Leaving an Inheritance: An Obligation or Privilege?
According to economists, Baby Boomer inheritances are predicted to be the largest intergenerational transfer of wealth in Canadian history. With an estimated 1 trillion dollars expected to change hands, the question that arises is how will the recipients choose to manage this windfall? Some may choose to preserve this wealth in order to pass on a significant inheritance to their own children. However, many others claim they may prefer to indulge themselves or leave more to charity instead.
One of the reasons more people are choosing to either forego or limit the passing of these inheritances is that Canadians are placing a greater emphasis on each generation earning its own wealth. This generation is also less likely to feel that they have a moral obligation to preserve the value of their estate in order to pass on as much as possible. This may mean more personal indulgences as they age. As this article points out, this is not necessarily about being selfish. More often, it is about instilling certain values. These can include motivating adult children to develop a strong work ethic, emphasizing the importance of leaving a legacy, or ensuring that an inheritance is not expected as some form of a birthright. In other cases, parents feel that their children have already received a large portion of their inheritance through the investment they have made in that child’s education.
Unlike some countries, Canada does not have a system of forced heirship. This means that provided the will is valid and does not violate any public policy provisions, a testator is generally free to give their money to whomever they please. This testamentary freedom provides Canadians with no shortage of choices regarding potential beneficiaries of their estate. As a result, Family Law and Dependent’s Relief legislation is sometimes required to step in to ensure that obligations have been met. However, with disappointed beneficiaries being a regular occurrence, distinguishing between obligations and entitlement is not always as clear as we would like.
The source of this dissatisfaction often begins with unrealistic expectations. In many cases, parents have not conveyed their estate plans to their children. When the parent passes and the children discover that the estate has not been divided as they had anticipated or it is significantly less than what was expected, they are often shocked and dismayed. Unfortunately, this disappointment all too often leads to litigation, the result of which is typically that the estate is even further depleted. This is why it is important to inform loved ones of your intentions and the motivations behind them as early on as possible. An open and transparent discussion regarding your estate plan can often assist in managing expectations and avoiding costly litigation down the road.
Thank you for reading.