We spend a lifetime building our wealth, but we don’t always put the same amount of time and effort into having a serious conversation with our family members to discuss our wishes, or develop any formal plans to transfer our wealth to the next generation in a tax efficient manner.
A recent bank report estimated that $750+ Billion of wealth will change hands over the coming decade, the largest wealth transfer in history; first, to us Boomers, then on our eventual passing – to our children and grandchildren. When working with my in-laws, we reviewed their estate and realized we needed to make some major changes in their investments for a number of reasons. Firstly; to work to reduce the large embedded tax liability on the last death with their estate. Then secondly; switching investments to segregated funds for the creditor protection and bypass of probate benefits as well as allow for the tax free transfer of their non-registered investments to their children when named as successor owners. Not an instant process – as it took over 15 years to implement, but done with no impact on their available cash flow to fund a continuing comfortable retirement lifestyle.
One thing that I must stress is that you need to get started with the process now, don’t wait until you have listed your farm, your business or settled in to retirement. Sit down now to have a non-threatening discussion with all of your proposed beneficiaries, especially any who may have a significant role in your final estate distribution process. The first step, in any discussion, is what your expectations are as to the eventual distribution of your estate to your heirs. It may even be helpful to have both the parents and children attend an estate planning seminar, to understand that settling an estate can be an expensive, complicated and time consuming process.
With my mother-in-law’s final estate, she had it structured so that she had designated specific items of furniture, pictures, etc, for her daughters, her 6 grandchildren and a few close family friends. This was determined with open discussions and thought given to who she wanted to have which pieces.
Wealth transfer planning tends to be just focused on the eventual passing of each partner. Waiting until this happens leaves far too many estate planning doors closed that could save the estate considerable money. What are your wishes? Some people may wish to transfer some of their wealth while still alive so that they can enjoy the giving while still alive. Others would rather wait until passed on for this to happen or may also wish to transfer some wealth by way of charitable gifting. How much of your estate do you want to go to CRA? Anyway you choose is good, but it’s usually best to keep all involved up to speed on your wishes.
Considering today more than 50% of Canadian families are either without wills or very outdated wills, it’s important to check to make sure that your will reflects your current wishes. If you don’t have a will or the existing one doesn’t reflect your current wishes, it’s time to sit down and have a new one drawn up. There are a considerable number of wealth saving strategies that can be used in estate planning and wealth transfer. So, please take the time to review your current situation and what your wish to happen with a trusted financial advisor, and do it sooner rather than later!
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