Vexxit Life


Tips to Successfully Transfer Wealth to the Next Generation

Clock5 min. read
byVexxit Staff onJune 23, 2021

An avalanche of personal wealth will transfer to Canada’s next generation between now and 2026. Experts indicate that roughly $1 trillion of financial assets will shift into the hands of our children and grandchildren. Are they prepared?

According to these same experts, less than half of Canadians have discussed this wealth transfer, made any provisions for estate planning, or provided their beneficiaries with any instructions. We get it – talking about money and division of wealth is a touchy subject. However, without these discussions, estate planning and creating a will, any plans you have for distributing your financial assets or leaving a financial legacy may be lost. After years of hard work, saving and building an investment portfolio, many Canadian retirees are in an enviable financial position. Yet, despite this cache of wealth, many have avoided talking about their final wishes or plans for distributing financial assets. This avoidance can spell disaster for your beneficiaries. Without proper estate planning, your province or territory will have final say when it comes to dispersing your hard-earned wealth.

If you’ve been postponing estate planning discussions, it’s time to take control over your family legacy. If you are unsure where to begin, we’ve outlined a few tips on successfully transferring wealth to the next generation.

1. Involve your beneficiaries

Talk with your adult children or loved ones about your estate plans, preserving your family legacy and educate them on their responsibilities associated with planned inheritance. Give them the clarity they need to carry out your decisions. When family is involved in discussions, it reduces any confusion about your plans and decisions. It also minimizes family conflict. We’ve all heard stories of family discord over misunderstandings related to an estate. If you are unsure how to broach the subject, consider enlisting the assistance of a financial advisor or estate planner to help you kick things off.

2. Inventory your assets & liabilities

When planning your estate and preparing your family to receive a potential financial windfall, begin by cataloging all your assets. This should include both financial and property assets. Also itemize all liabilities such as mortgages, secured debt (e.g., car loans), unsecured debts (e.g., credit cards). Before you can begin to consider distributing inheritance amongst surviving heirs, you need to know what you are working with.

3. Divide inheritance equitably

If you have more than one child (multiple beneficiaries), it’s best to distribute your estate as equitably as possible to retain family harmony. However, equitable doesn’t necessarily mean a 50-50 split. There are a myriad of factors that will determine how (and why) you divide and distribute your estate, including the amount and type of assets, the number of beneficiaries, their relationship to you and your own legacy vision.

4. Protect your heirs from themselves

A sudden financial windfall for the unprepared and less disciplined can be disastrous. The number one mistake many heirs make once they receive an inheritance is to spend it as quickly as they get it – especially if you are dealing with young adults who haven’t established sound financial habits. In such situations, a long-term trust can limit access to funds, which will give a young adult time to grow and mature.

5. Protect your estate against long-term care costs

Although we don’t like to think our health may fail, the expense of residing in a care facility or paying for in-home care can quickly erode your estate plans. Since you can’t predict your future health or the future health of a spouse or partner, consider investing in a Long-Term Care Insurance policy to protect your estate.

6. Gift a portion of your estate now

If you have a sizeable estate, rather than wait to transfer wealth at the end, consider gifting a portion to your child(ren) now to lessen their financial burdens. Gifting offers benefits to both parties – you get to reduce taxes owed each year, and they get to reduce debt and stress. An added advantage for you, of course, is that you get to watch them enjoy your generosity. Just a note of caution – beware of unintended tax consequences of gifting. Best to talk with a financial advisor before deciding to gift any portion of your estate.

Estate planning can be challenging for everyone, especially if you are a high-net-worth individual. There are so many nuances associated with estate planning that can make things tricky, such as tax liabilities and other issues that can affect the family. Adding to the mix – regulations and industry policies are constantly changing. When it comes to creating wealth transfer objectives and strategies, it’s best to seek the advice of a seasoned financial advisor who specializes in these matters, particularly if you are a high-net-worth individual. Smoothly transferring wealth to the next generation requires planning and having wealth planning discussions with family. Although these conversations can be emotional and stressful, they are worth having. Vexxit can match you with an experienced financial advisor to help develop your wealth transfer strategies.

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