This Blog was written by Emily Racine, Estate and Trust Consultant with Scotia Wealth Management
As an estate planner, I can divide the people that I see into two types of clients – clients who want to spend all their money before they die and clients whose major concern is structuring and maximizing the transfer of wealth to the next generation.
For the first type of client, I always jokingly say that it would be a lot easier to spend your last dollar on your last day if our birth certificates came with an expiration date. While this comment usually elicits rueful laughter, it also is a telling moment in an estate planning conversation. It says, this client has goals other than maximizing the wealth headed to the next generation. Often there are charitable intentions to consider or other priorities close to the client’s heart, but leaving a family legacy is not one of them
For the second type of client, the next generation is the primary concern. The question frequently asked is, how can I make sure my children will be taken care of. As a parent, this can be the ultimate goal of the estate plan.
However, the answer to this question will, of course, shift over the years depending on the stage of life of the children. When the children are minors, the most important question of an estate plan is who will be their guardian. From there, it is a matter of ensuring that the children will be protected until they come of age. This can include life insurance to replace the salary of the deceased parent as well as trusts for the children while they are still too young to control their own money. In my experience, this is one of the most difficult stages for a parent trying to make a will; no one wants to imagine a world where their child has to grow up without their mom or a dad. Nonetheless, this is one of the most common stages where Canadians have their first will done.
As the children get older, the focus tends to shift. When children are in their late teens into their 20s, they may no longer need guardians, but they may still not be quite at an age that a parent is comfortable leaving a lump sum of money to their children. We all know, or have been, a young adult who would not be able to handle inheriting a million dollars at such a young age. At this point, the questions shift to potentially a trust for these inherited funds and what trust terms make the most sense for each family.
When the children reach middle age, the priorities tend to move again. At this point, parents have a fairly good and firm idea of how their children can handle money. Parents are either much more comfortable leaving a lump sum inheritance to their kids to do with what they like, or they know for sure that some type of trust will likely be needed for the rest of that child’s life. At this stage, matrimonial protection also becomes a big topic of conversation. While no parent wishes to see their child go through a painful divorce, they certainly want to ensure that if that does happen, the money they have worked hard to leave to their children stays with their children and not a divorcing spouse.
As time goes by, the grandchildren begin to enter the picture. I frequently get asked to include gifts to the grandchildren as part of an estate plan. This again brings up the conversation about what trust terms make the most sense for the grandchildren at each stage of their lives. So it appears that, in some ways, the estate plan comes full circle.
To review the potential different priorities throughout the lifetime of a testator who wants to leave a family legacy is just one more illustration of the importance not only of having a will done, but also that it is reread and updated as necessary as testators make their way through the various stages of life.