1. Using a comprehensive financial plan as a starting point

For many individuals, looking ahead to the future often brings with it a number of questions relating to retirement, passing down wealth and their estate. Some common concerns include:

  • Will I be able to maintain my desired lifestyle in retirement?
  • How can I ensure I don’t outlive my money?
  • What might my unexpected costs be and how will I be able to handle them?
  • If I pass away unexpectedly, will my family be taken care of?

These are all important questions to ask and address, and a comprehensive financial plan may be very effective in this regard. While the scope of these plans is much broader than just estate and wealth transfer, the development of a comprehensive plan provides a clearer direction to strategically plan for certain scenarios, which in turn better equips individuals to make informed and strategic decisions about timing, appropriate amounts and the best methods for passing down wealth.

 

2. Developing and maintaining an up-to-date Will, and recognizing that estate planning is not static

When it comes to wealth transfer, having a valid Will is central, as it functions as the guiding document in the administration of the estate as well as a tool for the transfer of assets and funds. If an individual passes away without a valid Will in place (which is called dying “intestate”), the reality is that provincial laws will determine how the estate will be settled. Simply put, this means an individual loses all control over fundamental choices like who will administer the estate and who the beneficiaries will be.

 

3. Understanding that a range of strategies and options exist to meet varying situations and needs

When it comes to wealth transfer planning, uncertainty around handling unique needs or complex family dynamics may be perceived as a large roadblock among some. To overcome these worries, it is important to recognize there are a vast array of approaches and strategies which can help to navigate every specific circumstance.

 

4. Appropriately weighing personal preference with potential tax strategies

It is understandable that for many individuals, personal preference and strong feelings about helping younger family members now often carries a fair amount of weight in the decision-making process. While these personal aspects are very important to address as part of wealth planning, the main focus should be on striking the right balance of acknowledging those preferences while at the same time considering potential tax benefits or implications.

 

5. Discussing and defining family values

The centrality of this aspect in planning is unfortunately one that many individuals underestimate. When looking at wealth transfer as a whole, main underlying purposes include creating a lasting legacy (either family or business), ensuring family is taken care of, and providing financial health for younger generations to succeed and pursue endeavors.

 

6. Promoting open dialogue and ongoing communication

Regardless of family circumstances and dynamics, building an environment that supports conversation around wealth planning is so beneficial for both the giving and receiving generations. Understandably, this area of planning is often an emotionally challenging one, but the upside to open communication is that it removes any element of surprise or shock down the road, which can be incredibly negative and detrimental to the wealth transfer process, not to mention family harmony.

 

7. Finding the right balance with information sharing

Much like every individual is different, so too are comfort levels with transparency in planning. Many individuals in the giving generation are often concerned about sharing too much information with the next generation too early. Specifically, the worries often centre around whether disclosing amounts may have a negative impact on intended heirs, potentially creating a sense of entitlement or decrease in motivation to achieve their own goals. On the flipside, however, sharing details offers heirs the ability to proactively and accurately plan ahead for the wealth they are intended to receive.

 

8. Separating the concepts of fair and equal, and recognizing various methods for equalization

When determining what is fair and what is equal in wealth transfer, issues may arise because definitions will vary among individuals. For example, what’s interpreted as being fair by the giver may not be aligned with the children’s or other beneficiaries’ point of view or expectations.

 

9. Using financial literacy education as a supplement/support

The concept of financial literacy extends well beyond just wealth transfer, but its application is so vital for any individual who will be inheriting wealth or assets. Those in the giving generation may play a key role as educators in this sense, and this is another reason that involving family members in wealth transfer discussions is so imperative, as it builds exposure to aspects of the processes and approaches that are used.

 

10. Considering the value of philanthropic giving

For many individuals and families, having a focused philanthropic plan is a central component in wealth planning. Its purpose and benefits are twofold in that it offers distinct tax advantages by redirecting funds that would otherwise be subject to taxation. At the same time, from a family perspective, establishing a philanthropic plan or even a charitable foundation may be a strong unifier for family members and functions as a means to uphold family values for generations to come.