Living inheritance is an option
Photo: The Canadian Press
By Casey Cullen
Giving to children and grandchildren while you are still alive can have great benefits and satisfaction. A living inheritance can be very rewarding when done in a way that sees children handle the money responsibly. Of course, ensuring you continue to maintain a healthy retirement income that lasts for the entirety of your life is paramount, but the excess of your wealth should be discussed while you are alive.
It can be very rewarding to see what your children do with gifted money while you are alive. We have a client who enjoyed the satisfaction of their child starting a business and another who paid off their mortgage, allowing their children more disposable income to enjoy their own financial freedoms while preparing for their own retirement.
Photo: Contributed
The possibilities are endless, from funding a grandchild’s education to helping your children purchase a home, build a fence, start their own retirement contributions or enjoy a family vacation. What is the fun of having money if you can’t do exactly what you want to do with it?
Cash gifts can be emotionally rewarding in addition to other benefits. In Canada, monetary gifts to family are not taxable. Distributing money from your savings can reduce the size of your estate, resulting in lower probate costs and estate taxes.
According to Thomas William Deans, author of Willing Wisdom, “more than 125 million US and Canadian citizens over the age of 18 have no will.” That means that more than half the population will die without any discussion about their wishes with family and friends. He says the downside of not having a will is how it will affect relationships negatively, in life and in death. You might say to yourself: Who cares? I will be gone. But is a litigious legacy what you want to leave? Deans stresses that Willing Wisdom is “as much about protecting and passing on possessions intelligently as it is about passing something more valuable to your beneficiaries—ideals and values.”
There are four simple steps to prepare your heirs and build their knowledge. These include:
1. Introduce your heirs to your financial advisor.
2. Hold a family meeting with your advisor present to handle the difficult subjects in a low stress environment.
3. Share your wishes and how you would like your legacy managed.
4. Create an estate directory of accounts, wills, insurance policies and more.
Gifts of real estate and investments fall into another category altogether and can be subject to certain tax implications. Before you give a living inheritance, speak to your financial advisor. Ensure you have enough to live out your own life on, then discuss how and what you would like to distribute to family.
Casey Cullen is an investment advisor with IPC Securities/Bradford Wealth Partners, specializing in wealth management, retirement strategies and estate planning.
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