BUILD YOUR MARGIN OF SAFETY

Benjamin Graham, the father of value investing, considered it vital for investors to build a margin of safety into their calculations. According to Graham, if you’re buying a stock, you should insist on paying a price so low that even if the market turns sour and the stock turns out to be a dud, you still recover most of your money.

It’s an excellent idea to apply the same thinking to all aspects of your personal finances. The next decade is shaping up as a tumultuous time. You should plan your future with a margin of safety so that unexpected expenses or emergencies can’t derail you.

A good place to start is by stowing a couple of months of living expenses in a savings account or money market fund. A stash of cash ensures that if your job disappears, or you fall ill, you can survive until you find a more permanent solution.

Another way to increase your margin of safety is to eschew debt. “There are only two reasons you might want to consider borrowing — for your first home and for your education,” says Jim Otar, a certified financial planner and founder of retirementoptimizer.com.

If you’re newly married and thinking about buying a home, leave yourself room to breathe. Norm Rothery, chief investment strategist at Dan Hallett & Associates, says newlyweds often buy as much house as they can afford. But if one of you loses your job, or if one of you decides to stay home when Junior comes along, panic can ensue. “It’s a good idea to make sure that you can afford the mortgage on one salary — just in case,” says Rothery.

As you edge into retirement, a margin of safety becomes even more vital. Don’t assume your portfolio will generate double-digit returns. Don’t even assume the market will always go up.

The greatest danger comes if you hit a major market downturn in the first couple of years after you quit work. Say you start out with a $200,000 portfolio that you are counting on to produce 7% annual returns — in other words, $14,000 a year in income.

That doesn’t sound wildly unrealistic. But what if the market falls by a third in the first year of your retirement? What if it plateaus for the next five years while you keep on withdrawing $14,000 a year? By the time the turnaround finally comes, you will have only about $65,000 left. Even a vigorous recovery won’t provide enough profit to maintain the level of withdrawals you would like.

To avoid this dire situation, insist on a margin of safety. Experts say you should count on withdrawing no more than an inflation-adjusted 4% of your initial portfolio every year. If you have a $200,000 retirement portfolio, withdraw only $8,000 in income the first year. Every year bump up that amount by the rate of inflation. History demonstrates that keeping your withdrawals to 4% should allow you to weather even the market’s worst storms.

SEEK GOOD ADVICE

Did your financial planner warn you to get out of the market ahead of last year’s crash? Probably not. If there’s one thing that the recent market turmoil has demonstrated, it’s that experts have no more insight into what is going to happen next than you or I do.

If you want to prosper over the next decade, you should think twice about whether you really need professional advice — and how much you’re willing to pay for it. If you’re a typical Canadian, who invests primarily through mutual funds, you already hand over about $2,000 a year in fees for every $100,000 you have invested. You pay that year after year after year. You don’t notice the bite, because mutual funds deduct fees before reporting results to you, but as a general rule, the fees on a typical fund chew up a quarter to a half of the after-inflation gains your money will generate.

You can slash your fees and keep more of the profits for yourself by investing in low-cost index funds. (For more on this strategy, see the Couch Potato portfolio.) If this plan doesn’t appeal, you should look for ways to drive a better deal with your financial planner.

Start by understanding what a planner can — and can’t — do for you. The right planner can be a huge help if you’re dealing with complicated tax issues or estate planning problems or insurance questions. But financial planners are not investment gurus. They can’t reliably predict which stocks will pop, which mutual funds will do best next year or how the economy will perform in the months ahead. No one can. If you’re looking to a planner primarily for market tips, it’s time to think again.

While you’re thinking, devote a bit of attention to how your planner is getting paid. Most planners work on a commission basis and earn money for selling you products. The more products they sell you, the more they make. “No matter how conscientious they may be, there is an inherent conflict of interest if your financial planner only gets paid when they sell you something like a mutual fund,” says Marc Lamontagne, a fee-only planner with the planning firm of Ryan Lamontagne in Ottawa. “If you’re looking for independent financial advice from an advocate who works for you, and not the mutual fund company, you should choose a financial planner who is compensated in a way that aligns your interest with theirs.”

The best plan is to seek out a planner whom you can pay by the hour. This removes any conflict of interest. You’ll pay more upfront for the advice — $500 to $2,000 would be typical for a detailed consultation, complete with budget and portfolio plan — but most of that is a one-time expense. (You may want to pay smaller amounts for an annual update with the same planner, but that’s entirely up to you.) Once your plan is in place, you’ll save money over the long run because you won’t be paying hidden fees for unnecessary products. For a list of fee-only planners, visit moneysense.ca.

PAY DEBTS. OR SAVE. BUT NOT BOTH

It happens time and time again. A young couple pinches pennies, lives on Kraft Dinner and forgoes vacations so they can pay their mortgage, cover their daycare bills — and contribute to an RRSP. They complain about feeling trapped and penniless.

No wonder. By trying to simultaneously save and pay down debt, they guarantee slow progress on both fronts.

A better strategy is to focus first on erasing debt. This guarantees you a good return on your money. Simply paying down credit card bills gives you an after-tax return of 18% a year with absolutely no risk. Even paying down your mortgage provides you with a guaranteed after-tax return of 5% or so. Those returns are better than you can expect in an RRSP. And since you can carry forward your RRSP contribution room to future years, you’re not losing the ability to save for your retirement. Once your mortgage and other debts are paid off, you can redirect the income that you were previously using to pay down debt and pour it into your RRSP.

If nothing else, this debt-first strategy will improve your mood because it will allow you to focus on a single goal. “Many Canadians are stretched to the limit in their 30s and early 40s,” says Malcolm Hamilton, a consulting actuary with the benefits consultant Mercer. “They have debts to repay and children to raise. Not much is left for retirement savings. The important thing is to live frugally and pay down your debts as fast as you can without cheating yourself of what should be an enjoyable part of your life. For young families with children, frugality is a virtue… savings, not so much.”

DON’T PREDICT. PREPARE

It’s tempting to try and predict how the future is going to unfold, then bet everything on that scenario. Most of the time, though, that strategy doesn’t work. Economists who spend every day following the market rarely get the future right. It’s optimistic to assume that you can do better than the pros in a few hours of your spare time.

A better strategy is to prepare yourself in a way that will pay off no matter which way the future bends.

Exactly how you do this depends upon your individual situation. Is your problem that you’re not saving any money? Then buy a pocket notepad. “Keep it with you wherever you go,” says Debbie Gillis of K3C/Kingston Credit Counselling in Kingston, Ont. “Track what you spend every day for a few months. Write down every cent you spend. This is a very powerful tool. It shows very clearly just where you are spending your money.” Once you know where you’re spending, it’s often obvious where you can trim back spending.

For many of us, problems are more subtle. Consider your investing portfolio. Is it risky enough to generate the returns you need? Or too risky? David Martin, an associate with Second Opinion Investor Services in Halifax, says he sees many clients who are either too cautious or too aggressive with their investments.

He recommends you look ahead to see how much money you will need down the road, then work backwards from there. Using realistic assumptions, figure out how much you will have to save to amass the amount you desire. One common mistake is for people on the verge of retirement to still have a high-risk portfolio, full of stocks, when their goals could easily be met with a more conservative mix. “You have to have a plan with goals and objectives and you have to invest according to it,” says Martin. “Don’t take on more risk than you have to.”

Bear markets are going to occur every four to six years and you have to be prepared to weather them. Richard Deaves, author of What Kind of an Investor Are You?, says your best bet is to pick a mix of stocks and bonds that fits your needs and temperament and stick to it no matter what the market is doing. “There is abundant evidence that even sophisticated market practitioners have little success in timing the market,” says Deaves. If in doubt about how to build your portfolio, consider a 60-40 blend of stocks and bonds. This mix provides both growth (in the form of stocks) as well as a solid base of income (from bonds). Once a year, rebalance things, taking a bit of money out of the investments that have done the best over the past year and investing it back in the areas that have lagged. This simple technique ensures you always buy low and sell high.

That may strike you as odd. After all, the older we get the more experience we have. Presumably that includes knowing how to handle money.

True enough, but what differentiates people in their 20s and their 70s when it comes to personal finance is that people in their 20s have time on their side. They can rack up giant credit card debt, learn for their mistake, and slowly pay the bills off. They can make a lousy stock buy and not lose any sleep over their retirement–still 40-odd years away.

Seniors and aging boomers, on the other hand, don’t have the luxury of time to make mistakes. Also, seniors have more wealth accumulated so a mistake can cost them tens of thousands of dollars, if not their life savings. No wonder scam artists and the Ponzi set tend to target people who are 50-plus. They actually have money to lose. A lot of it, in fact.

If we’re going to teach kids in school how to handle money, we might also offer a couple of refresher courses on money, investing and (most importantly) preserving wealth to seniors as well.

Buffett’s punch card suggestion is all about the virtues of doing nothing. Most of us sabotage ourselves with too much trading. We listen to rumors, change our minds, jump in and out of stocks — at just the wrong times. Terrance Odean, a professor at the University of California at Berkeley, has traced the trading records of thousands of small investors and discovered that nearly all of us tend to buy stocks when they’re expensive (think back to 2006 and 2007) and sell them when they’re cheap (like last year). That, of course, is precisely the wrong way to make money.

Odean’s research suggests that many of us could boost our results simply by resisting the temptation to ditch lacklustre stocks in favor of hotter names. One of his research projects tracked people who sold stocks and then immediately turned around and bought other stocks. These people presumably thought they were dumping losers in favor of winners. But that’s not the way things worked out in practice. The stocks that the investors dumped went on to perform about 3.6 percentage points better over the next two years than the stocks they bought. Assuming that these results are typical, it would seem that most of us could bump up our returns from, say, 5% a year to nearly 9% simply by learning to buy and hold a few quality stocks.

Buffett follows exactly that approach. He has held many of his core holdings — the Washington Post Co., Coca-Cola, American Express and Geico — for decades. “Our favorite holding period is forever,” he avers.

But which stocks today are Buffett-like keepers? In this 10th anniversary issue of MoneySense we thought it would be fun to look ahead and attempt to pick 10 stocks that we think will be great buy-and-hold investments for the decade ahead.

We warn you that this is a dangerous exercise. Fortune magazine attempted a similar story in 2000. Out of the 10 “buy-and-forget” stocks it selected, only one (Genentech) proved to be a winner. Two of Fortune’s picks (Enron and Nortel) went bust. Many others (Broadcom, Nokia and Charles Schwab) are trading at a fraction of their 2000 price. The decade isn’t quite up yet, but it looks as if Fortune’s can’t-miss picks from nine years ago would have lost you about half of your money.

We wanted to avoid a repeat of Fortune’s experience, so we tried to learn a few lessons by observing where that esteemed publication went off the rails. Three observations:

• Fortune’s list of stocks to love was insanely expensive. Sure, 2000 was a giddy time for the stock market, but what were those Fortune writers smoking? The average price-to-earnings ratio of their picks was 100, as compared to a more normal ratio of 15 or so.

• Fortune assumed that current trends would continue pretty much forever, so it picked the current hot sectors and looked for the hottest companies in each of them: Nokia in cell phones, Viacom in broadcasting, Morgan Stanley in investment banking, Oracle in communications software, and so on. It appears that Fortune’s stock pickers never pondered the chance that these sectors might cool off.

• Fortune bet all its money on only four trends: networking, entertainment, the “boomerization” of financial services, and biotech. It did not diversify widely and it ignored the stodgy, old-fashioned sectors, such as banking, retail or consumer goods, that make up most of the economy.

In constructing our list, we started by reversing these three mistakes. We looked for cheap companies trading for 15 times earnings or less. We picked stocks that operate in some of the market’s coldest areas. We tilted things in favor of easy-to-understand businesses. We searched for companies that make or do things that people need every day or companies that, in some way, are essential to the economy.

Our research put a dent in some of our preconceptions. For instance, we had initially thought that our list of 10 can’t-miss investments would include several oil and gas companies. And why not? Just about every talking head on the TV screen appears to think that the world is facing an energy crisis.

Perhaps the talking heads are right, but after a lot of reading, we’re not so sure. Energy prices move in booms and busts. People have worried for half a century that the world will run out of oil — and so far oil is still flowing in vast quantities. In fact, the ratio of global oil reserves to current production has gone up. Back in the mid-1970s, the industry estimated the world had only 26 years of oil reserves at then-prevailing rates of production. By 2005, the ratio had soared to at least 40 years’ worth of production.

Most of the hysteria around oil centres on the Hubbert’s peak hypothesis, which holds that the world is at or near its peak oil production. The peak oil zealots may be right, but even if it is true that we are at our oil-producing peak, we still have decades left of gradually declining production. And it’s not by any means sure that we are at Hubbert’s peak. The date for the peak has been continuously revised over the years. M. King Hubbert, the geophysicist who invented the hypothesis, originally estimated that global oil production would top out between 1993 and 2000. In fact, global oil production in 2005 was 23% above the 1993 level.

There is no indication that the world is facing any shortage of natural gas either. Only three years ago, alarmists fretted that the U.S. was running out of the stuff. Then came massive new discoveries in the Barnett Shale of Texas and the Haynesville Shale of Louisiana. The industry now reckons that the U.S. has a reserve of natural gas equal to nearly 100 years of current usage.

What is an investor to make of all this? We acknowledge that oil and gas prices may soar over the next decade, but we think that they could equally well sink or plateau. There is no way to tell. By all means, invest in oil and gas companies if you want a well-diversified portfolio; just don’t think these firms are a sure ticket to riches.

More certain profits are to be had in other sectors. As we’ve already noted, we like cheap companies, in less than glamorous industries, that make money by providing everyday goods and services. Beyond that, our research led us to favor companies with a global reach (because emerging markets will provide much of the globe’s growth) and ones that can pass along price increases (because the amount of fiscal stimulus that governments are forcing into the system may well lead to a renewed outburst of inflation). Since debt is a major reason for corporate failure, we favored firms with as little of it as possible. We tried to select companies with entrenched market positions and substantial barriers to competition. And since consumer wallets may be rather tight over the next few years, we looked for firms that offer essential services or that can benefit from government spending.

These 10 stocks made our list of buy-and-hold investments for the decade ahead. (All prices are as of May 1.) Do your own research before buying and make sure nothing has changed since the time of writing.

Boeing (NYSE:BA, $41.50 U.S.) has taken a tumble over the past year and now trades for less than half its 52-week high. We think its plunge is a classic example of short-term thinking. However the future unfolds, rest assured that the world will need plenty of planes. Boeing is one of only a handful of companies that have the size and expertise to deliver the next generation of commercial jets. It can also count on landing a steady stream of defence contracts. Yet this essential firm trades for only 14 times earnings. It also pays a 4.2% dividend.

Cemex (NYSE:CX, $7.89 U.S.) makes cement. That’s it. Pretty exciting, huh? The Mexican company has operations that span the world and its stock price has collapsed in line with the global recession. But while construction projects are on hold for now, we don’t think the world has declared a permanent end to its need for cement. When growth does resume, Cemex should be highly profitable once again. Right now, you can buy the company’s stock for less than half of book value and under five times trailing earnings. That’s cheap, cheap, cheap. One caveat: this company has a large amount of debt, which it will have to renegotiate over the next couple of years.

eBay (NASDAQ:EBAY, $16.60 U.S.) continues to dominate the market for online garage sales despite competition from the likes of Amazon. It has essentially no debt and trades for less than 13 times trailing earnings. Its PayPal unit, a system for handling online payments, is growing fast and now generates over 30% of eBay’s revenues. The danger here is that management has a record of making some less-than-brilliant acquisitions. (Remember Skype?) But assuming that management concentrates on defending and building its core businesses, we love eBay’s prospects for the decade ahead.

Fairfax Financial (TSX:FFH, $321) is cheap. It trades for less than four times its trailing earnings and less than book value. Just as important, this Toronto insurance company is a great asset allocator and a fantastic value investor. Prem Watsa, its leader, was one of the few investors to bet against the housing bubble. He made billions by buying credit default swaps that would rise in value as other companies’ creditworthiness deteriorated. These days Fairfax is expanding globally, with subsidiaries in Asia and central Europe. While insurance is a cutthroat business, we think Fairfax’s investing expertise will set it apart from the pack.

Leucadia National (NYSE:LUK, $21.65 U.S.) operates a bit like a small town junk shop. It buys a bit of this, a bit of that. It fixes the stuff up and resells it. The strategy isn’t complex, but it’s immensely profitable if you’re a good judge of value. Ian Cumming and Joe Steinberg, who have been running Leucadia since 1978, appear to be excellent judges. Their record of investor returns is actually slightly better than Warren Buffett’s. But their sprawling empire — which encompasses everything from iron mining to wineries to biotech — has had a rough year and Leucadia’s shares have fallen to less than half their 52-week high. We think that means it’s time to buy. No matter how the world unfolds over the next decade, we suspect Cumming and Steinberg will find a way to prosper.

Johnson & Johnson (NYSE:JNJ, $52.59 U.S.) is the classic widows-and-orphans’ stock. The huge health-care company spans the globe and operates in markets ranging from medical equipment to skin care. It is a financial fortress, with little debt, steadily growing revenues and the ability to profit from the world’s growing desire for health and beauty products. It trades for less than 12 times earnings and pays a dividend of 3.7%. Boring? Probably. But we think that boring might do very well in the decade ahead.

Microsoft (NASDAQ:MSFT, $20.24 U.S.) has lots of flaws. Let us list some of them for you. It’s a software giant that doesn’t make industry-leading software anymore. It’s hopelessly unhip. It has yet to come up with a convincing online strategy. And so on. But you know what? This is also a company that has zero debt, that has doubled its net income over the past four years, and that trades for under 12 times earnings. We think there’s life left in the machine that Bill Gates built. And at this price, it doesn’t cost much to go along for the ride.

Service Corp. International (NYSE:SCI, $4.48 U.S.) makes its money from death. The Houston company operates funeral homes and cemeteries in the U.S., Canada and Germany. Given the greying demographics of much of the developed world, we are confident that the funeral business will enjoy steady growth over the next decade. While Service Corp. has more debt than we wouldlike, it trades for around book value and only 12 times earnings. It also pays a 3.6% dividend.

TransCanada (TSX:TRP, $30.25) performs two essential tasks: it generates electricity and it transports natural gas via its pipelines. We think both industries will do well over the decade ahead as power needs continue to grow and natural gas becomes a bigger part of the North American energy mix. TransCanada is no growth stock, but the Calgary company could be a surprisingly rewarding performer, given that it’s trading nearly 25% below its 52-week high. A dividend yield of 5% gives you plenty of reason to stick around and find out what lies ahead.

Wal-Mart (NYSE:WMT, $50 U.S.) is hated by unions. And it doesn’t get much love from Wall Street, which considers it too big to grow fast. But what company is better suited to the grind of the current economy? The world’s biggest retailer is the master at delivering low-priced merchandise to budget-hugging consumers. While other storekeepers staggered through the past year, Wal-Mart grew its earnings per share at a 6% annual clip amid one of the worst retailing climates in history. It may be nearing its limits to growth in the U.S. and Canada, but it still has lots of room to expand in China, India, Japan and Latin America. It trades for only 15 times earnings.

Our take: An invaluable guide for anyone on the lookout for cheap stocks.

Building Wealth: A Beginner’s Guide to Securing Your Financial Future (free): If you’re looking for an outstanding introduction to the basics of personal finance, look no further. This book from the Federal Reserve Bank of Dallas shows you how to set up a budget, deal with debt, and construct an investment portfolio.

Our take: Great advice on how to build your personal wealth. While written for U.S. consumers, most of the tips apply equally well in Canada.

Sustainable Energy — Without the Hot Air by David MacKay (free): If you’re confused by all the conflicting claims about global warming and alternative energy sources, this book, by a Cambridge physicist, will, um, clear the air. MacKay sets out the numbers about everything from clean coal to hydrogen-powered cars.

Our take: A fascinating book that carefully evaluates a myriad of energy sources ranging from nuclear generators to windmills. It’s down to earth, conversational in tone, and filled with facts, not emotion. While British in focus, it offers insight for everyone.

The General Theory of Employment, Interest, and Money by J.M. Keynes (free): It would be an exaggeration to say that this book saved capitalism, but there’s no doubt that its publication, in 1936, pointed a way out of the Great Depression for Canada, the U.S. and Britain.

Our take: A difficult, frustrating, but wonderful book. If you’re not an economist, skip over the hard stuff and go to Chapter 12. Its meditation upon the psychology of markets sounds as if it were written for today.

The Conservative Nanny State by Dean Baker (free): This book will either delight you or infuriate you. Dean Baker, the author, is a left-leaning economist who believes the wealthy are adept at using government to enrich themselves. His book explains how.

Our take: Even if you conclude that Baker is a no-good commie, his book is guaranteed to make you think. And before you dismiss Baker, ponder this: he’s one of the very few economists we know to have predicted both the dot-com crash and the U.S. housing disaster.

This time the Brooks had to wait three weeks to sell, but they’re not complaining. Not only did they get close to their asking price, they pocketed $12,000 that would otherwise have gone to an agent. If you want to do the same, follow our five steps to do-it-yourself real-estate bliss:

Step 1: Be precise on price

The secret to selling your home isn’t stainless steel appliances and granite countertops. It’s price. Set an amount that’s too low and you give away thousands of dollars; set the price too high and your home will languish unsold for months. Real estate agents are masters at pricing homes because they have all the data on what various houses sold for in your neighborhood. You can piggyback on their work by checking how they’ve priced homes on your street at Realtor.ca. Look for houses similar to yours and set the same price or close to it.

If you want to sell fast, price your home at slightly less than market level. When Ed Enns, a factory worker in Stratford, Ont., decided to sell his three-bedroom bungalow last fall, he looked at two similar homes for sale nearby. One was priced at $169,000, the other $166,000. “I decided to price mine $500 cheaper to draw traffic,” he says. When it didn’t sell right away, Enns dropped the price to $164,500 and quickly found a buyer.

Step 2: Get a little help

Selling your home by yourself doesn’t mean going it alone. Many online real estate services offer package deals for $300 to $800 that include lawn signs, open house signs and an online listing with photos of your home. Some services, like ComFree.com in Alberta, SkHomes4Sale.com in Saskatchewan and Grapevine.ca in Ottawa focus on specific markets, while others like PropertySold.ca and PropertyGuys.com are national. Once you’ve found a buyer, a lawyer will charge $500 to $1,000 to walk you through the legalese and handle the paperwork.

Step 3: Hold an open house every weekend

Nothing turns a browser into a buyer like an open house, says Ralph R. Roberts, a Michigan real estate broker and author of Sell it Yourself. To draw a crowd, drop flyers in mailboxes up and down your street. Neighbors who have friends who want to move into your neighborhood are often the best source of buyers.

Step 4: Brag about your castle

Patricia Brooks made sure to highlight her home’s best features in both her online listing and during open houses. Rather than say her home has hardwood floors, she raved about the “brand new ash Merlot hardwood floor.” And she talked up the neighborhood by mentioning the school and library up the street. “Your home is a product and you have to have confidence in that product. If you’re shy, you might be better off with an agent,” she says

Step 5: Protect your commission

Smart home buyers know that you aren’t paying the standard agent’s commission, says Roberts, so they’ll try to bargain you down on price. Don’t let them. But if a real estate agent brings in a buyer, you might have to sweeten the pot and give the agent a 2.5% commission to seal the deal. Another option: If you’re going to buy another house right away, suggest to the agent that she represent you. She won’t make any money off your home, but she will earn a commission when you buy.

Get a copy of the will

Your dad had a perfect right to leave you out of his will. But if you can show you were named in a previous version of his will, you may be able to argue that your dad was not in his right mind when he inexplicably dropped you from his list of heirs. “You should ask your dad’s executor for three things — a copy of your dad’s last will, a copy of his prior will, and a list of his assets,” says Barry Fish, a wills and estates lawyer in Thornhill, Ont. If your dad’s executor hands over the necessary documents, proceed to step 3.

Get a lawyer — fast

If your dad’s executor won’t give you copies of the documents, you will have to sue to see them. Have a lawyer file a court application to force the executor to hand over the papers. “As long as you can show that you may be a beneficiary under your dad’s prior will, the court will likely order the executor to provide you with copies,” says Fish. But act quickly. Once the money is handed out, your chances for a successful challenge are next to zero. “You can’t protest six months after your brother has taken the money and spent it at Casino Rama,” says Ed Olkovich, a wills and estates lawyer in Toronto. “If the money is gone, it’s gone.”

File a challenge

Have your lawyer file a “Notice of Objection” or a “Caveat” to advise the court that you are challenging the will. You will have to outline the grounds for your challenge. Grounds can include forgery, fraud, undue influence, and mental incapacity. It could be that your dad had dementia and didn’t know what he was doing when he made his last will. It could be that he was pressured by your sister, who was taking care of him, to leave everything to her. Even if you don’t have grounds to contest a will, you may be able to argue your right to other claims. For instance, if you took care of your father’s six-plex for years and weren’t paid for your work, you may have a claim for labor costs.

Consider the cost

Think about whether a fight is worth it. In the best case, your father’s estate will agree to settle within months. But if your dispute drags on for years, the bill can run into six figures and may be entirely your responsibility. “If your case goes to trial, the loser is responsible for his own legal costs and also those of the winning side,” says Charles Ticker, a wills and estates lawyer in Markham, Ont. “So make sure there’s enough to fight over.”

Consider mediation

In some cities, you must undergo mediation before a courtwill hear your case. In other areas, mediation only occurs when both you and the estate agree to be involved. Mediation involves meeting with both a representative of your dad’s estate and a mediator, who is usually a former judge or estate lawyer. The mediator shuttles between you and the other side and tries to hammer out a compromise that will settle the estate as quickly as possible. “Mediation is emotionally draining, but very effective,” says Ticker. “Both sides know it’s their best chance to end the fight without a drawn-out battle in court.”