Parents of the boomer generation in Canada are expected to leave roughly $1-trillion in inheritance to their children over the next 15 to 20 years. Some are choosing to transfer that wealth while they are alive, rather than have a will do it for them after their death.
From a financial planning perspective, it's tough to bank on an inheritance when you don't know how long your parents, or their money, will last. And since many families talk about money as openly as they talk about sex, few children know all the details of their parents' fortunes, or lack thereof. Perhaps they are mortgaged to the hilt and don't have much net worth to pass on once you subtract what they owe from what they own. Or maybe they really did like your younger brother more than you.
For the comfortably retired who expect to have a sizeable estate when they die, Mark Goodfield, tax expert and managing partner of Cunningham LLP in Toronto, says it can be rewarding to gift part of your child's inheritance while you are still alive. "Why not receive the pleasure of your gift either directly, such as a family vacation, or vicariously by observing your children or grandchildren enjoy their gift such as a bike, car, or even cottage," says Mr. Goodfield, who writes about personal finance and taxation on his blog TheBluntBeanCounter.com.
Partial gifting makes a lot of sense. Of course, you should avoid giving away everything, since you don't know how long or expensive your retirement will be. But some people have buffers large enough that they can start dispersing their wealth for the enjoyment of the next generations, as well as themselves.
So where to start? As people get older, they may lose interest in certain assets, such as cottages or boats. These are prime candidates for gifting.
Grandparents who have previously contributed to their grandchildren's post-secondary education savings could consider topping off that fund with a lump sum, or filling any shortfalls. That would provide financial relief for multiple generations, when they need it most.
Another popular option for wealthier retirees is experiential: the gift of travel.
Everyone knows that there's the potential for drama when travelling with family, sometimes directly co-related to the number of extended family members who tag along (think National Lampoon's Vacation). But the gift of travel doesn't have to be stressful.
Mr. Goodfield recently wrote about a man named Les Brooks, a Vietnam War veteran who vowed he would never return. He had served on the USS Cavalier, which had shipped Agent Orange to the region. After a change of heart, he travelled there with his wife, to get a sense of the country and its people today. Mr. Brooks described it as a mission of healing, saying he was able to let go of much of the guilt he had bottled up for decades. The trip was paid for by his mother, who gave him the money while she was still alive (sadly, she passed before they embarked).
On the other side of the coin, Jean Rae Baxter has enjoyed a few family vacations with up to three generations of her family. She footed the majority of the bill for two daughters and one daughter-in-law to travel to Iceland. The next trip to Paris included two granddaughters as well. "It was an all-female, intergenerational bonding experience. It meant a lot to all of us," says Ms. Baxter.
There is a lovely opportunity here to create memories of a lifetime, for all generations.
As Mr. Goodfield says, "Personally, I would rather my grandchildren say, 'When I was young, my grandparents took me on the most amazing trip!' than, 'I just inherited $25,000 from my grandparents. What should I buy with it?'"
Preet Banerjee, B.Sc, FMA, DMS, FCSI, is a W Network Money Expert, and blogs at wheredoesallmymoneygo.com. You can also follow him on twitter at @PreetBanerjee.
Preet Banerjee