18 March, 2019

Passing along an inheritance?


The saying, “shirtsleeves to shirtsleeves in three generations” is almost universal in one form or another across cultures – for a reason. Unfortunately for most families, inherited wealth is often lost by the third generation. Making the money is half the battle. Holding onto it is another. As people grow their wealth, the task of managing and retaining it becomes more complex.

Traditionally, the focus has been on those passing along their assets, but what about those on the receiving end? Here are ways you can beat the odds and nurture effective wealth management over the generations.

1. Open dialogue

Talking about money is seen as impolite or taboo to some people. Others fear that revealing their financial situation to their heirs will lead them to count on their inheritance and lose ambition. In a poll among Canadians with at least $500,000 in investible assets, we found that 58% of those surveyed had not shared their estate plans with their beneficiaries1.

If you haven’t talked to your heirs about your inheritance plans, now is the time. The foundation for effective intergenerational wealth planning starts with a conversation. Transparent discussions about financial and family goals establish common values and a team approach that provide your loved ones with the support they may need. Ultimately, open and honest communication promotes family harmony and healthy decision-making.

2. Financial education

Without a doubt, introducing the concept of money management to your heirs at a young age increases their chances for future success. Financial literacy improves their financial awareness and gives them the tools to effectively manage their finances and establish a positive, anxiety-free relationship with money. Teaching your heirs to be fiscally responsible aids your confidence and peace of mind that they can handle the wealth you entrust them with. Education brings empowerment, to all involved.

3. An up-to-date estate plan

By clearly indicating your wishes, a proper estate plan helps eliminate any uncertainties and tough decisions that your family may need to make after you die or are incapacitated. However, it is not a set-it-and-forget-it exercise. Life changes and your will and other estate planning documents should reflect your current situation, so review them regularly. This is especially important for blended families, where issues like the division of assets can be more complicated. Risks of an outdated plan include legal and tax problems, your intentions not being carried out and strained family relationships. Take the steps required to ensure these types of situations do not happen to you.

4. Partnering with an Advisor

Estate planning can feel overwhelming, but this is where your Advisor plays an integral role. They understand your family and your needs and can help you to create a road map with a clearly defined vision. Your advisor is there to serve as your “point person”, someone who maintains the big picture, takes charge of your financial plan and can engage other experts on your behalf. As an unbiased third party, your advisor can also take the emotion out of the process and empower you to make rational decisions in the best interests of you and your loved ones. Together, you can manage your money for future success and enable your heirs to turn their inheritance into a lasting legacy.

Is it time for you to get better prepared? Contact our office to discuss your estate planning needs or learn more by downloading our Wealth Transfer 101 E-book.