A woman (let’s call her “Marge”) wrote into an advice column about the fallout over her sister’s inheritance. Unlike most of the stories we’ve written about inheritance, “Marge” wasn’t exactly upset about it. In fact, she was glad that her sister inherited everything from their late mother. Unlike other articles, this isn’t about a typical sibling inheritance dispute. Not at all.
According to “Marge,” the mother left everything her sister, “Charlotte,” and “100% earned it,” for all the care “Charlotte” gave their ailing mother. “Marge” explained that the mother’s personality of “throwing tantrums” had a cumulative effect of a) forcing multiple carers to quit, and b), escalting to the point of getting kicked out of multiple senior homes (three, to be exact).
Someone like that would naturally be very difficult to deal with: “Marge” kept limited contact with her mother, limiting their interactions to holidays and supervised visits. “Charlotte” on the other hand, stepped-up, took care of their ailing mother, and even organized her schedule around doing so. To take some of the burden off “Charlotte”, “her sister “Marge” would always watch her neices and nephews, while “Charlotte” took care of the mother. In this way, everyone was involved in taking care of the family.
After the mother’s passing, “Charlotte” was rewarded with an inheritance large enough to treat both herself and her children: galivanting about on trips and buying her children nice toys. No hard feelings on “Marge’s” part, no sibling inheritance dispute here, but “Marge’s” children want to know how to explain this turn of events to her own children, who now are asking why they can’t go on the same nice vacations, have nice toys like their cousins, or worse yet, why grandma didn’t leave any money to “Marge.” “Marge” is befuddled about how to handle this delicate situation, and wants advice. There was no mention as to how old her kids are, and how much “Marge” can tell them.
It’s a thorny situation: ideally, “Charlotte” would be including her neices and nephews into mix, perhaps buying them in a nice toy or two, but ultimately, she did earn the inheritance. She can spend it the way she wants. No doubt, “Marge’s” children would question the money either way.
The answer the sister was given:
“Marge” was definately taking the high road, and thankfully, wasn’t upset about being essentially disowned by her difficult mother. “Charlotte” did all of the heavy lifting, and while she doesn’t begrudge “Charlotte” at all, the issue lies with how her own children are taking the issue regarding the money.
Perhaps some would tell “Marge” to just come out and be honest with her children about the disinheritance. However, “Marge” was provided with an entirely different path:
“Marge” was told that she may not want to break the news to her children yet, at least not until they were older. All “Marge’s” children really needed to know, was that “Charlotte” was given grandma’s money to pay for some nice things, and that “Marge” wasn’t, because she and grandma weren’t as close as “Charlotte” and grandma were. “Marge” was further advised to tell her sister that she was going to have this conversation with her kids, and it might lead to her kids talking to their cousins, which may bring up a (further) uncomfortable conversation among the entire family.
All in all, despite the fact that “Marge” wasn’t close with her mother, everything does sound wholesome: there was no animonisty between the siblings, no split between the sisters, no jealousy on anyone’s part, just sisters helping each other out when necessary.
It’s a refreshing inheritance story that (thankfully) doesn’t involve any sibling inheritance dispute. One of the few stories that we’ve written about where an inheritance doesn’t lead to a battle among family members.
Taking on the role of executor might sound respectable, but do you know what the role actually entails? The role is far more intricate and challenging when you look into what it actually entails. If you have recently been named as an executor of an estate, it’s important to carefully evaluate the the legal, financial, and emotional difficulties that can make being an executor more complex than you initially anticipated.
1. Legal and Financial Responsibilities of an executor:
An executor is legally responsible for maintaining and distributing the estate of the deceased (obviously in accordance with his or her Will). Because the executor has to be in compliant with government laws, it’s important to know what he/she is doing. The role involves filing out court documents, notifying beneficiaries, and managing the debts and taxes for the estate of the deceased. Executors can run into complex legal requirements, and those complexities can lead to potential mistakes. This can delay dispersing assets to the right heirs.
In short, you REALLY need to know what you’re doing in your official capacity as executor.
2. Time and Resources:
Executorship is a time-consuming process: coordination with accountants, attorneys and beneficiaries is all a necessary part of being an executor. Depending upon the complexity of the estate, completing all of your duties can take several months (or even years) to close the estate. Executors have to deal with their own personal responsibilities, fill out the proper estate documents, attend meetings, etc. The duties of an executor are akin to a full-time job: a “job” that can take up about 100 hours (or more) and 12-18 months, to finally complete.
You may want to start with a team of individuals behind you: if you’re not a lawyer, and you need help in to manage your duties, you may wish to start with getting an estate planning lawyer to help you out. An estate planning lawyer can assist in dealing with unreasonable beneficiaries – beneficiaries who may dispute the prescribed amount of money they were designated by the deceased. An accountant can help you manage the ins-and-outs of filing estate administration taxes, correctly and on time, while simultaneously assist with paying off any outstanding loans (or debts) on the estate. A financial advisor can help manage asset distribution. A real estate agent can assist with selling any property the deceased may have wanted sold.
You can see the importance of having a whole team of people behind you.
You may have to take time off work to become an executor.
3. Family Dynamics and Emotional Strain:
In addition to all of the legal and financial duties of an executor, the role is definitely going to be emotionally draining, because the executor is usually a family member of the deceased. Combined with the added element of grief, this can lead to disagreements between beneficiaries (who may or may not be siblings of the executor in question). A lawyer may be able to assist with unruly beneficiaries who want to battle it out in court over the deceased’s estate and assets.
When it comes to money or sentimental items, tempers and emotions may flare.
4. Potential Financial Risks:
Executors could face the possibility of being held personally liable if financial assets are mismanaged; there are financial risks to consider: mismanagement of estate funds, filing taxes on time, and paying off debts.
One benefit of being an executor is that you can be compensated for your time as an executor: the Trustee Acts in Canada outlines instructions for executors to be compensated for their work. The provinces do have their own rules as to how executors should be compensated. The CRA upholds that any compensation received by an executor is to be taxed as income.
Even that comes with risks: some family members may have difficulty with giving one sibling compensation, running the risk of favoritism.
Nonetheless, everyone should be paid for their work.
This isn’t even going into the headache that Probate could bring.
Whether or not you decide to take on the role, take into account everything that the responsibility holds. That includes both the benefits and the potential pitfalls.
The great wealth transfer is currently underway: millennials/genz are finding some financial relief with some money trickling down their way from their boomer parents (this brings up an entirely different topic on the problem of generational wealth). For now, some millennials/genz have some money coming their way; this can go a long way to keeping some money in their pockets, given the absolute shamble of an astronomical cost of housing/rental market, sky-rocketing student loan debt, and a weak job market. Some millennials and genz are even getting “living inheritances” from their parents. The stigma that usually surrounds topics of dicussion around money and inheritance are slowly fading away – it’s no secret that income inequality is growing, and people are more open to talking about money, debt and loans. Having solid discussions surrounding inheritance and money can, at the very least, soothe any hurt feelings. You wouldn’t, for example, want one sibling questioning as to why he/she is getting less inheritance than another, so that’s why talking about it openly (no matter how uncomfortable) can really help out your family members.
A whopping $1-trillion is set to be passed down to millennials/genz in Canada by 2026. This unprecedented shift, happening one family at a time, creates the need for tailored financial advice. Obviously, parents are going to be wary about having their money being blown. This is why talking about money and the need to spend, save and invest it wisely is so crucial.
Wealth transfers are full of opportunities – and challenges. Keep these following strategies in mind to ensure a smooth process:
1. Start Open, Transparent Conversations Early:
One of the most vital, yet often overlooked, aspects of wealth transfer is open communication. When wealth transfer is shrouded in secrecy, it can lead to feelings of resentment and rumours among family members. It can cause fights and breakups. You may want to start by initiating the important (yet, somewhat uncomfortable) conversations surrounding money, your legacy, your estate plan, etc. Open and honest expectations for everyone involved means you’re off to a GREAT start.
Adult family members come together to have a meaningful discussion on matters of wealth in the family
Here are some steps to initiate those conversations, if you’re feeling uncomfortable:
Regularly scheduled meetings with key members of your family (children, spouses, trustees)
Discuss what you want to do with your money, your assets, your estate, and why
You may want to involve a trusted financial advisor or estate planner to help ease into these (difficult) conversations
2. Drafting a Comprehensive Estate Plan:
A comprehensive estate plan includes a Will, trusts, a Power of Attorney, a Living Will, and other principal documents. It also involves a comprehensive strategy about minimizing estate taxes, and other important decisions regarding your assets.
Charitable Donations: Leaving items to charities in your Will, can help reduce taxes (which are deductible)
4. Succession Planning for Family Businesses:
Obviously, succession plans are necessary for family buisnesses to run. Without a succession plan in place, there is the possibilty of a family business being poorly-managed or fall apart without your prescence.
A couple looking over who will take over their business
Here are some steps to initiate the process of succession planning for a family business:
Identify the best individuals to run your family buisness (a child, star employee, etc.)
Training and mentorship are provided to said potential heir to the buisness. Mentorship is key
A succession plan with documented roles, responsibilities, etc., – are all provided – a training manual, if you will
Plan strategies through your trusted family’s financial advisor; someone who your children (or heirs) can depend upon. Later, they can switch to a different advisor, if necessary
Instill certain values: fiscal responsibility, philanthropy, prudent investments, wealth preservation
6. Review and Update Your Plan Regularly:
Life changes, and so should your estate plan: review it on an annual basis (don’t try to leave it on the backburner – we have had many clients who often leave creating their Will, Power of Attorney and Living Will to the day right before a vacation). Make sure everything is properly written out – don’t rush it!
Parents carefully reviewing and updating their Will, Power of Attorney and Living Will
Here are some steps to initiate the process:
Review your estate plan on an annual basis – perhaps once a year
Discuss modifications with your financial advisor, to keep abreast of changes in the law
Coordinate and discuss changes to your plan with your family members, so there are no surprises
An intergenerational philanthropic strategy:
This isn’t really part of your estate-plan, but you may want to look at the importance of philanthropic giving.
Philanthropic giving towards charities or causes you really respect or admire is always a good strategy of estate planning. It’s about giving back, and shows your loved ones the importance of being charitable.
What would you do with your inheritance?
You can have a open and honest discussion with your family members about which causes they would like to support and why. How much of your estate would go to those causes? This can bring everyone together in the estate planning process as well.
You may want to read more about easing into smooth wealth transfers, here.
It’s no secret that Millennials and Gen Z are in a financial quagmire. That’s old news: the cost of living,inflation, and a stagnant job market have all pushed younger generations to the brink of despair. Millennials (born between the early 80’s to the late 1990’s), and Generation Z (born in the late 90’s) have had it rough: many are struggling to keep afloat in an economy that has been less than kind to them. This goes all the way back to the 2008 great recession, which was the start of a chaotic, bumpy, economic ride that has affected elder Millennials several years later. Then came the pandemic, which upended the lives of many Millennials and Gen Z (economically speaking). There is, as of 2024, a looming recession on the horizon which is going to (further) diminish what little finances the younger generations have.
So, naturally, parents wants to help out. We think.
The great wealth transfer between Boomer parents and their Millennial children is hopefully on its way
How are parents helping their kids out?
Housing is probably the most pressing issue for many younger people, as the astronomical cost of housing/rent has forced many young people (at a time when their parents were living on their own at the same age) to either move back in with their parents, buddy up with roommates, live off the grid in rural areas, or as a last resort, move out of North America altogether. Those who move often settle into cheaper countries, like Mexico, Portugal, or Thailand.
Usually, those who move have either a cushy job or remote job already lined up. If it’s a remote job, it’s through a North American company all lined up.
Living abroad can come with a set of unique challenges to deal with: cultural differences, infrastructure, climate, etc. It’s a whole new way of adapting to a new life.
The ability to up and leave may not be so easy: many have family, friends, and a network of people in Canada and the U.S. So moving to another country may not necessarily be the best option for younger people (or older ones, for that matter).
Younger generations (literally) can’t survive in the West, not with the cost of living the way it is.
What is the solution for younger Generations?
For those who are choosing to stick it out, they continue to struggle, hopeful that the economy will improve, that the job market will bounce back, and that inflation will eventually ease. We’re seeing some of that take effect; the easing of inflation will no doubt help younger Canadians save, but it’s not a permanent solution to the whole mix of issues that Millennials/GenZ are facing.
What can parents do to help?
Millions of young people across America are expecting an inheritance from their parents. In fact, around a third of U.S. Millennials and 38% of Gen Zers are expecting a payday when mom and dad pass, according to Northwestern Mutual’s 2024 Planning & Progress Study.
Canadian Millennials and GenZ are following suit: more than HALF are banking (no pun intended) on an inheritance to help boost their income and their savings, according to an Edward Jones study.
Look, relying on the bank of mom and dad isn’t pleasant, but the reality is that while Millennials/GenZ are struggling, they need extra help: help that they’re parents didn’t need to the same extent (we’re generalizing here). A “living inheritance” – an inheritance from parents to help pay for the essentials while their (adult) children are in the prime of their lives – can go a long way to help members of the younger generation “launch.”
A member of the younger generation receiving money for a living inheritance
A study conducted by Northwestern Mutual shows a cavernous gap between the expectations of Boomers and that of their children: while 38% of Gen Zers and 32% of Millennials are expecting (or hoping) for an inheritance, only 22% of boomers expect to leave an inheritance.
Boomers, like everyone else, are feeling the financial pinch, too. The idea that Boomers will be living large on a sunny beach somewhere, during retirement, isn’t really the reality for a lot of Boomers: they, like everyone else, are worried about their finances.
Boomers are feeling the pinch and (mostly) spending less: they’re saving for their own retirement, which includes the healthcare facilities they might they wind up in after retirement.
So with everyone feeling squeezed, is there a way for Boomer parents to help themselves, their children, and save for retirement?
As it turns out: yes!
Is spending down all your assets really smart for you?
Well first, planning to either spend or squirrel away every cent of your retirement money may not make sense: maintaining a safe withdrawal rate, on the other hand, leaves enough money in your retirement account without penny-pinching, and sacrificing your lifestyle after retirement.
What remains of your retirement portfolio when you pass away can be an inheritance for your kids. If you own a family home and want to stay in it until you die (as a Forbes survey revealed 92% of older adults do), this valuable asset could be passed down to your children. You could even joy being part of a multi-generational household.
Enjoy your future as a (maybe not-so-big) spender, while providing for your family.
A Boomer saving for retirement – meanwhile, Millennials and GenZ don’t know when they’ll ever retire
Baby Boomers Can Give their kids a Living Inheritance and prep for Retirement
As Baby Boomers edge closer to retirement, the topic of the transfer of wealth into the hands of the younger generations (for Gen Z in particular) has been brought up numerous times in the media. A generation, struggling to begin their adult lives, striving to keep afloat, would really benefit from a “living inheritance”— wherein parents would provide financial support while parents are still alive.
Hey, a “trickle down” concept that may actually work!
Understanding the Concept of a Living Inheritance
It’s basically as described – a “living inheritance” is supposed to help out the struggling members of Generation Y and Z. The money provided to these (adult) children is supposed to help pay for milestones: students debts, save for a house, etc.
The fun stuff, like trips, concerts, etc., can all be paid for by themselves when they have the money.
If parents really want to do this, they need to be able to balance their support with careful retirement planning. Parents need to ensure that they can both help their children, doling out money for their needs, while maintaining their own lifestyle in retirement.
Steps for Baby Boomers to Provide a Living Inheritance
If you’re a Boomer looking out for your own retirement, while trying to help your kids, you’ll want to follow these steps:
1.Assess your healthcare needs: You may want to sit down with a financial planner on this one. Someone who can assess your potential healthcare needs and what you might need in the future: visits to the doctor, medicine, what type of healthcare facilities you may reside in, etc. All of this may take time, so discussing this with both your children and a financial advisor, could help.
2. Tax Considerations: Just as with your healthcare needs, you may want to discuss the implications of gifting money to your children with your financial advisor. There may be, depending on the area you live in, a way to gift a specific amount of money tax-free. Again, all of this should be discussed with your financial advisor.
3. Trial-Run: One financial advisor recalled how one of his client’s had gifted his (adult) Millennial child with $200k as a “test-run.” Essentially, the parent wanted to see how well the child would spend his/her inheritance. Can you guess what happened?
The child squandered it. This was an adult, by the way. So, the parent decided that instead of a “lump-sum” inheritance to their child in question, to instead dole everything out in Trust. You can find information about Trusts, here.
One way to avoid this is to discuss what the money (the living inheritance) will be used for. If your children use it pay off their debts/put the money in savings, you’ll know the money is being used responsibly.
A Boomer looks to make payments towards his retirement, healthcare and wants to help his kids out
The Benefits of a Living Inheritance
So this is, like everything else in life, all about balance: your needs, desires, and whatnot with the need to help out your children.
That is a discussion for another time, but in the meantime, if you want to help out your child(ren), a living inheritance may be your best bet, particularly when it comes to housing. This can strengthen the relationship between you and your children, and set them up for success.
