More than half of Canadians expect to leave assets upon their death, but when it comes to having conversations about transferring their wealth, many (47 per cent) say they have not discussed it with their family or a financial advisor, says a survey by CIBC. On top of that, 79 per cent say they haven’t discussed the financial and tax implications of an inheritance with a financial advisor.
Lack Of Communication
“Without the right amount of communication, Canadians run the risk of the next generation not being prepared to manage their inheritance,” says Sarah Widmeyer, managing director and head of wealth advisory services, CIBC. “To help bridge the gap, families need to become comfortable having conversations about wealth transfer.”
There is a clear disconnect between generations when it comes to wealth transfer, and this can have a lasting impact on family legacies. “Without open, honest communication, family’s risk significant conflict, especially when parents’ wishes don’t align with their children’s,” she says.
Key areas where there may be conflict within families who don’t communicate about wealth transfer:
Transfer of the family cottage: Parents may expect the cottage to be used for many generations, but their children may feel differently. This could result in lost planning opportunities for the property while the parents are alive.
Inheritance: Parents who want to protect their wealth for their children or grandchildren through the use of trusts may be concerned that their children could perceive it as not trusting their judgment.
Charitable gifting: Parents may look to reduce taxes at death through charitable gifting, but their children may not agree with or understand the benefits.
Probate: Parents may want children to jointly hold investment or bank accounts to avoid probate, but may not realize it could potentially cause conflict among the children and limit estate planning strategies that could be leveraged.
Insufficient Planning
While discussions between generations are lacking, so is communication with financial and other professional advisors, including lawyers and accountants.
“While many estate planning strategies may help you achieve your objectives, all successful plans start with open conversations between spouses, professional advisors, and, ultimately, family members to provide clarity and a vision for your legacy,” says Lana Robinson, executive director, CIBC Wealth Advisory Services. “It is key to work with an advisor who can objectively help you understand what strategies are best for you and can also provide advice on how and when to communicate the plan to your family.”
For those leaving an inheritance, Robinson stresses the importance of diligent estate planning with a team of professional advisors. “There can be significant complications for loved ones if arrangements for a wealth transfer are not properly managed,” she says. “Open communication with your advisors is critical. Strategies viewed in isolation, without the full picture of your situation, could cause unintended consequences.”
Recommended Steps CIBC recommends the following steps to start to develop a wealth transfer plan:
Discuss with your spouse or partner how you want your wealth to benefit the people you care about. What are your values? What are your goals? Are there areas where you disagree?
Think about who in your life may require special financial considerations, such as someone with a disability.
Complete an inventory of your estate, itemizing assets such as your house, cottage, car, investments, and insurance.
Initiate conversations about your intentions with your professional advisors to develop a plan.
Communicate your plans to your family and engage their feedback. Ensure your family has been introduced to your advisory team before difficult times arise.
The survey found that 51 per cent of Canadians expect to leave assets to someone upon their death (compared to 16 per cent who say they won’t and 33 per cent who are undecided or don’t know). Meanwhile, only 18 per cent have discussed the financial and tax implications of an inheritance with a financial advisor. ‒ Private Wealth Canada Staff