Why families need to break the silence about wealth transfers
Talking about money is taboo for many Canadian families.
It should be an essential topic of conversation. Instead, it’s a multitrillion-dollar elephant in the room, says Tracey McLennan, director of the Client Consultant Group at Edward Jones Canada. “It’s those dinner table rules: don’t talk about religion, politics, money and death.”
She says she considers it a missed opportunity, noting that $1-trillion is set to pass from the baby boomers to Generation X by 2026 in Canada, and that nearly $3-trillion in business assets will be changing hands by 2033.
Financial planning has often revolved around having enough to get through retirement and maybe helping children pay for priority spends such as post-secondary education. The big dollars represent how successful Canadians have been at building wealth to achieve these and other goals, Ms. McLennan says.
“Now, families are thinking more deeply about what this means for them, finding they have more than enough for those objectives.”
That’s why the great wealth transfer needs to be accompanied by the great wealth talk. Passing on assets to the next generation in a prudent way, and leaving a legacy that matters, starts with effective estate-planning conversations. They should happen within the family and with an advisor to set the stage for ideal strategies.
Part of that involves how to structure a will in a tax efficient and fair way, but wealth transfer conversations should cover more ground than that, like how to make a financial impact before death.
“We hear all the time from clients something along the lines of ‘I want to give with a warm hand rather than a cold one,’” Ms. McLennan says.
She adds that planning is also shifting from how to pass on “stuff” to addressing more non-financial needs. “There are memories, family values and life lessons that many parents want integrated into estate plans to ensure the well-being of future generations.”
While finances remain important, modern planning involves much more. That’s why Edward Jones’s process involves four key pillars: health, family, purpose and finances. All are interrelated, but purpose and family stand out with respect to meaningful legacy and estate planning.
“At Edward Jones, we spend a lot more time figuring out not just how to divide the wealth pie, but understanding the recipe,” Ms. McLennan says.
Tracey McLennan, director of the Client Consultant Group at Edward Jones Canada.supplied
She explains that the “filling” is the assets, and the “crust” is the form and structure. The latter are informed by the family and purpose pillars. “Without those, if the pie was just the assets, it would be a blob on a plate.”
Defining those pillars requires open communication and family meetings, which Edward Jones recently published a guide about. It outlines the types of meetings that are helpful to build a wealth legacy.
The first involves a cursory discussion about the will and powers of attorney, and what being an executor entails. That includes asking family members if they actually want the role. “Many think of it as a privilege, but it can be a big job, especially for complex, large estates,” Ms. McLennan says.
Edward Jones refers to the second meeting as “the closer look,” where parents share the broad strokes of their net worth. It’s not a detailed reveal, but it gives the next generation an opportunity to ask questions like, for example, whether their parents have enough to retire comfortably.
The third meeting involves more extensive education. “This is the opportunity where adult kids can learn about being good stewards of the family wealth,” Ms. McLennan says. The final meeting is “the deep dive,” discussing how assets are structured and how to divide them.
Together, these conversations can support the structure of the estate plan in a way that meets family goals and ensures everyone is on the same page. “If you don’t know where to begin, start with your advisor to find the path that suits you,” Ms. McLennan says.
But, she adds, don’t expect legacy planning to be “a one and done.” “Life changes, so the planning should too. At Edward Jones, we’re your trusted partner on that journey.”
Advertising feature produced by Globe Content Studio with Edward Jones. The Globe’s editorial department was not involved.
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