Posted on April 11th, 2019 by Brad Giroux in Financial Planning & Wealth Management

Inheritance Planning

Inheritance Planning Process

John and Mary have worked hard throughout their lives to build a successful business. Each of their three children have worked in the business in different capacities over the years, but they’ve followed their own interests, which have lead them away from the family business. John’s plan was always to keep the business in the family, passing it on to one of his children when they were ready. Mary, on the other hand, wasn’t as sure about John’s plan, as she had watched her oldest brother take over her father’s business, knowing that he was never really happy about it. Mary wanted her children to follow their own passions, wherever it took them. As a result, John and Mary are contemplating selling their business as they near retirement.  Realizing that it will leave them with a very healthy sum of money, they want to leave each of their children an inheritance – but don’t want to leave themselves short either. They are also fearful of creating trust fund babies, which they’ve heard disaster stories about.

What is the Purpose?

First and foremost John and Mary need to determine what the purpose of the inheritance will be. Is it to:

  • enhance their children’s lifestyle;
  • protect the assets from marital breakdown or litigation;
  • provide education funding for their grandchildren; or,
  • perhaps the intent is to create multi-generational family wealth?

They will have to decide if they want to gift some of the money now or maximize the inheritance to their heirs after their deaths. Whatever they decide, they will need to be clear about exactly what the purpose is to ensure their inheritance plan is properly structured.

Commit to a Plan

Secondly, they need to commit to a plan. Inheritance planning requires very careful strategizing, with specialized knowledge; which is why they need to build a team of professionals to work with to achieve their goals.

  • The Lawyer will draft the documents needed, such as Wills, Trusts, Powers of Attorney, etc.
  • The Accountant will ensure the plan is structured in the most tax-effective manner possible and with in-depth knowledge of their business, will ensure a smooth and effective transition of their business as they convert their lifelong working capital into cash.
  • A Certified Financial Planner will help John and Mary create a comprehensive financial plan to determine how much of the proceeds of the business will be necessary to fund their lifestyle during their retirement and how much can be immediately allocated to the inheritance plan.

Inheritance planning is not so rigid that it’s carved in stone but it can be costly in the future if it’s not structured well in the beginning.

Take a Disciplined Approach

Taking a disciplined approach will help John and Mary avoid the many nightmares that sometimes come with managing family wealth. We’ve all heard the stories of elder abuse as one child exerts undue influence on the parents, convincing them to pay their debts, buy them a car or provide money for a lifestyle they’ve not earned, all at the expense of the parents and other inheritors. Having a disciplined inheritance strategy in place can protect John and Mary’s wealth to ensure that it’s used for the purposes that they initially outlined in a fair and structured manner.

Practice Open and Honest Communication

The most important issue in inheritance planning is having open and honest communication between those who are passing the wealth on and those who are to receive it. In this case, John and Mary should involve their three children in the process so they understand the goals they have for their wealth, what they are committing to and how their wealth will be distributed. This open communication provides a platform for the children to ask questions and better understand their parents’ wishes to ensure that everyone is on the same page or at least knows what to expect. Having an open communication strategy can have a tremendous impact on maintaining family harmony and minimizing discourse between the inheritors.

Once John and Mary have created their inheritance plan and communicated their intentions to their children, they can get on with enjoying their freedom in retirement. They can spend their days enjoying the fruits of their many years of labour.  Instead of worrying if they are spending their children’s inheritance they can rest assured that they have a plan in place to achieve their retirement goals and pass on their wealth in a strategic and meaningful way.


About the Author

Brad GirouxVice President, DJB Wealth Management Inc. | CFP®, CLU, CHS

As Vice President of DJB Wealth Management Inc., Brad is a firm believer in holistic planning, through a seamless integration of accounting, financial planning and investment management. 
More About Brad >