Inheritance Planning for Families: How to Prepare Both Sides of a Wealth Transfer

You may be in your 50s, 60s or beyond and starting to think more seriously about what eventually happens to everything you’ve built.

The house may be paid off or close to it. You may have investments, registered accounts, a business, a cottage or another property. You may already know that much of it will eventually go to your children.

In your mind, that may feel straightforward:

We want the kids to be looked after.
We want to leave them something meaningful.
We want to make sure as much as possible reaches them.

But your adult children may be looking at the same inheritance very differently. They may know they’ll inherit the family home or cottage without knowing whether they would keep it. They may receive a significant investment account without knowing whether to invest it, pay down a mortgage or use some of it to help their own children.

And even if you know what you hope they’ll do with what you leave behind, they may not know unless you tell them.

That is where inheritance planning becomes much more practical.

Start With What You Want the Inheritance to Do

Before getting into beneficiaries, account types or tax strategies, think about what you want the wealth to accomplish.

Maybe you want your children to have more financial security. Maybe helping them buy a home matters to you. You may want to support your grandchildren or keep a cottage in the family.

Ask yourself: What is the objective with the money? How do you hope the person receiving it will use it? And what is the plan with it?

Those answers do not need to become rules. They give your family context.

There is a big difference between receiving $300,000 with no conversation around it and understanding that your parents hoped it would create more choice around your mortgage, retirement or children.

Make Sure Your Adult Children Are Prepared to Receive the Wealth

You can have a detailed estate plan and still leave your children with a lot to figure out.

A significant inheritance can change someone’s financial picture quickly. 

Your child may go from managing a mortgage, RRSP and TFSA to also being responsible for a six-figure investment account, second property or another meaningful asset.

They may need to consider how the inheritance affects cash flow, whether they have available TFSA or RRSP contribution room, how much should remain accessible, whether beneficiary designations still make sense and whether their will or powers of attorney should be updated.

There is rarely one simple answer like “invest it all” or “pay off the mortgage.” The wealth needs to fit into the financial life they are already building.

Talk About Property Before It Transfers

Property can make inheritance much more personal.

A cottage may hold decades of family memories. A second home may have been purchased as an investment. A property overseas may be somewhere you spend part of every year.

Your children may not feel the same way about owning it that you do.

If you plan to leave a cottage, family home, investment property or second property to your children, talk about whether they want it. Discuss the ongoing costs and responsibilities. Find out whether one child might want to buy the others out.

If the property is outside Canada, there may also be additional tax, legal and estate considerations to work through.

If a Business Is Part of the Estate

If you own a business, succession deserves its own conversation.

You may assume one or more of your children will eventually take it over, but they may not want to, may not be prepared to, or may not all be involved in the business equally.

That can raise questions around ownership, valuation, taxes and how to balance the estate fairly between children.

Clarifying whether you picture the business staying in the family, being sold or transitioning to one child gives everyone more time to plan.

Blended Families May Need More Deliberate Planning

Blended families can add another layer.

You may have shared assets or a co-mingled family home while still wanting to make sure children from previous relationships ultimately receive part of your estate.

A business can complicate this further, especially if a child or former spouse has a financial interest after someone dies. The right shareholder or buy-sell structure, along with appropriate funding, can help protect that interest while giving the surviving business owner a clearer path forward.

Give Your Children Enough Context Before They Need It

You do not need to give your children a full accounting of every dollar you own.

But they should know who is involved in your financial and estate planning, whether certain assets have specific intentions attached to them, and whether one child will be responsible for settling the estate.

If everyone assumes the cottage will stay in the family, find out whether everyone wants that. The same goes for a business or second property.

An advisor can help you look at what you can comfortably give during your lifetime, what needs to remain available for your own retirement, how different assets may eventually transfer and what your children should be thinking about once that wealth becomes theirs.

If you have started thinking about what you want to leave to your children, reach out to Smith Rogers Financial. For our clients, we can help them work through the financial, tax and estate-planning questions around transferring wealth and make sure those decisions fit into your broader financial plan.

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