Skip to main content

Norman Brownstein, a financial services professional who lives in Toronto with his wife and their four kids, is pretty sure he will receive an inheritance when his parents pass away.

“My mom has a teacher’s pension and my dad has a RRIF (registered retirement income fund), and I think they just live off of that,” said Mr. Brownstein, 51. “Whatever they’ve salted away is just growing.”

While it’s impossible to know when he might expect this windfall, knowing approximately how much it could be is just one candid conversation away. But it’s a conversation he’d rather not have.

“I would not want to put any pressure on my parents,” said Mr. Brownstein. “By that I mean that if we were to have the discussion and there was to be a certain amount expected as an inheritance based on their current situation, it might cause my parents to reduce their spending on themselves to ensure that they could leave the expected amount. My parents are quite conservative and would err on the side of greater savings, and reduce the amount they might use to enjoy their golden years themselves.”

Besides, Mr. Brownstein is in the fortunate position of not needing his parents’ money. He’d be happy if they spent freely now, with nothing left at the end of their lives.

“But that’s not really in their nature,” he said. “I think they’d like to leave something to us and their grandkids.”

Being in the dark about the size of an expected inheritance isn’t rare, but it isn’t recommended, either.

“It’s important to have that family dialogue,” said Al Nagy, a Certified Financial Planner and senior financial consultant with Investors Group Financial Services. “For adult children, knowing the amount of the inheritance will definitely have an impact on their individual financial planning, long term.”

For example, if an adult child of wealthy parents knows they’re going to receive a $2-million inheritance sometime in the next 20 years, they might decide to invest less in their own retirement savings fund, opting instead to pay for private school for their kids, buy a vacation property or make more significant contributions to a charity that means something to them.

Mr. Brownstein isn’t alone in not wanting to have what Mr. Nagy calls “the talk” with his parents. Many adult children might think their parents would consider them greedy, presumptuous or just plain rude if they raised the topic of planning for an inheritance. Or they might feel too emotional about the whole matter, knowing that eventual cash injection is inexorably linked with their parents' death.

Elderly parents, too, often resist talking about inheritance with their kids. According to a survey of 400 Canadians with at least $500,000 in investable assets done by the Investment Planning Council earlier this year, 58 per cent said they had not discussed instructions for their estate with their heirs, of which 12 per cent said they had no plans to raise the topic with their beneficiaries, ever. Naturally, lots of people shy away from talking about their estate because it requires them to face the reality of aging and death. They also might worry that if they divulged how much they’re worth, their kids might have a disincentive to work hard and save money, or, even worse, might wish them a speedy demise.

In Mr. Nagy’s experience, however, when families are open and honest about their finances, the outcomes are almost always positive.

“What I’ve found from clients that I’ve worked with who are well aware of a potential inheritance, especially if it is significant, is that they still want to make it on their own,” said Edmonton-based Mr. Nagy. “There’s a certain sense of pride there for most individuals who I work with who say, ‘I know it’s coming but I don’t want to depend on it.’ "

Some, like Mr. Brownstein, “will go as far as to say, ‘Let’s pretend it’s not coming,’ ” Mr. Nagy said.

Being open about what heirs can expect to receive is essential for accurate planning on the part of the younger generation, but it also helps eliminate disappointment, misunderstandings or all-out feuds among heirs after a parent dies.

For Candice Levine, a 46-year-old Toronto clothing designer and mother of two, whose father died of cancer eight years ago, avoiding talking about finances with her dad nearly cost her the cottage she now adores. Grief over his cancer diagnosis and his quick decline, linked with her own laissez-faire attitude about money in general, meant that Ms. Levine and her dad had just one discussion about his finances before he passed away.

“My dad owned a number of properties and he was listing which ones I would get and which ones my brother would get,” she said. “I was not even really listening or paying attention and then he said he would give the cottage to his two nieces. I was like, ‘What? Why?’ And he said he thought I didn’t like the cottage. But with a growing family, it was a place I really wanted to spend more time at."

“If we hadn’t had that little conversation, I wouldn’t have my cottage today.”

One way to help avoid misunderstandings, and for parents to retain some control over their financial gifts while also witnessing the fruits of their generosity, is to make living gifts out of part of what is expected to be an inheritance.

“There are some risks to this approach, including giving out too much money and not being able to cover your own living expenses,” Mr. Nagy said. “But, done right, it can be rewarding to see your children enjoy the inheritance and you can actually control what gets to them and when it gets to them.”

Mr. Nagy’s best advice for wealthy parents and adult children who suspect they’ll receive an inheritance, is to talk – either with a financial planner or just among themselves – about what the financial future looks like.

“Studies have shown that talking about money can help reduce feelings of anxiety and financial stress and help people make better decisions,” Mr. Nagy said. “It can be the elephant in the room, but it doesn’t have to be.”

Eds note: This version corrects Al Nagy’s title as it has recently changed.

Report an error

Editorial code of conduct