Canadians will be travelling over the coming weeks to spend time with family, and some experts say the holidays might be the right time to bring up some important conversations with parents and family around tricky financial planning topics like money, wealth and inheritance.
Talking about money can be difficult, especially when it comes to questions of death and inheritance in the family.
Data shows just how awkward questions of inheritance can be. A recent U.S.-based report by Fidelity Investment shows that 68 per cent of parents have not told their children what they’ll inherit — or if they’ll inherit at all.
The report said 35 per cent of parents don’t want their children to know how much their kids will inherit and 34 per cent said talking about inheritance makes them uncomfortable.
But experts say those conversations are important to have, especially with Canada in the midst of what some are calling “the great wealth transfer” — which the Chartered Professional Accountants of Canada projects will see $1 trillion of wealth be transferred from Baby Boomers to their millennial and Gen X children between 2023 and 2026.
As morbid as this conversation may seem, it can avoid more pain down the road, experts say.
“That’s not an easy conversation and it’s not a fun conversation but it is an important and necessary one,” financial planner Laura Whiteland said.
“Ten out of 10 times, humans die,” she said, adding that planning for the inevitable is a practical thing to do.
The conversation around money can get more difficult after someone’s passing, said Shannon Terrell, personal finance expert at NerdWallet Canada.
“It’s essential to conduct these conversations, ideally in a way that helps adult children understand their parents’ expectations. The last thing anyone wants is to find they have a nagging question and it’s too late to ask,” Terrell said.
A key element of estate planning is making sure your parents have a will, said Bloom Finance CEO Ben McCabe.
Get weekly money news
Get expert insights, Q&A on markets, housing, inflation, and personal finance information delivered to you every Saturday.
“For homeowners, not having a will means the estate may not be handled the way you intended, leading to delays, higher costs, and confusion about the family home,” he said.
But without a clear family conversation, confusion can still compound after a death, Whiteland said.
“I worked in banking, and it wasn’t uncommon to have people walk in the door with the will and death certificate and ask, ‘Hey, did my parents have stuff here?’” she said.
On top of grieving a loved one and processing their loss, adult children are left with uncovering all their parents’ assets.
This elongates the process from weeks into potentially months. For parents, having clear conversations early can also prevent rifts in the family after their passing.
“It doesn’t take a lot of money for families to get unpleasant with each other. And that’s what you’re trying to avoid,” Whiteland said.
She added, “(I have seen) four adult children completely fall apart over $18,000 because two of the siblings didn’t trust two of the other siblings.”
The holidays can be “a natural moment for quick check-ins,’ McCabe said.
“(This is) because multiple generations are finally in the same room,” McCabe said.
Ambushing a loved one who’s not ready to talk money can be a bad idea, Terrell said, but it can help to get a quick temperature ahead of time.
“If there’s a quiet moment that presents itself amid the bustle and chaos, getting important loved ones together in a room to discuss estate plans can be impactful,” she said.
Whiteland recommends starting small.
“The way to feel good about any type of financial situation is often to not make it about dollars at first,” she said.
Instead of asking about the house or the family cottage, ask about your grandma’s dinnerware set, the family’s cherished set of cookbooks or that cast iron pan that has seen 40 Thanksgiving dinners. That can be a natural segue to larger conversations around money and property, Whiteland said.
In ideal situations, though, the parent would be leading the conversation, she said.
If you’re a parent with adult children, Terrell says a good place to start is to make sure you have a basic estate plan in place.
“A basic estate plan includes a will, beneficiary designations, and powers of attorney. Consulting with a legal professional during this process can ensure the language of your estate plan protects your interests and intentions,” Terrell said.
It could also include other wishes parents might have, such as funeral arrangements.
However, she said it’s important to communicate your plan to your kids, or whoever stands to inherit your estate.
“When my dad called to ask if I would agree to serve as the executor of his will, I knew that I was being tasked with an important legal obligation. Before I agreed, I did some research to ensure I understood what I would actually be responsible for. That homework made all the difference,” she said, adding that financial literacy helps children take their responsibility towards their parents more seriously.
“Including younger family members turns inheritance from a mystery into something they can plan around. Even a broad context helps them make better choices about saving, borrowing, and housing,” McCabe said.
Regardless of who brings this up over the holidays, Whiteland said this conversation needs a lot of grace, tact and care.
“Ideally the parent proactively deals with everything. But if not, you kind of have to go in with a little bit of grace. You’re talking about someone’s mortality,” she said.