Transferring generational wealth can be challenging – both in preparing to give and in receiving. The reality is that approximately only 30 percent of wealth transfers are successful (success meaning the family keeps control of assets and family harmony is intact).1 A significant part of transferring generational wealth successfully is being proactive and seeking the right advice.
What is generational wealth?
Generational wealth is an accumulation of wealth passed from one generation to the next during one’s lifetime or at one’s passing.1 Generational wealth has many forms that may include stocks, bonds, real estate and even a family business. The successful transfer of wealth from one generation to the next entails many considerations.
Why is planning overlooked?
Many people overlook how this wealth will pass on to their family’s next generation. There can be several reasons as to why this is not addressed.
The importance of family dialogue
Having family dialogue is a key element to the transfer of wealth and works towards maintaining family harmony. A lack of communication in this area can create a lot of uncertainty and even resentment amongst family members – especially if there is certain expectation from recipients and a different plan instructed by the transferee. By opening the conversation, the current generation can communicate their wishes and help facilitate and educate the next generation on decisions and plans, minimizing scrutiny and objections. Family meetings are a positive way to deliver the information, while expressing views, intentions, and family values.
Finding the best strategy
It is important to understand the process of settling your estate to so that a proper strategy can be created to achieve family goals. Sourcing the help of a professional advisor helps to ensure that your goals are achieved seamlessly and efficiently, taking into consideration taxes, timing, and specific family considerations. Developing and utilizing estate strategies will help maximize the value of the estate being transferred and may reduce uncertainty and stress for your loved ones. Some strategies are as simple as utilizing roll over provisions for named beneficiaries and wills. Other estates may require more in-depth planning and solutions such as trusts, life insurance, tax strategies, charitable donations, and/or other estate planning tools.
Implementing a plan and process for your generational wealth that aligns with your family goals, promotes family harmony through communication, and includes the best strategies will create stability for your family through the transfer of wealth. Connect Wealth is experienced and available to provide sound financial strategies that take into consideration your unique family goals and personal estate planning. Having the right advice and plan in place will help preserve the wealth you have worked to build for your family and ensure it is successfully received.
1 https://www.rbcwealthmanagement.com/en-ca/insights/wealth-transfer-and-the-next-generation
Connect Wealth is an independent financial planning firm that offers holistic advice to clients based on their current goals and future aspirations. We use well-established workflows and cutting edge technology to maximize planning efficiencies while simplifying the process for clients. Learn how you can maximize your financial opportunities at www.connectwealth.ca
De-Bunking Your Budgeting Barriers. If you don’t have a million dollars in your account right now, it is likely that you hate budgeting. It’s even more likely that you’re annoyed, even enraged, the moment the topic arises. It’s an interesting phenomenon, we all want to be financially successful, yet this first step is often the […]
The income sprinkling rules outlined in July 2017 held strong and the rules pertaining to passive investment income weren’t as harsh as predicted. Specifically, Budget 2018 has implemented two simple measures as it pertains to passive investment income:
Budget 2018 proposed to provide for an alternative reduction to the small business tax rate where a Canadian Controlled Private Corporation (CCPC) and its associated corporations have investment income in the year exceeding $50,000. The amount of the reduction is $5 for every $1 of investment income exceeding $50,000. In effect, the small business tax rate reduction disappears if passive income in a related business exceeds $150,000 in a fiscal year.
Currently, private corporations are entitled to claim a tax refund equal to $38.33 for every $100 of taxable dividend Where the corporation has a combination of regular business income (taxed at the regular business rate which does not include a refundable tax element) and investment income (taxed at the corporate investment rate which includes a refundable tax component), planning was commonly implemented to have the business income distributed by way of eligible dividend (taxed at a lower rate) while still being able to claim the tax refund.Budget 2018 proposes to modify the refundable tax regime to eliminate this planning and ensure that, in general, the private corporation is entitled to a dividend refund only when non-eligible dividends are paid.
There are ways to reduce the impact the business tax changes outlined within Budget 2018 through other financial strategies. These strategies may include Individual Pension Plans, Cash Value Insurance, as well as the strategic use of prescribed loans. We highly recommend contacting your financial advisor to determine which of these strategies will best suit your financial situation.
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If you have any questions on this taxes, or the different kind of impact it could have on you, please, do not hesitate to contact us!
Connect Wealth is an independent financial planning firm that offers holistic advice to clients based on their current goals and future aspirations. We use well-established workflows and cutting edge technology to maximize financial efficiencies while simplifying the process for clients. Learn how you can maximize your financial opportunities at connectwealthp.wpengine.com
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