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A growing number of single people and couples are choosing not to have children for myriad reasons – a decision that advisors say have implications for their long-term financial and estate plans.
A Pew Research Center survey from November 2021 found that a rising share of adults in the U.S. who aren’t already parents don’t ever intend to have children. About 44 per cent said they were not too likely or not at all likely to have kids in the future – up from 37 per cent in 2018.
The most common reason was a lack of desire to have children, with other reasons including medical or financial concerns, the “state of the world,” the climate crisis, their age, not having a partner, or having a partner who didn’t want kids.
Recent data on childfree Canadians isn’t available, but according to Statistics Canada’s 2016 census, just about half (51 per cent) of couples were living with children, the lowest percentage on record. Furthermore, between 2011 and 2016, the number of childless or childfree couples also grew at a faster rate than couples with children at 7.2 per cent and 2.3 per cent, respectively.
However, the agency noted the figure on Canadians living without children captures both childless or childfree singles and couples as well as parents who’ve become empty nesters.
“We have a trove of clients who are childfree, and from that, there are quite a bit of planning considerations that are really unique to them,” says Blake Griffith, certified financial planner and president at Griffith & Associates Financial & Estate Planning Services Ltd. with Sun Life Financial Investment Services (Canada) Inc. in Calgary.
“Often, children play the role of caretaker, power of attorney, executor, and beneficiary, [so] childfree clients require more planning in these areas, and it’s more complex.”
Mr. Griffith says childfree clients will have different insurance needs than clients with children. While caring for an aging parent represents the most common form of caregiving in Canada, childfree individuals and couples can’t rely on this support. That makes disability insurance to support them if they experience an injury or illness during their working years, and long-term care (LTC) insurance for their retirement years, all the more important.
“The major retirement risk to a childfree client’s nest egg is the cost of care and illness,” he says.
He says the LTC insurance he tends to advise pays clients if they need assistance with daily living activities including feeding, clothing and bathing themselves, transferring in and out of chairs and beds, or having challenges with mental cognition. He notes that while some policies are strictly for facility care, a broader policy can cover aging at home with assistance.
On the flip side, while life insurance is a sensible purchase for clients with dependents who may need financial support in the event of a parent’s early death, this is less necessary for childfree clients.
Childfree clients need to save ‘more’
Noel D’Souza, CFP at Money Coaches Canada Inc. in Torontom, is childfree and works with a small group of childfree singles and couples. He says childfree clients tend to have more disposable income to play with in their working years than clients with children and can afford to spend more on themselves.
He says that makes it particularly important to ensure these clients are saving “substantially more” to afford to continue enjoying that lifestyle in their golden years.
“We’re mostly creatures of habit and tend to want to enjoy that lifestyle into retirement,” Mr. D’Souza says.
Clients who are parents may also be high-earners, but the expenses related to their children constrain what they can spend on themselves, which he called a “forced savings program.”
“When it comes to retirement and they don’t have to pay to raise their children. It’s an easier transition because they were spending a lower amount on themselves anyway.”
Individuals and couples without kids have to have a volunteered savings plan to maintain their lifestyle, and prepare for higher expenses in retirement without having children to help them out, he adds.
Outliving their money in retirement can be a key concern for childfree clients, Mr. Griffith notes, but buying an annuity product can mitigate this longevity risk.
“Oftentimes, the drawback is that it could shrink the size of your estate, however for [childfree] clients this is less of a concern,” he says.
Designating a ‘trusted’ person to advocate on their behalf
Mr. D’Souza stressed the importance of naming a trusted power of attorney for legal and medical decisions, as well as an executor, given that these clients won’t have a child who can advocate on their behalf.
“You want somebody who knows you well and is able to communicate your wishes to caregivers and those around you,” he says, noting that some online services can help clients work through the complexities of these decisions.
When it comes to estate planning, Mr. Griffith notes that clients who don’t have children are “still very passionate about creating a legacy and an estate for future generations” and often have deep relationships with nieces, nephews, friends, and other family members whom they want to name as beneficiaries.
Mr. D’Souza points out that no one questions people who name their children as beneficiaries, but deciding to divide up assets among certain nieces and nephews or other friends and more distant family members “can become more of a minefield,” and requires a lot of thought from clients, particularly if they have a sizeable estate to divide up.
“It can be tough to decide, especially if you have fairly substantial assets. … You could be looking at millions of dollars [to designate to beneficiaries],” he says.
Charitable giving can also play a significant role in estate planning for childfree clients, Mr. Griffith says. Although he notes that it may make more sense to front-load those gifts while the client is still alive.
“It allows clients to witness the benefits of their gifts, and reap the tax benefits in their lifetime,” he says.
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