Photo: Canadian Press
The image in this handout shows Tracy McLennan, Director of Edward Jones Canada’s Customer Advisory Group. THE CANADIAN PRESS/HO-Edward Jones Canada **Required Credit**
Massive economic changes will occur in the coming years as baby boomers pass on their wealth to millennials and Gen Z. But many parents don’t prepare their adult children to handle that wealth.
The Chartered Accountants of Canada said this is expected to be the largest intergenerational wealth transfer in Canadian history, with young Canadians expected to receive a combined $1 trillion over the next few years alone.
But Tui Lam, a certified financial planner with Objective Financial Partners, a fee-based firm in Toronto, said talking about money remains taboo for many families.
“The reality is that the vast majority of parents don’t sit down with their kids. Less than a third of parents are willing to sit down with their kids,” Lamb said.
Despite working in the financial industry for more than 20 years, she said she is still shocked because it is so rare for families to have open conversations with their children. However, having this discussion is something she always encourages.
The unfortunate irony of this silence is that parents’ big worry is that their children lack financial literacy, and they worry that their children won’t know how to manage money, Lam said. said. However, it is difficult to learn forbidden topics, especially if parents have a special desire for their own wealth. Lam pointed out that a lack of communication can cause confusion in families over inheritance.
Tracy McLennan, director of Edward Jones Canada’s client advisory group, said inheritance requires special consideration because it involves death.
“We don’t like to talk about mortality either,” she pointed out. “So we’re now linking money to mortality.”
However, the parents are consulting an advisor. And it turns out they have a lot to say.
The biggest concern for this affluent generation is children’s financial literacy, Lam said. The next big concern is the child’s spouse.
“My children and spouse’s marriage is going well now, but I sometimes worry about it,” Lam said. “They want to be able to protect any heritage sites from potential collapse.”
McLennan sees it too.
“Parents often ask, ‘We love our daughter or son-in-law, but what if the relationship doesn’t last?'” she says.
“I think we’re also hearing concerns from parents about not wanting to give away wealth too soon or in a way that affects their children’s lives and relationships.”
Mr McLennan said older generations worked hard for their money and worked hard to save money. She says her clients are concerned about their heritage going to waste and want it to have meaning.
“They want to make sure they impact the next generation in a way that matters and that it doesn’t go to waste,” McLennan said. “Or, with enough funding, it could actually be available for more than a generation.”
Sometimes parents’ visions of wealth can be very specific, she added. Use it to pay for her grandchildren’s education or as extra money for vacations her children couldn’t otherwise afford.
You may also want coverage for an heir who is self-employed, works in the family business, or has a disability or addiction.
Adult children may initiate conversations even if parents do not initiate them. Lam sometimes finds himself coaching younger generations on how to start a dialogue. Start by asking about the role of the executor.
“Positioning, right?” Mr. Ram said. “And it’s very real because estate planning is not just about the distribution of assets, but also the role of the executor. Who takes on the specific role of liquidating the estate?”
It may take a year from a parent’s death to the date of reconciliation, she added. “Imagine trying to learn the role and learn how to manage large sums of money within a year. That’s not a very long time frame.”
McLennan recommends starting the conversation and offering support during a stressful time for parents. Working with an advisor and adding a mediator can help bridge the gap between families, she added.
“We do everything from making sure instructions regarding documents, wills and powers of attorney are shared, to making sure parents understand what their wishes are.”
Adult children can start their own financial education by reading the news, listening to popular podcasts and seeking advice from experts, Lam said. Gain confidence in your investments, debt management, and overall financial health long before you own a property.
Lamb said this confidence can ease some of the anxiety heirs experience when suddenly managing large amounts of money.
McLennan agrees. Adult children recognize their responsibility for the gifts given to them, which can impact the rest of their families, businesses, and communities.
“There’s a little bit of fear, you know, ‘What if I make the wrong decision? What if I invest and the market goes down?'” McLennan said.
“I think there’s a lot of anxiety sometimes about the role of steward. Most kids want to fulfill their parents’ wishes. And they want to do it well.”