In many cultures money, health, and care are things that we simply don't talk enough about - especially looking into the future. Parents occasionally talk with children about the amount of wealth they may inherit. Very few people talk about their health issues or goals. And it is extremely rare to have discussions about the level of care you hope for as you age. These are all "hard conversations" because they involve acknowledging our own mortality, frailty, or dependence on others, but these "hard conversations" are also the ones that can build stronger relationships and demonstrate how much we do care for the people in our lives. Expressing your wishes can be extremely comforting when financial or health care challenges arise. The point of this series is to provide a framework for these discussions so that you can start having them.

 

For some people, leaving a financial legacy after they pass away is incredibly important, others want to bounce their last cheque or spend their last penny in their lifetime. Regardless of where you stand on the matter, the old adage "You can't take it with you" is incredibly important to consider as ultimately, you have to choose who will take ownership of everything that you've ever owned. It can be a sobering, but also empowering perspective. As we said last week and back in March - you need a will. Preparing a will is a fairly straightforward process but preparing our heirs to receive the assets in the will is a whole different issue.

 

Before you set up a meeting/phone call/video call with your heirs, I think it is incredibly important to figure out what goals you have for your heirs and how you want their inheritance to benefit them. At the core of that is an understanding of what you value in life and want your heirs to value as well.

 

Step 1: What do you want the inheritances to do? Does the family cottage or home need to stay in the family for generations? Do you want your children to learn how to manage investments and generate long-term income? Do you want to give them a lump sum so that they can make their own decisions or do you worry they will use it up too quickly? Do you want to cover university costs for grandchildren? Do you want to support a charity or other institution? Are there any heirlooms or items that you want to give out to specific people? Hopefully if you've written your will you have a good sense of some of these, but understanding your will as achieving specific purposes - rather than just distributing assets, is a great starting point for the discussion with your heirs.

 

Step 2: Make sure you understand the mechanics of how your assets will be distributed through your will, as well as the values. If you have a rough estimate of the values and the associated taxes or fees then you can give some assessment of what the values might be.

 

Step 3: Decide if this is a one-way or two-way conversation. A one-way conversation would just be an explanation of the will, the assets, and the impact you want to have. A two-way conversation would open the door to discuss the possibility of gifting in your lifetime. There is no right answer here as some people will choose to distribute assets only on their terms and without any other input. Others may choose to work more collaboratively with their heirs to maximize the impact of the transition (i.e. a gift that pays off a mortgage in your children's 30s is probably more impactful than that same gift would be 30 years later when they are already in retirement). 

 

Step 4: Set up the meeting

Just like with our last conversation, I suggest starting with a casual email, phone call, or text. "Hey, I'm updating my will and wanted to go over it with you. Can we set up a time to meet?". Make sure you have physical versions of the actual will, as well as a breakdown in more simple terms, especially if this is the first major discussion that you will have with them about it.

 

Step 5: Set the tone

Continuing with Step 3, will this be a one-way conversation or a two-way conversation? Typically we see clients having one-way conversations with younger heirs and speaking more in generalities; while older heirs will be given more information and their is more opportunity for discussion - particularly around family heirlooms. 

 

Step 6: Explain

Start by outlining how and why you are passing specific assets to specific people and then go through the will in detail together - providing time for your heir to ask specific questions about each section. The language can be technical and so it may require a few readthroughs to fully absorb. 

 

Step 7: Open the door for questions

This is optional of course but, if you want a more complete discussion, make sure to give the other person an opportunity to ask questions as well as the time to think of those questions. If you've gone through the entire will then there are likely to be some basic questions ("How come you chose to give this asset to this person") and some more complicated questions ("What happens if your partner passes away first?" or "If my sibling passes away before me do we split the estate or does a portion go to their children"). It's ok to sit in silence for a few minutes as they work through all of the information.

 

Step 8: Pause

If there are any problems that either of you see, or issues that have come up, you can discuss them now but do not commit to anything until you've both had time to think about it. There is likely a lot of new information being brought to light for your heir and that can potentially bring up some strong feelings. Any decisions should be made from a calm mental space. This pause could be a 10 minute cooling off period within the meeting itself, but i'd suggest taking at least a week to give your heir some time to assess how they feel about it. 

 

Step 9: Discuss with professionals

There may be some new ideas that were shared, and if you both like them or think they have value (after the pause), then chat with professionals to ensure they make sense and meet your goals. If the changes include gifting assets (financial or otherwise) then please talk with a lawyer, Wealth Advisor (Lee and Jamie), and/or Certified Financial Planner (Pete). These people can evaluate and quantify the impact of these new ideas and identify potential issues ahead of time.

 

Step 10: Implement and repeat

Once you know what you want (and your lawyers and advisors have given the go ahead), make the changes. The goal of the entire process is to be more comfortable with your heirs, your assets, and your life. We recommend repeating the process every 5 years, or whenever you or your heirs have a major life change. Doing so will keep everyone up to date so the information is a little more fresh. It is also a great way to role model good behaviours.

 

There are lots of hard conversations to have, hopefully we've made this one a little easier. If it still seems daunting please reach out to us and we would be happy to facilitate the discussion.

 

Cheers,

Pete Galbraith, Investment Advisor & Certified Financial Planner

613-531-2922

peter.galbraith@cibc.com