Transitioning wealth: How ready is your family?

Did you know that many Canadians are not adequately prepared to pass on or inherit family wealth? This is often due to a lack of communication and planning. The good news is that it’s never too early or too late to start. Planning helps you identify tax saving opportunities, mitigate potential financial gaps and maximize your current lifestyle. Here are 10 actions you can begin to take today.

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1.         Clearly define what legacy planning means to you

Having conversations with your parents or children about topics like death and inheritance can be uncomfortable.  To help family members feel more invested in the outcome, it helps to approach this as a values- and goals-based conversation, rather than simply talking about the details of a will.  Initiating these conversations from a values-based and aspirational tone often helps ease into the heavier topics.

2.         Prepare now for the unexpected

Our needs change over time, and the financial well-being of loved ones can be impacted across generations. Whether for yourself or your parents, it’s important to keep your family informed and ensure you have the right risk protection plan in place. This might include long-term care financial planning or life insurance strategies.

3.         Think about your family structure

The way you shape your legacy will largely depend on the structure of your family. Every family has different dynamics, and a well-structured estate plan is unique to each family situation. For example, estate planning for blended families can be considerably more complex.  Another important consideration is beneficiaries with special needs.

4.         Ensure your estate is passed on in the most tax effective manner

Speak to a tax expert to ensure that your estate will be structured in a way that results in the highest after-tax result. Keep in mind that each province or territory has different tax considerations that will impact your decisions.

5.         Take care with special assets like family businesses and vacation properties

Depending on your family structure, when dividing up an estate, some assets may be more appealing to one recipient than another and more complex to share. Ensure everyone is clear on your decisions and reasons, including tax implications and responsibilities.  For additional information for business owners, refer to this article.

6.         Address personal items with sentimental value

Value isn’t always defined by dollars. Often there are items that hold great sentimental value, such as family heirlooms, jewelry, artwork, or furniture.  It’s important to communicate your intentions with these items as well, rather than assume what loved ones may or may not want to inherit.

7.         Consider a trust

If a beneficiary is still relatively young or is someone requiring oversight in managing a large amount of money, talk to a tax and estate expert on how best to structure the inheritance so it is used appropriately.  For more information, read our article How to protect your child’s inheritance.

8.         Plan charitable giving carefully to maximize the tax benefits

How will charitable giving benefit your overall estate? A carefully constructed giving plan helps create a legacy that expresses your values and the causes you care about, while also reducing your income tax liability.

9.         Identify important roles

Choosing a personal representative (sometimes referred to as an “executor/executrix,” “liquidator” or “estate trustee” depending on where you live) is a critical decision during the estate planning process.  Other important roles include power of attorney, trustee, guardian if you have young children, and caregiving roles for elderly parents or family members with disabilities. 

10.       Address financial literacy early

Many parents are concerned with their children’s ability to manage their inheritance, even adult children.  These conversations will include many financial terms that some family members, especially younger children, may not understand. If you also need additional guidance on a topic, your IG Consultant has access to a variety of educational resources to support you, including the Money and Youth program, a partnership between IG and The Canadian Foundation for Economic Education.

Finally, get in touch to request a copy of IG’s interactive Intergenerational Guidebook, “Plan for memories today and leave a legacy for tomorrow”, as well as our “Create Your Family Mission Statement” workbook. 
 These are great resources to use on your own or with loved ones to start mapping out goals, identify unique family considerations, and explore shared values.

It’s also important to remember that when you put a wealth transfer plan (also known as an estate or legacy plan) in place, you don’t have to feel like it’s set in stone. As your family grows and evolves, so can your plan.  Your IG Consultant, along with tax, estate, family law and insurance specialists, have years of experience helping Canadian families thoughtfully navigate the opportunities and complexities of wealth. Get in touch today for more information on how we can help you and your family.

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