It's Your Money  

Dealing with passing on, or inheriting, family wealth

Giving, getting inheritance

Did you know that many Canadians are not adequately prepared to pass on or inherit family wealth?

This is often due to a lack of communication and planning.

The good news is that it’s never too early or too late to start. Planning helps you identify tax saving opportunities, mitigate potential financial gaps, and maximize your current lifestyle.

Here are 10 actions you can begin to take today:

Clearly define what legacy planning means to you

Having conversations with your parents or children about topics like death and inheritance can be uncomfortable. To help family members feel more invested in the outcome, it helps to approach this as a values- and goals-based conversation, rather than simply talking about the details of a will. Initiating these conversations from an aspirational tone often helps ease into the heavier topics.

Prepare now for the unexpected

Our needs change over time, and the financial well-being of loved ones can be impacted across generations. Whether for yourself or your parents, it’s important to keep your family informed and ensure you have the right risk protection plan in place. This might include long-term care financial planning or life insurance strategies.

Think about your family structure

The way you shape your legacy will largely depend on the structure of your family. Every family has different dynamics, and a well-structured estate plan is unique to each family situation. For example, estate planning for blended families can be considerably more complex. Another important consideration is beneficiaries with special needs.

Ensure your estate is passed on in the most tax effective manner

Speak to a tax expert to ensure that your estate will be structured in a way that results in the highest after-tax result. Keep in mind that each province or territory has different tax considerations that will impact your decisions.

Take care with special assets like family businesses and vacation properties

Depending on your family structure, when dividing up an estate, some assets may be more appealing to one recipient than another and more complex to share. Ensure everyone is clear on your decisions and reasons, including tax implications and responsibilities.

Address personal items with sentimental value

Value isn’t always defined by dollars. Often there are items that hold great sentimental value, such as family heirlooms, jewelry, artwork, or furniture. It’s important to communicate your intentions with these items as well, rather than assume what loved ones may or may not want to inherit.

Consider a trust

If a beneficiary is still relatively young or is someone requiring oversight in managing a large amount of money, talk to a tax and estate expert on how best to structure the inheritance so it is used appropriately.

Plan charitable giving carefully to maximize the tax benefits

How will charitable giving benefit your overall estate? A carefully constructed giving plan helps create a legacy that expresses your values and the causes you care about, while also reducing your income tax liability.

Identify important roles

Choosing a personal representative (sometimes referred to as an “executor/executrix,” “liquidator” or “estate trustee” depending on where you live) is a critical decision during the estate planning process. Other important roles include power of attorney, trustee, guardian if you have young children, and caregiving roles for elderly parents or family members with disabilities.

Address financial literacy early

Many parents are concerned with their children’s ability to manage their inheritance, even adult children. These conversations will include many financial terms that some family members, especially younger children, may not understand. The earlier you start on this the better but it is also never too late to begin!

It’s also important to remember that when you put a wealth transfer plan (also known as an estate or legacy plan) in place, you don’t have to feel like it’s set in stone. As your family grows and evolves, so can your plan—so make sure to review and update it on a regular basis.


Once you've picked a financial advisor, ask these questions

Questions to ask

In last week’s column, I discussed five questions to ask when looking for a new financial advisor.

As a follow up this week, I wanted to look at five more questions to ask your existing or new advisor during your annual review.

Once you’ve selected your ideal financial advisor, you should be meeting with him or her at least once a year to go over the past 12 months and look ahead to the next year.

These are some of the questions to ask your financial advisor to make sure everything is staying on track:

1. How has my portfolio performed?

How you judge your investments’ performance will depend on the expectations you set with your financial advisor. If you told them that you have a high risk tolerance and want to maximize growth, then your portfolio’s performance should reflect that.

Your financial advisor should be able to explain not only how your portfolio performed, but also what factors may have influenced it.

Similarly, it’s important for you to know where your net worth sits and how it compares to last year. Again, your financial advisor should go over the reasons for any changes.

2. Are all of my goals still on track?

This is where you get to test the value of the financial plan your advisor put together for you.

You should expect to see consistent progress towards all of your goals. If this is not the case, your advisor should not only be able to explain why, but also have a plan in place to get them back on track.

Ask them if you can still retire on time, with the amount of income you expect to need to maintain your preferred retirement lifestyle.

This is the chief concern for most investors, and your advisor should be confident in being able to help you reach this goal. They should be able to tell you how much you currently have saved for retirement, how much you’re on course to save by the time you stop working, how long that money will last (while including all other retirement income, such as CPP and OAS) and if you are falling short in any way.

If it currently looks like you won’t have enough money by the time you want to retire, your plan needs to be tweaked to make up this shortfall.

3. Do I need to make any changes to my plan?

When you ask this question, your advisor should in turn ask you if there have been any major changes in your life, such as getting married, having a baby, or switching jobs. If you’re earning considerably more (or less) money, then not only your plan but also your goals may need to be modified.

Do you have new financial goals, such as the need to save for a wedding, or start an education savings plan, or a desire to travel the world when you retire? Or has there been a major change in global stock markets?

Now is the time to bring those considerations into your financial plan.

4. Is my plan making the most of tax strategies?

When it comes to the most important questions to ask your financial advisor, this is often the one that people forget, even though it can be the most crucial.

A thorough financial plan will incorporate every aspect of your finances and each aspect should be set up as tax efficiently as possible. Now is the time to go over which tax strategies your advisor has put into place, how well they’re working and what you should do before you file this year’s taxes.

5. What should I concentrate on in the coming year?

Your annual review conversations should prompt ideas and directions that may be different from last year.

Your financial advisor may set new goals for you to aim for this year, along with ways to achieve them and any tax strategies that will be helpful along the way.

You should leave your annual review with a clear plan of action for the upcoming 12 months.

Now that you know which questions to ask your financial advisor, it’s time to put them to the test.

If you haven’t heard from your advisor in some time, reach out to them to arrange a review and have these questions ready to ask.

Important to ask questions when selecting a financial advisor

Finding the right advisor

Whether you’re shopping around for a new advisor or already have one, there are some key topics you should discuss and consider.

Many Canadians who have investments work with but rarely talk to their financial professional. And according to a survey conducted by FP Canada, four in 10 Canadians feel like their financial futures are not under control.

That number is a sign that these investors are not being well served by their advisors. This speaks to the quality of advice people are getting, or entire lack thereof. Even if the average consumer does meet with an advisor, their lack of knowledge about finances and investments often makes them feel intimidated about the whole process.

So, what kind of conversations should you be having? The questions to ask your financial advisor fit into two distinct categories: one set to ask when choosing a new financial advisor and the other to ask your financial advisor during your annual review.

Let’s start with this week’s column focusing on what you should discus when finding a new advisor:

1. What qualifies you to provide advice?

Whether you’re looking for a new advisor or already working with one, it’s a good idea to find out how they’re qualified to give financial advice. Ask them about their qualifications and how they’re continuing to educate themselves in a constantly changing world. Advisors often have many areas of expertise, from investments to life insurance and estate planning.

What most people need — especially when seeking advice for the first time — is a Certified Financial Planner (CFP) professional. The CFP certification is widely considered the global gold standard and it takes years of studying and examinations to achieve.

2. What is your approach, and what services does it include?

Discussing the advisor’s investment style is also an important conversation to have. Are they picking stocks and bonds, or choosing professionally managed portfolio solutions? Does that line up with how you want your money to be invested? Also, talk to them about the other services they offer.

Many now offer comprehensive estate plans, succession plans for business owners and more. Another important discussion to have is around availability. You want someone who can keep these conversations going after the initial meeting and plan regular updates and reviews.

3. What am I paying for all of this?

Of all the questions to ask your financial advisor, this is often the most eagerly anticipated. We all know that advice isn’t free, but you deserve to have a frank and open discussion about fees before agreeing to hire them.

It’s important to understand what you’re paying for and to determine whether you’re getting value for money. If the cost is X, and you’re getting 3X in return — financial planning, portfolio management and tax-savings strategies — that’s good value.

4. What should my goals be, and how can you help me achieve them?

The first place to start is to set some goals – which includes far more than simply saving for retirement. Goals might include retirement, but could also include buying a cottage, saving for a child’s education, taking annual trips or more.

Your advisor should help you define your goals and then develop a plan to reach them. That can only be done if you and your advisor are talking regularly, reviewing progress and making adjustments as needed.

5. How will we measure success?

Once you define your goals, talk about what success might look like. A win isn’t necessarily measured by a portfolio beating its benchmark. It could be taking that vacation, buying that cottage or just seeing assets increase.

If you ask an advisor how they define success for themselves, the answer might be how many clients have hit their goals. Ask for some references to see if they’ve been able to achieve success with others.

When on the hunt for a new advisor, take the time to ask a lot of questions, meet with multiple options and trust your gut if something doesn’t feel right.

I will follow up next week with part two – Questions to ask your current advisor during your annual review.


With CRB benefits coming to an end, you need a financial plan

Financial planning

Approximately 40 per cent of the Canadian workforce received benefit payments from the Canada Emergency Response Benefit (CERB).

One year ago, the CERB program was wound up and, in its place, a revamped EI program and a new Canada Recovery Benefit (CRB) program allowed those still out of work to continue receiving income.

Over the coming weeks the CRB program will close, and many people will come to the end of their EI program eligibility period. It is estimated that 2.2 million Canadians currently receiving these benefits will be left to face the unknown.

On one hand, there is a valid argument that the generosity of these programs has far exceeded the need. Many people receiving these benefits have openly shared that they have no intention of looking for work since they have been earning more in benefit payments than they would at their job.

This 18-month “paid vacation” certainly needs to come to an end for many of these people as labour shortages are widespread in Canada right now. Walk down any street with businesses and you will see help wanted signs in every window.

But on the other hand, there are still many other Canadians who for one reason or another truly can’t go back to work yet. And there is a lot of questions around what they have in store when their income stream dries up.

There is talk of the federal government creating new benefit programs to carry on for a further period of time but at this point we have no idea what those will look like since the Liberal party will need to form a government with support for one or more of their opposition. If they fail to do so, none of these new programs can be put in place.

Regardless of which side you are on (able to work and just haven’t bothered or still truly unable to work), you need to have a plan in place for what you intend to do. Sitting by doing nothing and deciding that you will just “figure it out next month” when the cheques stop coming is not the right decision—no matter how dire your situation may feel.

Being proactive now, researching the options available to you and making decisions on what you plan to do simply cannot be delayed another day. There are many resources available to you if you feel that you need support.

A quick google search will show you credit/debt counselling services from a variety of organizations.

Employment services from groups like the YMCA, Kelowna Community Resources and many others can also provide assistance for those that aren’t sure where to start.

Whatever your situation is, if you are one of many that are about to come off these income benefit programs in the coming weeks, please take action now so that you are as prepared as you can be.

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About the Author

Brett, designated as a chartered investment manager and certified financial planner, is the regional director (Okanagan) for IG Wealth Management.

In addition to his “day job," Brett was appointed to the board of directors of FP Canada (formerly FPSC) in 2014, named as the board’s vice-chair in 2017 and took over as board chairman in 2019. 

Brett has been writing a weekly financial planning column since 2012 and provides his readers with easy to understand explanations of the complex financial challenges that they face in every stage of life.

Enhancing the financial literacy of Canadian consumers is a top priority of Brett’s and his ongoing efforts as a finance writer and on the regulatory side through the FP Canada board focus on this initiative.   

Please let Brett know if you have any topics that you’d like him to cover in future columns by emailing him at [email protected]

The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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