Toronto Star

Preparing adult kids for transfer of wealth


A massive financial shift is set to take place in the coming years as baby boomers pass their assets down to the millennial and gen Z cohorts.

But many parents aren’t preparing their adult children to handle that wealth.

CPA Canada says it’s expected to be the largest generation­al transfer of wealth in Canadian history, with younger Canadians expected to receive a combined $1 trillion in the next few years alone.

But talking about money is still taboo for many families, said Thuy Lam, a certified financial planner with Objective Financial Partners, a fee-only firm in Toronto.

“The reality is a majority of parents do not sit down with their kids. Not even a third of parents will sit down with their kids,” Lam said.

Even after being in the finance industry for more than 20 years, she said she’s still shocked when a family has had an open discussion with their kids because it’s so rare. Having this discussion is always something she encourages, though.

The unfortunat­e irony of this silence is a major fear among parents is that their children lack financial literacy — they worry their kids don’t know how to manage money, Lam said. But it’s hard to learn a forbidden topic, especially if parents have specific wishes for their wealth. Lack of communicat­ion, Lam noted, can create family chaos around inheritanc­es.

There’s extra sensitivit­y about inheritanc­e because it involves death, said Tracey McLennan, director of the client consultati­on group for Edward Jones Canada.

“We don’t like to talk about mortality either,” she pointed out. “So now we’re pairing up money and mortality.”

However, parents are talking to their advisers. And it turns out they have a lot to say.

The top concern for this asset-rich generation is the financial literacy of their children, Lam said. The second biggest concern is their children’s spouses.

“Although the marriage amongst their kids and spouses are currently going well, you know, that’s sometimes a concern,” Lam said. “They want to be able to protect any inheritanc­es from potential breakdown.”

McLennan sees that too.

“‘We love our daughters- and sons-in-law, but what if the relationsh­ip doesn’t last?’ ” she said parents often ask. “I think that we also hear parents are concerned that they don’t want to give the wealth too early, or in a way that will affect their children’s life or relationsh­ips.”

The older generation has worked hard for their money, and worked hard to save it, McLennan said. Her clientele tells her they’re concerned about their legacy being wasted — they want the inheritanc­e to have meaning.

“They want to make sure that they are going to impact the next generation in an important way, and it not be wasted,” McLennan said. “Or if there’s enough funds, that it’s actually available for even more than one generation.”

Sometimes parents’ vision for the wealth can be very specific, she adds: paying for the grandchild­ren’s education or used as extra money for vacations their kids couldn’t otherwise afford.

They might also want security for heirs that are self-employed or work for the family business, or perhaps have a disability or addiction.

Adult children can sometimes get the conversati­on started if their parents have not. Sometimes Lam finds herself coaching the younger generation on how to open a dialogue: start by asking about the executor role.

“It’s in the positionin­g, right?” Lam said. “And it’s very genuine, because the estate plan has not only to do with the distributi­on of the assets, but also the executor role. Who’s going to take on certain roles of settling the estate?”

It might be a year between a parent’s death and the settlement date, she adds. “Imagine trying to learn that role and learn how to manage a big amount of money within a year’s time — that’s not a very long timeframe.”

As a conversati­on starter, McLennan recommends offering assistance for what may be a stressful time for parents. Working with advisers, she adds, can help bridge the gap between family members by adding a mediator. “Everything from making sure that we share instructio­ns about documents, wills, powers of attorney to making sure that they understand what their parents’ wishes are.”

Adult children can start their own financial education by reading news, listening to reputable podcasts, and seeking expert advice, Lam said. Long before an estate lands in their lap, they can gain confidence about investing, debt management, and financial health overall.

This confidence, Lam said, can help with some of the anxiety heirs experience when suddenly managing large amounts of money.

McLennan agrees — adult children recognize the responsibi­lity of the gift they’ve been given, which may impact the rest of the family, a business and a community.

“There’s a bit of fear, you know: ‘What if I make the wrong decision? What if I invest and markets go down?’ ” McLennan said. “I think there’s a great deal of worry, sometimes, about that role to steward. Most kids want to fulfil their parents’ wishes. And they want to make sure they do it well.”

(Older generation­s) want to make sure that they are going to impact the next generation in an important way, and (inheritanc­e) not be wasted. Or if there’s enough funds, that it’s actually available for even more than one generation.




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