In wealth transfer, communication is as important as inheritance

By Jim Greenwood, CFP

Special to the Financial Independence Hub

What’s the most difficult thing to talk about with your children? For many of us, discussing plans for our estate is pretty high on the list. Talking about your will and your own passing can be uncomfortable. According to a recent IPC Private Wealth survey of Canadians with at least $500,000 in investable assets, 58 per cent have not talked to their heirs about instructions for their estate, both financial and personal.

Having the inheritance discussion is very important, largely because of the consequences after your passing if you don’t have the talk. Perhaps one child wants to keep the vacation property while the other wants to sell, creating financial discord among siblings. Or there is a dispute about one’s final wishes upon death. The consequences are many and varied, and can be different for each family but equally devastating.

Holding the family meeting

As a financial planner myself, I can tell you that I am very happy to host or attend a family meeting, which should include the executor. It takes the pressure off you. Just let your children know that your advisor recommends having beneficiaries present during part of your estate planning process.

Or say you want to hold a meeting on your own. Beforehand, ask your advisor for coaching on approach and content. You’ll feel a lot more comfortable during the family meeting.

At my firm, we believe there are two main themes to a wealth transfer meeting. The first is about values. Share your views of money and wealth, ask your children what money means to them, and have a discussion. Tell your children what it took to create your wealth. Talk about the idea of a legacy – helping out your children and grandchildren with the hope that your children will do the same. Why discuss these ideas? You want to guide your children to a place where they feel appreciative, not entitled. Where they are trustworthy, not irresponsible.

The second theme is all about your will. Talk about how you’d like your legacy to be managed, and go through the distribution of assets, explaining the reasons for your decisions. This is where you discover if any of your bequests could unintentionally lead to conflicts between children, delays in estate administration, or your will being contested. If any problems arise, you’ll have the opportunity to resolve them — and you’ll be thankful you uncovered the issues now.

Wealth transfer for blended families

If you’re in a blended family, you have an additional layer of estate planning. Take the case of an individual in a second marriage who has children from the first marriage, and needs to provide for both the spouse and children.

This situation could involve a whole new set of strategies to implement and to communicate to heirs. You may own the family home as tenants-in-common to control your own share. Maybe you’ll decide on a marriage contract. Dividing registered and non-registered assets becomes an estate planning strategy instead of a simple bequest or transfer. You might purchase life insurance as an immediate inheritance for your children. Giving during your lifetime could be an option. Together, these strategies involve input from your advisor, lawyer and accountant.

Prepare an Estate Directory

I’d like to point out one more item related to communication. We call it an Estate Directory, which we provide to clients. It’s simply a record of professional contacts and financial information. If you don’t have such a document, which is easy to prepare by the way, you leave quite a challenge for your family members and executor. You record the contact information of your financial advisor, lawyer and accountant. List assets and liabilities, and record bank and investment accounts. Include the location of your will and insurance policies, and leave funeral instructions. Of course, tell your executor or a family member where you keep the document, or give them a copy.

When it comes to planning the transfer of wealth, it’s important to work with a qualified financial planner. You want a professional who can organize your financial information, documents and strategies in a way you can understand and explain to your beneficiaries.

In the IPC Private Wealth survey, 46 per cent of respondents do intend to eventually talk to their children about wealth transfer, and 12% have no intention of having the talk. My hope is that the 12% have a change of mind. And I hope the 46% will first contact their advisor, because we really can make life easier.

Jim Greenwood is a Certified Financial Planner and Financial Adviser at Investment Planning Counsel. 


Leave a Reply