Preparing to Leave an Inheritance
How to prepare for leaving an inheritance to your loved ones
You’ve worked hard to build up your wealth and assets. Have you thought about how you want to pass on your estate? Here are 5 tips for successful estate planning.
1. Include estate planning in your retirement planning
The first step to successful estate planning is to make sure it’s part of your retirement plan from the outset. Feel like it’s too soon? Not at all! Estate planning should be considered long before you reach 75 or 80 years old. Choosing the right investment products for retirement can facilitate wealth transfer and protect and guarantee your assets against market fluctuations.
Tip: A financial advisor can suggest the options and strategies best suited to your situation, taking into account the tax and legal aspects of your estate.
2. Talk to your loved ones about your estate planning
Talking about money isn’t always easy, but it helps to include family members in your estate planning and explain your choices to them. That way, you can better prepare them and avoid misunderstandings or (un)pleasant surprises when the will is read.
Prepare your loved ones for managing their inheritance
Are your loved ones equipped to make informed decisions about the inheritance they will receive from you? They’ll need to be well informed about how succession works, and about the best savings practices to ensure a secure financial future for themselves and their children.
3. Work with the same financial advisor for the whole family
Working with the same financial advisor has many advantages for family members. You could benefit from discounts or special offers on services available, as well as the advice and support of an expert who cares about the financial success of the whole family. Because they take the needs and aspirations of each person into account, they’re better positioned to optimize financial strategies for everyone.
Also, a financial advisor can act as an impartial mediator and facilitate more delicate discussions, should they arise. Finally, getting the support of a competent professional could protect you from becoming a worrying statistic, as 70% of wealth transfers fail.1.
Decide how to transfer your estate
There are many different ways you can decide to transfer your estate. Some strategies may be more profitable from a tax perspective than others. There’s also the possibility of combining options. Your advisor can help you decide.
Here are three options to consider:
- Living inheritance: This option offers tax benefits, and also allows you to see for yourself how your assets are helping your loved ones. With the challenges of housing affordability, for example, many people want to help their children or grandchildren buy their first home.
- Wills and trusts: These legal tools ensure that your assets and money are distributed in accordance with your wishes after your death.
- Life insurance and segregated funds: These solutions provide immediate liquidity to beneficiaries after your death. This money can help them cover certain expenses such as funeral costs, estate fees or your remaining financial obligations.
Segregated funds
Do you know about segregated funds? This type of investment combines the growth potential of mutual funds with guarantees that protect your capital at maturity or death.
Segregated funds also allow you to designate beneficiaries (as with life insurance). In the event of your death, your money is transferred to them without having to go through the estate, which is much faster. Also, when you designate an irrevocable beneficiary, your investments are protected from creditors, which further secures your assets.
5. Review your succession plan regularly
Your financial situation may change over time. Make sure that all your legal and financial documents are up to date and reflect your current wishes. This is important, because some of your decisions can change depending on the economic situation or an unexpected event in your life.
Want to make changes to your succession plan? Talk to your financial advisor first to make sure the plan still provides protection for your heirs. Then make sure you tell your loved ones about any changes to avoid unpleasant surprises!
