Do you wonder why many seniors are reluctant to discuss estate planning with their children? There is the obvious awkwardness of talking about death but also the potential for financial vulnerability. A recent Ipsos Reid survey, commissioned by HomEquity Bank, says 35 per cent of Canadians are “waiting” for money left behind in a will to fund their retirement. Another 45 per cent are not expecting an inheritance, while the last 20 per cent say they are not sure (though the likelihood of turning it down is quite slim). In total, about two-thirds of Canadians are relying on an inheritance for their retirement.
It’s not that kids are greedy as much as they are in need. The HomEquity Bank survey found that “94 per cent of adult children aged 45+ are very focused on what’s best for their parents and very willing to forgo half their inheritance to improve their parents’ lifestyle,” according to HomeEquity’s Yvonne Ziomecki.
The HomEquity study results are consistent with a 2014 BMO survey which that shows about 40 per cent of Canadians anticipate funding their retirement through an inheritance. A HSBC Bank report in the fall 2013 found similarly that 39 per cent of Canadians plan to fund their retirement through an inheritance, even with a median inheritance of about $77,213. Another inheritance-focused survey released this spring shows high-net worth Canadians (those with assets of more than $1 million) who plan to leave nearly one-third of their wealth to their children. They were confident the inheritance would be used responsibly, as two-thirds had educated their kids about money matters.
The lack of conversation between generations may be contributing to poor retirement and estate planning we see all the time in our practices. 60 per cent of the wealth of high-net worth Canadians surveyed planned to give two-thirds of their wealth to a surviving partner or spouse, while 40% would leave the funds to charities.
Adult children awaiting an inheritance also need to keep in mind the cost of medical care or daily assistance living for parents who are living longer. The BMO Retirement Survey found that, in 2006, 45% of mature Canadians (50 years and older) reported spending more money on living and medical expenses than they had planned. This is not unexpected as basic accommodation in publicly supported long-term care institutions ranged from $540 to $3,960 a month per person, according to a study by the National Union of Public and General Employees. Seniors will certainly be facing a shrinking nest egg as they pay more of their health care related costs.
Lesson Learned: Children waiting for an inheritance should start thinking about funding their own retirement as they may soon find a smaller inheritance than initially thought.
Until next time,
Jasmine Sweatman
