Inheriting money in Canada: Fantasy meets reality

You may rue the day: According to research from Investors Group, an estimated $1 trillion dollar transfer of wealth forecast to occur in the next 20 years may result in fallen expectations for some.

Yet more than half of Canadians are expecting an inheritance (53 per cent) and, of those who believe they know the size, 57 per cent expect the value will be over $100,000. Are they delusional to think so? No, but assuming and knowing can be the defining difference between fantasy and reality.

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"Quite a few people had indicated they had spoken to their parents and 30 per cent of them said the discussion was easy and only 3 per cent said they found it difficult," remarks Christine Van Cauwenberghe, director, Tax and Estate Planning at Investors Group in Winnipeg. "We hear a lot of people saying they don't want to talk to their parents about it but obviously there are a number of people that have.

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"When we talk to people about their estate plans, we don't suggest they talk specifics. We're suggesting more of a high-level discussion. Generally speaking, once people broach the topic they usually find it's not that difficult."

While nearly half of Canadians who have already received an inheritance prefer not to disclose the size (47 per cent), those who indicated the amount received an average of $57,000. One in five (18 per cent) who have already inherited say they received $100,000 or more while one quarter (26 per cent) received less than $5,000.

More tellingly, nearly half (45 per cent) of Canadians aged 60 or older are concerned they are going to need their savings to fund their retirement and won't have money left to give to their survivors. Only one quarter (25 per cent) is willing to make personal sacrifices to ensure an inheritance for their family.

But these strategies and their implications need to be considered by both recipients and benefactors. The issues range from retirement planning and saving to tax planning and insurance planning.

"As people live longer and have higher expectations for their retirement, younger generations may have to adjust their own expectations about the anticipated transfer of wealth," she advises. "People are also living larger in retirement. Living longer means you'll spend more on healthcare costs, living larger means you might spend more on buying that dream house even in retirement."

There's a third factor to bear in mind: The evolution of the makeup of the Canadian family.

"There's lots of people over the course of their lifetimes that are widowed or separated or divorced," she adds. "By the time they pass on, they've got a second or possibly third spouse or kids from various relationships and that estate will be carved up more ways."

While the majority of Canadians (53 per cent) think they will receive an inheritance, expectations decline with age: 80 per cent of Gen Y (Canadians aged 18-29 years) expect an inheritance but only 62 per cent of Gen X (Canadians aged 30-44 years) and less than half (48 per cent) of the boomer generation (Canadians aged 45-64 years) assume they'll be getting an inheritance.

"A good, large portion of people do expect to receive something from their parents of varying sizes," Van Cauwenberghe continues. "What the poll shows with younger Canadians though maybe a bit of a naïveté. They don't understand how much it costs to live through retirement and I think older Canadians have a greater appreciation for that."

Also noteworthy for common law couples: Don't assume you automatically have a right to inherit part or all of your partner's estate.

"In a good number of provinces in Canada, common law partners are now acknowledged in the same manner as a spouse but that's only after you've lived together for a specific amount of time, usually two or three years," she adds. "But in half the provinces, they're not acknowledged at all. You could have lived together for 30 years and it doesn't matter.

"If you're in a common law relationship, make sure that's specifically acknowledged. Our most populous province, Ontario, doesn't recognize common law partners at the time of death when there is no will."

And if you suddenly or unexpectedly find yourself pegged as an executor for a family member's estate and you require help, Van Cauwenberghe advises contacting a financial planner, accountant, or ideally, an estates lawyer to help and guide you through the process.