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The inter-generational transfer of wealth has been a hot topic for several years.
The biggest wealth transfer in Canadian history is set to take place and parents are worried their children won't be able to manage.
Baby boomers of aging parents are getting ready to receive a fortune of about $1 trillion over the next 20 years, according to the Canadian Inheritance Study.
In the U.S., the numbers jump to about US$41 trillion.
Based on a recent poll by IPC Private Wealth of Investment Planning Counsel, many families are overly concerned about passing their wealth down to their children.
Out of 400 Canadians with investable assets of $500,000 or more, more than half (58%) haven't discussed finances or investments with their heirs and 12% don't plan to at all.
"The topic of inheritance is an important issue that requires communication to help the next generation succeed in handling new found wealth," said Sam Febbraro, executive vice president of Investment Planning Counsel. "Children need to understand their parents' financial objectives for the money that they are leaving behind so they can continue their legacy."
There's a growing concern the Boomers are relying on the inheritance to provide for their immediate needs and haven't undergone any financial planning.
In 2006, a Canadian Inheritance Study reported 1.5 million Canadians were relying on their inheritance as their primary source of capital for their retirement.
"It's important to have that financial planning conversation between family members when parents are still healthy, and everyone is calm as opposed to making decisions in a time of crisis when emotions are high," said Febbraro.
Of those involved in the handover, 32% expressed worry about how the inheritance will be handled and 36% believe their children aren't financially literate enough to handle a potential windfall.
But the conversations simply aren't taking place in families.
While 40% want their heirs to have the same financial advisor that have helped manage their wealth, only 19% have introduced their heirs to a financial advisor.
It's not just children who may not have the chops to handle the finances. Women are outliving men and yet according to IPC Wealth, men (74%) remain the lead decision-maker in their household around finances.
In 2016, Statistics Canada reported there are 54 men for every 100 women between the ages of 85 to 99.
There's a growing need for women and children in Canada to become more financially literate.
We want to hear from you!
How do you think the topic of handing down any amount of money in the family should be handled?
What have you found that works well in these types of conversations?
What needs to change?
Tell us your thoughts in the space below, or email us at news@kelownanow.com.
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