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Michael Orlando / December 29, 2020

Family Wealth Transfer: Why (And How) To Start Now

Have you started to make plans for your future estate? Are your children aware of your plans, and prepared for their future financial responsibilities?

If not, you are not alone. Canadians will hand down about $1 trillion worth of assets to younger generations over the next 25 years, and at least half lack an up-to-date, signed Will.

For many, talking about a wealth transfer can be awkward, stressful, or daunting. Perhaps it’s because many find it difficult to discuss death and ultimately plan for it. Or, maybe it’s because we’ve all heard stories of conflicts arising among family members.

Regardless, failing to properly plan for what happens to your assets can end up doing exactly the things you would rather avoid – adding fees, increasing taxes and worst of all, creating conflict.

Here are some strategies to improve the odds of a positive outcome for your family:

Have the conversation

Open communication may not be comfortable at first, but it will help your children understand the choices being made and eliminate any surprises in the reading of your Will, which will already be a highly stressful time. It also allows your children to express their interests and concerns, which may affect your decision-making.

Discussing topics such as trusts, investments and taxes will also strengthen your heirs’ financial knowledge, which can improve their confidence and ability to manage their inherited wealth more prudently.

Start them investing

If you intend to transfer financial assets to younger generations, consider getting them used to working with a professional wealth manager now. Odds are, they are already very comfortable with technology, so a digital platform for investing might resonate more than traditional means.

Our Portfolio Advisor Tool (PAT) is often found to be a great solution for children and grandchildren. It enables them to manage their investments in a similar fashion to the online banking tools they already use, except with professional portfolio management to guide their investments and access to one-on-one education when they need it.

When your heirs have an opportunity to invest in an environment where they are already comfortable, it will likely increase their engagement, boost their understanding of wealth management, and can ultimately increase the odds of a successful estate transfer.

Create a plan

You want an estate plan that fulfills your intentions effectively. The right plan will help you realize your legacy while minimizing taxes and probate fees, maximizing the positive impact you have on the people and causes you care about the most.

At Cumberland, we can collaborate with you and your tax and legal experts to put your plan in place. Here are a few of the strategies and associated benefits you might consider:

Strategy Benefit

Gifting Assets While Alive

This lets you see the benefits of your gifts while you are alive and can result in lower probate fees and tax upon death, especially if your heirs are in a lower tax bracket.

Having a Current Will

A current Will ensures that you control how your assets are distributed, aligned with your wishes and your tax planning.

Joint Ownership (with right of survivorship)

Sharing ownership of assets with a spouse in this manner can potentially allow the transfer of assets without probate fees or taxes.

Inter-vivos Trust

This type of trust is created while you are alive and can allow you to plan the timing and amount of assets distributed to your heirs, potentially with creditor protection and avoidance of probate fees.

Testamentary Trust

This type of trust is created upon death and allows you to control the timing for distribution of assets to your beneficiaries, which may be helpful if you wish to manage their ability to spend the assets.

Estate planning is often a sensitive topic, but procrastinating can be a big mistake. By having the conversations now, getting your children started with money management, and putting a plan in place, you can set your family up for a healthier and wealthier future.