full-time nanny. All of that costs money.

However, that arrangement assumes that Mindy and Danny stay on good terms. If they don’t, Laing says they could purchase life insurance policies on each other. “Provided he’s willing to go through the underwriting process, [Mindy] can pay for an insurance policy that [she] owns on his life.”

Laing agrees that Mindy and Danny should update their wills so they’re no longer each other’s beneficiaries, outside of the parental life insurance. “They would need to make sure […] that the child is the beneficiary in trust for anything he receives before age of majority.”

They would also need to make custody arrangements for Leo in case one of them dies. If Mindy would rather her parents get her custody privileges upon her death, she needs to state that; while that choice wouldn’t be legally binding, a court would take her wishes into consideration.

Tune in to Advisor to Client tomorrow to learn what Mindy should do about her cash flow and saving for Leo’s education. If you missed yesterday’s column about custody plans, see it here.