Repeated client planning situations has identified a growing trend with families dealing with estate and succession issues. One of our client’s recently lost his mother to breast cancer. The family was left reeling from a loss they weren’t prepared for. The client, his sister, and their father expected that their mother and wife would be able to beat the disease.
When his mother passed, she had a will, but she wasn’t ready to go mentally. She had plans that she was going to fight this cancer. When she did pass, it was a bit of an eye-opener because there were a lot of things that they weren’t necessarily prepared for. With his father approaching his 76th birthday, our client wasn’t surprised when asked him and his sister to join us to have a family meeting about his father’s financial expectations in case anything were to happen.
We wanted them to have a thorough understanding of their father’s affairs and to know exactly what his assets were and how they are distributed so there will be no surprises when the time comes. It wasn’t just a review, but it was an open discussion where if they had any observations or a suggestion that they liked to do things differently or change, then this was an opportunity for them to bring it up.
Such family meetings are becoming a bigger part of the financial-planning process as Canadians are now living longer and many retirement plans are being extended to the age of 100.
We embraced this holistic perspective a long time ago and can see the linkages and help people with those turning points in their lives. We feel we provide more related services than traditional advisors. Today, there is nothing that is off the table. As people age, cognitive health becomes a bigger issue, educating children about leaving an estate, sickness and disease and the implications that come with that.
The importance of that role is growing. Canada is in the midst of the biggest intergenerational wealth transfer to date. Not addressing plans can lead to misunderstandings, unpleasant surprises, possible legal complications and, in turn, family conflict.
Among Canadians with at least $500,000 in investable assets, 58% have not discussed instructions for their estate with their heirs. (Recent IPC poll) Of those, 46% said they intended to have a discussion at some point in the future, but 12% said they had no intention of ever discussing inheritance plans with their beneficiaries.
A lot of people don’t want to talk about it because they are afraid to upset family members, but the lack of communication could be leaving inheritors in the dark. Financial advisors can be introduced to family members as a first step. Parents should explain their objectives and make sure there is clarity in the decisions they have made.
In addition to investment portfolios, supplementary information that should be shared in a family meeting includes physical items, vacation homes and cottages, charitable donations and medical information. Many people also don’t anticipate the size of the digital footprint they will be leaving behind. They need to provide details and passwords for financial, e-mail and social-media accounts and for any professional contacts such as lawyers and accountants.
Family meetings aren’t top of mind until there is a catalyst. They can be tricky to set up because most people want to maintain their privacy, especially around close family. Money for many families is a taboo topic. It’s not something they are used to talking about, and want to keep very private. There are many clients who then realize how complicated it can be and they say they didn’t realize what went into it. They don’t know how difficult it is for the survivors to cope with things.
For our client, he didn’t want to leave anything open for interpretation and plans to conduct a family meeting once every few years and will eventually probably incorporate grandchildren into the discussion. His children had a pretty good idea of what his total investments portfolio is, but he had never broken it all down for them. This is something we laid out for them. While the total number wasn’t a surprise, the breakdown allowed them to see what is held in North America, held internationally, why we have it there, and what the return is in each segment.
The client’s children appreciated the opportunity to actually be able to listen to my his plans for himself and to speak with us, the person who will be executing on those plans. The appreciated the ability to talk about his final wishes and for him to know we will be able to follow through with them.
More Canadians need to start engaging family members in their estate and succession wealth-transfer conversation. We recommend the following steps to help ensure a smooth transition and prevent family conflicts.
Introduce your family to your financial advisor: Set up a meeting with your children and your financial advisor – even if your adult children have their own advisor, it will be beneficial for them to have made the connection.
Make decisions in a low-stress environment: Hold a family meeting when you are healthy and not under pressure to make decisions quickly.
Explain your objectives: Share the reasons for the decisions you are making, your objectives and how they align with your values.
Create an estate directory: This directory will detail essential items such as bank accounts, investments, insurance policies, wills and power of attorney and how to access them when needed.
Include your executors: Introduce your executor to your financial adviser. Inform and educate your executor on your intent and wishes, where to find the will and if they need to contact any third parties.
Educate your heirs: Educate and prepare your heirs to take over and manage your wealth.
Family meetings seem to be a natural augmentation to Financial Life Planning process. The last thing is to leave your family and beneficiaries unprepared and unaware of your final requests and plans. Family meetings are a growing element of proper Financial Life Planning. Family meetings are in line with Keeping Life Current.
