Four adult family members dressed in formal attire sit closely together in a living room, to discuss matters of inheritance

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.

Four adult family members dressed in formal attire sit closely together in a living room, to discuss matters of inheritance
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.

Boomer looking over payments
A parents looks over his Living Will

Here are some steps to initiate the process:

3. Minimize your taxes:

Estate taxes can significantly reduce the wealth transferred to your heirs. Therefore, reducing taxes when it comes to planning your estate is integral.

Father doing his taxes
A father furrows his brow as he goes over his taxes

Here are some steps to minimize taxes on your estate:

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.

Parents over looking their succession plans
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
5. Financial Literacy:

Obviously, coming into a sudden inheritance can be both a windfall and a hazard – a windfall to help you out if you’re struggling financially, but it can be a potential hazard if you just end up blowing your inheritance. Whether it’s a “living inheritance” or an inheritance your children receive upon your death, follow the steps below to help guide your family:

Estate Planning in Canada
No matter how young or old, it’s best to always review your estate plan

Here are some steps to initiate the process:

  • Encourage your children to attend financial planning sessions – they’re not only for the rich
  • 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!

family overseeing their estate-planning documents
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.

man holding dollar bills
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.

https://www.theglobeandmail.com/investing/adv/article-these-four-strategies-can-help-families-ensure-a-smooth-wealth/

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.

A broke millennial
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).

A young Gen Z leaves Canada for inexpensive places to live
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.”

GenZ receiving money
A member of the younger generation receiving money for a living inheritance

This is all assuming, of course, that the younger generations will get anything at all – either in the prime of their lives – or when they retire. The way things are going right now, it’s kind of bleak: Millennials and GenZ will be lucky to ever retire.

While the younger generations are hopeful about their parents helping them out, their parents might be dashing their expectations: a study shows that Boomer parents are less amenable to forking over their inheritance, even to help out their children.

https://www.usatoday.com/story/money/2024/08/31/gen-z-boomers-inheritance/74908414007/

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.

Boomer saving for retirement
A Boomer saving for retirement – meanwhile, Millennials and GenZ don’t know when they’ll ever retire

One caveat: to maximize the benefit your kids get from you (financially speaking) you may want to think about providing a “living inheritance.” Many younger Millennials and GenZ are expecting something from their parents to help them along. Some inheritance can help younger people from the (admittedly) bleak financial future they are currently facing.

That inheritance, in the prime of your children’s careers and adulthood, could help them pay down their loans, and boost their savings.

See, Millennials and Gen Z aren’t really the stereotypical avocado-and-toast, latte-sipping, snowflakes that they’re portrayed to be (well, most of them aren’t, anyway). The younger generations are scraping by.

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.

Boomer looking over payments
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.

There are drawbacks, of course: one drawback is the simple fact that for many who simply don’t have family to rely on, life will become tougher in the decades ahead, and we may see more “intergenerational unfairness” come into play. What that means is, according to a Think Tank called Generation Squeeze, is that people who succeed in life will be the ones with inherited wealth.

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.

Two old siblings fight over money

Inheritance can be tricky; many of us dream about receiving a large inheritance from a long-lost dead relative (with no strings attached, of course). Inheritance becomes a contentious issue within families, conflicts arise, relationships become strained (or completely severed). When a family member passes away, the way in which their assets are distributed can lead to feelings of envy, anger, or disheartenment. Feelings of perceived favoritism may arise, anger over the “unfairness” of splitting assets, etc. Disputes are exacerbated by underlying family dynamics and unresolved tensions; all of this adds further fuel to the fire that is the grief and turmoil the family is already going through, having lost a loved one. Communication is key!

In reality, getting an inheritance in real life does come with strings attached: wars over inheritance can tear families apart. Celebrities like Michael Jackson, Prince, and many others, have left behind bawling, brawling, family members fighting countless battles in the courtroom.

But does the average joe, who doesn’t have as much money as say, Michael Jackson, really have to worry about what he or she is going to pass on to their kids?

As it turns out: yes.

Inheritance isn’t just about the money you’ll pass on to your family members. Receiving an inheritance is loaded with emotional significance: sentimental items, heirlooms, family paraphernalia – all have a connection to the past. This connection could either make or break the members of your family members when you pass away. This is more than just about money; inheritance can become a symbol of how loved a child feels.

Emotions can run high; especially when one sibling fears receiving nothing left behind by his/her parents, or when when one sibling learns that he or she is about to inherit less than a brother or sister.

Communication is the key to dealing with this problem: when tensions are running high among family members, having a calm discussion with your children before setting out your Will can really soothe over any hurt feelings. Your children should be able to understand the reasons as to why they are getting what they’re getting when you pass away. The reasons concerning their inheritance should be clearly outlined. Essentially, if you, as the father, or the mother, are writing up your Last Will, you’ll want to sit everyone down and have an open and honest conversation as to why your children are inheriting what they are, and the reasons behind it. Why is one sibling getting more? Why is one sibling getting less? Communicating with your loved ones about the reasons behind their inheritance before you pass away, before you get sick, and while you’re clear of mind, keeps the lines of communication open.

For some, communication with their parents is not so easy, particularly when one parent appears to be narcissistic. There are parents who will make decisions regarding their children’s inheritance and have the attitude of “It’s my money, and I can do whatever I want.” The lack of a need to justify their decisions as to why they’re doing what they’re doing can cause a rift among their children. That appears to be the case with one person who recently wrote to an online column (Dear Amy) asking for advice about how to deal with her estranged brother:

“Dear Amy: My brother and I are both in our 70s. We’ve only spoken once in the last three years. After our father passed, our mother sold their home. My father had previously told my brother that when they sold the house, he wanted to give a certain amount of money to each of us. Our mother did not honor our father’s wishes, but did give us each a smaller amount. Years later she deposited a good sum of money into his account but asked him not to tell me. (I wouldn’t have cared at all.) Mom later called the bank and asked for the money back. My brother was angry, but approved it, and then stopped speaking to her. My mother moved closer to me and I was her sole caretaker for seven years until she moved into assisted living. She spent the rest of her money paying for her care. My brother thinks I got more money from her than he did, which is not true.”

With the mother now gone, greed, as the author implies, is the problem:

“He [my brother] also expected me to give him money from the sale of my home because I had gotten more than the asking price. I had sent him $1,000. I also sent him over $5,000 when he needed emergency dental care. I wondered why he never returned my calls, until I found out from his estranged wife that he had expected to receive a lot more money from me from the sale of my house.”

There are certain details that appear to be omitted, but that is the gist of the letter. The author wonders what she can do to smooth things over with her brother.

The ball, as Amy replied, is now in the brother’s court.

You can read more about this story, here.

Although the author doesn’t mention it, things could have been smoothed out if their late mother had simply sat down with her two children and explained the reasons as to why she was spending their inheritance the way she was. A (difficult) conversation about the whole thing could have saved years of estrangement between the two siblings after she passed away.

It may have even kept the relationship between the two siblings intact.

Take this as a lesson when you’re planning our the inheritance for your children or loved ones: communicate!

man holding dollar bills

Many people view inheritance as a gold ticket: it’s the key to paying off debt, travelling the word, and living a life of luxury. Many Millennials have been suffering through a prolonged period of economic hardship since the great recession in 2008. The supposed “wealth transfer” might (hopefully) mitigate some of that financial blowback. An inheritance can change the person’s life for the better, if the money is blown on stuff they don’t need. Even a small amount of money is life changing in this day and age. If you’re lucky enough to inherit a small fortune, don’t blow that money. Besides doing the responsible thing and paying off your debts and mortgage, you can use it to have fun AND spread it around to your community.

Many people have used their inheritances to create positive and lasting impacts, honoring the legacy of their benefactors. When people inherit money, jewellery, or anything of value, there are those who choose to invest in their education or grandchildren, which releases a lot of the financial burden for their own children. While many people are relying on the possibility of an inheritance these days, only a few lucky ones may have the money to direct their efforts towards philanthropic efforts. This would include charitable foundations, funding scholarships, supporting medical research, etc. The latter is what we’re going to focus on today.

Let’s delve into the ways inheritance can be used as a widespread force for good:

Legacy

Social Changes

Humanitarian Aid

Startups

Guardian of the Sydney Harbour





Building a Legacy of Education

Leaving a legacy is important for many people. Regardless of an inheritance or not, many people do want to give back to their community. Many people choose to leave money for schools and hospitals. Some people have given back by donating to their local school system, either because they really believe in the importance of education, or they had a good experience at their former alma mater, or both. The people who inherit and choose to do good with their money aren’t just leaving behind a legacy in the field of education, they’re changing other aspects of society as well:

Catalyzing Social Change

Many wealthy people often leave money to charities or foundations in the form of philanthropy. There are a variety of causes to support and charities always need money. Philanthropy can ease the burden and leave a legacy behind for your heirs. There are some billionaires, for instance, who have promised to donate their entire fortunes when they pass away.

Humanitarian Aid Efforts

An inheritance can also bolster humanitarian aid efforts in other parts of the world. An inheritance can go to worthwhile causes, such as Doctors without Borders, provide support for organizations around the world, and much more.

Empowering Entrepreneurship and Innovation

There are always startups looking for seed money: startups offer new innovative ways to offer products that can change people’s lives for the better. Supporting these startups can lead to supporting something brand new and innovative.

Guardian of the Sydney Harbour

This brings us to Australian native Andy Orr: the 55 year-old former school teacher inherited enough money to leave his job and dedicate his time to something he truly passionate about: sweeping up the Sydney Harbour. Every morning, Orr leaves his house with his trusty hat, bucket, and gloves in tow. He spends each morning picking out the plastic litter that sweeps across the harbour. He came up with the idea while strolling along the harbour with his wife a decade ago. He began cleaning up the plastic debris in his spare time.

The inheritance he received in 2020 has allowed him to quit his job and pick up trash full-time.

The most common piece of garbage that he often finds? Plastic straws. Reflecting on the activity, Orr says that picking up litter full-time is a “meditative” process. He finds it calming.

What happens when the 55 year-old’s knees give away? Orr says he’ll continue his work from a boat.

You might argue that Orr is only making a small impact on the world; but he’s doing what he loves and his inheritance has freed him of any financial restraints. He’s doing good in the world. Will you do good in the world as well? Inherit and do good!

Inheritance can make a meaningful difference in the world.