Start the conversation now to prepare your heirs for what’s coming

Estate planning is often the last thing on Canadians' to-do list, and talking about it with your family can seem like an even more daunting task. But for individuals who plan to leave significant funds for their loved ones, the time to discuss your intentions is now.

There is a massive wealth transfer happening in Canada, which will see baby boomers transferring almost $1-trillion to their heirs by 2026¹. Heirs who aren't prepared to inherit this money may experience emotional overwhelm, confusion and even bad financial outcomes after your passing.

There are steps you can take to ensure heirs are set up for success. If everyone understands the wealth transfer process, heirs can feel empowered, rather than stressed, about receiving these funds, says Jeanette Power, Senior Wealth Advisor, CIBC Wood Gundy.

“It's about empowering them, it's about wisdom, it's about the financial literacy they will need. Often, if the next generation is not prepared, it can be overwhelming for them when the time comes.” 

Ms. Power has worked with many clients and guided many successful wealth transfers over the years, providing advice to protect heirs so they use their inheritance wisely and shield the family wealth as it passes down. In her view, the most important tool is communication. While discussions don’t always have to be formal, they should be done early and often, so they can happen more naturally and gradually. 

“I often tell clients when I'm working with them that it's important to start that conversation with the basics that can touch on family values,” she says. “How did you gain this wealth? What's important to you? If you're leaving an estate legacy, regardless of the magnitude, what does that look like? What values do you want to pass on? Because money means something different to everyone.”

By communicating your intentions and including your family members in the planning process, you can avoid any anxiety that your heirs will become overwhelmed or not know how to handle the transfer of wealth successfully, she adds. 

A trusted advisor can be a source of advice and support during planning, helping clients through the process of sharing their estate plans with family members, Ms. Power says. The advisor can also help build heirs' financial literacy, from explaining the different kinds of financial products within the estate to more strategic conversations around tax planning.

To build strong relationships, Ms. Power says she often suggests that her clients arrange a meeting with their children or grandchildren, so she can get to know them, “which can lead to deeper, more informed conversations” later on.

“For example, I am working with a couple who has two sons. As I learned more about the family and their values, the parents shared their concern about their sons. Could they comfortably handle making these very important decisions when they are no longer here? I immediately said I would like to meet them and work with them.” 

Since that time, the sons received an inheritance from their grandfather, Ms. Power says. She has helped them open tax-free savings accounts (TFSAs) and first home savings accounts (FHSAs) and educated them on the benefits of investing early.

She gives another example of working with the grandfather of a client who decided to skip the next generation and pass his estate on to his granddaughter.

“I have worked with the granddaughter as she attended university, and when her grandfather passed, I had a well-established relationship in place,” she says. “In updating her financial plan to reflect this new wealth, I introduced her to an Estate Planning Specialist as well as CIBC Trust. She is now married and has protected her wealth through a marriage contract.”

Family dynamics are also an important consideration in a wealth transfer because money often comes with emotional attachment, says Ms. Power. Keeping inheritors in the know can avoid surprises at a challenging time and reduce potential disputes.

“For example, maybe you have three or four siblings and not everyone gets along.  Or perhaps some have more financial literacy than others; or a blended family situation,” she says. “Those dynamics need time and communication to work though, to ensure the transfer process is as smooth as possible.”

It’s also important to inform whoever is chosen as executor of the estate of their pending duties. Executors usually take on an extra level of responsibility, says Ms. Power, so she likes to have specific conversations with that person to make sure they are set up to succeed and to minimize their stress during the wealth transfer process.

“I talk about things like, what does that executorship role look like? Who can you build around as your centre of influence who can help you with this?” she says.

The worst thing a client can do is ignore or avoid these money and estate planning discussions, says Ms. Power, but so many do “because they don’t know where to start.” 

“I have clients in their 80s and 90s where their adult kids who are maybe my age or older still don't know what mom and dad have,” she says. “If you're handing everything down to charity, that's great. But if we're handing it down to heirs in the family, we need to start saying, ‘Where are these accounts? Who is the executor? What is the plan?’”

Ms. Power also has some advice for advisors to help foster the lines of communication. She says that in today’s fast paced world, people may not have time in their schedule for an in-person trip to chat with the family’s advisor. That's why it's important for advisors to make meetings with the younger generation as convenient as possible.

“When I’m working with the next generation, they want the freedom to have virtual meetings when it suits them,” she says. “They may not have time for an hour-long meeting, so maybe shorter, more frequent conversations are the answer.”

When finding an advisor to help with your estate planning, look for someone who will work with you and your family members in the ways that work best for everyone, Ms. Power says. Involving your heirs early on can help you gain peace of mind about your family's future.

“As advisors, I feel we have a responsibility,” she says. “In order to help build this legacy for that next generation, we need to have a relationship with that generation long before we actually get the privilege of working with that client.”