- Sense of Entitlement: Parents and children may have very different opinions on whether their children should be entitled to their wealth. Although most families recognize the importance of legacy, some demand that their children adopt their values and that inheritances be earned by establishing strategic trusts that reward children for achieving certain milestones.
- Lump Sum Distributions or Extended Distributions: Many people are uncomfortable with the idea of leaving their children with a lump sum payment upon their death. Again, transferring assets to a trust that distributes money in increments can encourage adult children to develop independent means.
- By the Roots or By the Head: Figuring out how to divide the estate among descendants can cause tension. By way of example, if child #1 has three children and child #2 has one child, how should you distribute your wealth? By two equal pots or by four equal pots to your grandchildren? Again, parents should discuss the pros and cons of these distributions with their estate lawyer.
- Differing Needs: Often, parents believe that dividing assets equally is the only way to treat their children fairly. Many times, there are situations that might require parents to treat their children differently. These issues are very hard to resolve but must be thoughtfully discussed with both your advisor and children to ensure everyone understands the reasons behind the disposition for the wealth. Flexibility in the design of your estate plan is also important. Your family’s estate plan needs to be reviewed at least every five years and must be flexible enough to accommodate changing family circumstances.
Consider what portion of your wealth you want to give to charitable causes. Deciding how much to give to descendants versus how much to give to charity requires serious thought and consideration. Charitable giving can be a wonderful tool for promoting your family’s financial values and teaching basic financial skills. Strategic philanthropy is the process of becoming intentional about family giving (money and time) by investing in issues that articulate a family’s passions and are close to your heart. A family foundation or a donor advised fund offers children ongoing involvement in the financial affairs of the family and an understanding of how you can make a difference with your money. With privilege comes responsibility.
Mike Jaczko, BSc. Phm, RPh, CIM®, FEA, a pharmacist by background, is a portfolio manager, partner and member of KJ Harrison Investors, a Toronto-based private investment management firm servicing individuals and families across Canada. For more information on this topic, email [email protected].
Max Beairsto, B.Sc. Pharm., MBA, CVA is a pharmacist and valuation analyst with Enterprise Valuators Corporation (EVCOR), an Edmonton-based business valuation firm that focuses on business valuations and sale advisory of small and mid-sized private companies. You can reach him at [email protected]