last will and testament waiting to be filled and signed

With the biggest intergenerational wealth transfer in Canadian history taking place now, the majority of affluent Canadians remain tight-lipped on how they plan to pass on their wealth, according to recent poll conducted in partnership by Mississauga, Ont.-based Investment Planning Counsel Inc. (IPC) and Toronto-based Environics Research Group Ltd.

Specifically, 58% of wealthy Canadians surveyed have not disclosed instructions for their estate with their beneficiaries. Moreover, 12% don’t intend to discuss their inheritance plan at all.

“The topic of inheritance is an important issue that requires communication to help the next generation succeed in handling new found wealth,” says Sam Febbraro, executive vice president of IPC.

“Children need to understand their parents’ financial objectives for the money that they are leaving behind so they can continue their legacy,” he adds.

Toronto-based research firm Strategic Insight predicts that approximately $1 trillion in personal wealth will be transferred from one generation to the next in Canada between 2016 and 2026, with roughly 70% of that in financial assets.

Among affluent Canadians, 32% say they’re concerned as to how their heirs will handle their inheritance. An even greater number — 36% — don’t believe their children have the financial literacy to manage a potential windfall.

Notably, only 19% of survey participants have introduced their children to a financial advisor or included them in their own planning meetings with an advisor (18%).

“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,” Febbraro says.

Among blended families, especially those with children from a previous marriage, inheritances become even more complicated. In fact, 28% of those Canadians in a blended family lack trust in their beneficiaries’ ability to handle money.

They also share other fears, such as whom to appoint as the primary beneficiary (15%), how to fairly divide assets (13%), and the fact that they haven’t openly discussed estate plans with their spouse (13%). And those concerns aren’t an anomaly — almost 20% of survey participants were part of blended families.

“There is an opportunity for financial advisors to start that dialogue with their clients on inheritance planning and help educate the next generation on how to steward their finances,” says Paul Wylie, senior vice president of business development at IPC Private Wealth.

“Advisors can play a quarterback role and help clients overcome their fears over their heirs’ ability to manage their wealth,” he adds.

Other key findings from the poll include:

  • One in five Canadians fear that their children will not have anything to pass down to their own children
  • Twenty-eight per cent don’t trust their children’s spouses to manage their heirs’ inheritance money
  • Men (74%) are the lead decision-makers in their household when it comes to finances and investments
  • Forty per cent want their heirs to have the same financial advisor that they have to help manage their wealth.

The poll was conducted among 400 Canadians with at least $500,000 in investible assets.