Inheritance: Using Family Day to Start a Conversation with Your Heirs

by Craig Fryzuk, CIRP, LIT
February 14, 2023

RBC Wealth Management reported that Baby Boomers in Canada are set to transfer a whopping $150 billion to their heirs by 2026.  In the US, that number is closer to $68 trillion.  It will be the largest transfer of wealth in our history to date.

With this in mind and Family Day soon upon us, if there were ever a good time to discuss the topic of inheritance with your heirs, it’s now. Granted, it’s not an easy topic to broach. We all have a different comfort level with the thought of our own demise, and the conversation can be just as awkward for our heirs. However, talking about the assets they will someday receive is important.

But it’s not a conversation you want to drop on them like a death bomb.  It’s best to approach it gradually over multiple conversations and revisit it often. Just be sure not to dilly dally—you want to discuss your wishes while you’re still alive and well to ensure a problem-free transfer of wealth.

When deciding about the inheritance you leave behind, there are a few things to consider:

  • Your income needs will have to be met into your late retirement years, even if you live to be 100. Have you factored inflation in when calculating your retirement fund contributions? Putting enough aside for yourself will ensure your nest egg will last.
  • You should familiarize yourself with the tax implications of earmarking some of your money for your heirs’ inheritance. Some of your investments will draw different taxation, both when you’re alive and after your passing. In some cases, like in a Family Trust, it’s important to get sound financial advice on the best way to minimize taxes for your heirs.
  • You also need to have an updated, valid, and legal will and it’s important that your heirs know where to find it. I cannot emphasize how important it is to have a will. If you die without a will, your assets will be divided up as the government sees fit.

Next, you might be wondering what to discuss with your heirs. A great place to start would be learning about the process itself.  For example, it could take 3-6 months for your heirs to receive their inheritance after you’ve passed on and sometimes much longer. Your executor will gather the necessary documents, and file for probate with the courts.  Filing one last tax return for you will be on the list too, as well as paying off any remaining debts you might have on behalf of your estate. Then your executor can proceed with your last wishes.

It would also be prudent to let your heirs know the amount of money they should expect to inherit.  Of course, we don’t want our children relying on this money, but discussing the projected amount will allow them to better prepare for their own retirement. Interestingly, statistics say that most heirs are around 61 years old when they receive their inheritance.

Also, the transfer of your liquid assets (like bank and investment accounts) will be handled differently than your illiquid assets (which include real estate and land).  There are different rules associated with each—it would be wise for you and your heirs to become familiar with both, so you know what to expect.

Whether you’ve been talking about leaving a family legacy behind for years or are just starting to discuss it with your heirs, it’s an important topic to cover.  And if you’re passionate about donating a large sum of money to Habitat for Humanity every year, you’ll want to share that information with your heirs too, so that your legacy can live on.  Or perhaps you want your wealth to keep growing so it can be passed on to grandchildren, and their grandchildren.  Whatever your wishes are, be explicit about them.

The most important thing is to simply open the lines of communication with your heirs.  It will make everyone feel more comfortable and prepared for the “someday” transfer of wealth.  They will be grateful for not only their inheritance, but for the time you spent with them to clarify your wishes. 

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