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Leaving a Legacy

What Is Your Financial Legacy?

Many people would like to have a more meaningful conversation about their legacy with their families and their professional advisors*. But it can be a complicated one for many reasons. It’s not unusual for people to want to avoid discussion the topic of death, for example. In addition, there may be significant family dynamics that are obstacles to planning.

Yet, done well, a proper legacy plan can lead to an enduring tribute a lifetime of personal contribution.

What Decisions Need to be Made? 

Legacy planning questions many families may have to discuss include the following:

  • The disclosure of wealth, roles and responsibilities for those who are left behind:
    Are personal net worth statements, wills, powers of attorney and health care directives up to date and The equalization of the estate: Are there some assets, like a cabin, business or farm, that if left to one beneficiary would cause the legacy to be unequal?
  • The potential for squandering of money:
    Is there a question of trust around one or more beneficiaries?

    In addition, for many families, charitable giving is an important part of the equation as they seek to convert their personal wealth into some form of social capital.  What’s both interesting and challenging about this is that your family values and history can great influence your legacy planning.  A strategic wealth planning approach to your legacy can help you realize your social goals but also, understand and take better advantage of the generous tax incentives. 

What Kind of Advice is Required?

Legacy planning usually begins with the need to have a will and an executor in place, but the preliminary work that has to be done before a will can be written is often the barrier to legacy planning success.

For example, it is important to have a clear understanding of what the terminal may look like, and how it may affect planning for distribution of assets to family or community. Your financial advisor can help you with the following issues:

  1. What kind of taxes may be owing on the terminal return?
  2. Are asset valuations up to date?
  3. Is insurance in place to provide tax free benefits to your heirs?
  4. Will there be a spousal rollover of assets at your death; or will there be a distribution to others?
  5. Is there an opportunity to deregister assets at a lower income bracket during your lifetime as opposed to at death?
  6. Will there be significant income tax on RRSP or RRIF balances? Can they be offset with a charitable donations credit?
  7. Will there be capital gains on properties and if so, how can tax be mitigated? Are there holding companies with assets that will be taxable at death?

Your Objectives:

The questions that are often more difficult to discuss are around your values and dreams beyond your impact during your lifetime. In planning for your social capital – what you will leave to the community – a strategic process begins with a different set of questions[1]:

  1. Beyond family and business, what is most important to you?
  2. What principles have guided how you have lived your life? Raised your family? Run your business?
  3. Have you ever thought about what kind of personal legacy you want to leave?
  4. What does charitable giving mean to you?
  5. Five years from now, how do you want to be remembered by the community? Your family?
  6. Do you want to bring future generations into the giving activities of your family?
  7. Are there any areas of conflict within the family that must be acknowledged when developing a legacy plan?

Some things to consider are:

One of the most important things you can do to begin your legacy plan is to check in with your financial advisor to better understand your financial health. The second is to consider a strategy and a process for giving – whether this is to family and friends or to the community. People who have a strategy, a process and an intention for giving tend to give more and fulfill their legacy plans more impactfully[2].

Talk to your financial advisors – including financial planner, tax accountant and lawyer – about your specific desire to leave a meaningful legacy. 

Also add under making financial decisions include the investor article: How to give money to grandchildren

[1] Excerpted from the MFA-P™ Philanthropy designation program.

[2] The Personal Philanthropy Project: Research Helps Move the Dial on Charitable Giving Attitudes and Behaviors by Michele Benoit, published by Imagine Canada, September 2017

*Source: CAGP “Doing Good for Business”