Anthony Layton MBA, CIM

Chairman & CEO, Portfolio Manager

Peter Guay MBA, CFA

Portfolio Manager
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Transferring wealth: Why you need to prepare the next generation

January 15, 2018 - 0 comments

In the coming years, an estimated $400 billion will transfer from one generation of Canadians to the next. Unfortunately, research indicates many of these transfers will not go smoothly. Too often, there will be family disputes, poor financial decisions and squandered wealth.

That’s why it’s so important to plan the transfer of wealth by preparing the next generation to manage it.

Money is a difficult subject to talk about in a family. So, you won’t be surprised to hear that many put off the discussion. In some cases, the younger generation is surprised when they learn the magnitude of the wealth they will be inheriting, and unprepared for the duties and responsibilities that go with it.

That’s not a healthy situation. As hard as it may be, it’s absolutely essential to lay the groundwork for a smooth and harmonious transfer and to begin as early as possible.

Teach children about handling money

You can start when the next generation are still children. Kids can be taught the importance of hard work, saving and sharing with others.

As they reach adulthood, you can begin teaching them about handling your family’s wealth responsibly. This should involve both financial education and a transfer of knowledge within the family. 

For the younger generation, there are many things to learn. They will need to understand:

  • how to manage their personal finances through prudent spending, saving and budgeting;
  • the principles of intelligent investing; and
  • how to manage and protect wealth through such things as tax strategies, insurance and wills.

They will also need a clear picture of your family’s financial landscape. Where is the family’s wealth and how is it administered? This will lead them into such areas as business management, tax and estate planning, and charitable giving.

Many areas to learn about 

Again, there are many areas to be potentially explored. For example, are there one or more operating companies? Are there holding companies? How about trusts or a charitable foundation? How does each function? 

While not all your children will have the same level of interest, going through the learning process should make them feel more involved and confident about their role as future stewards of your family’s legacy.

Identifying who in the younger generation will play a leading role in managing the family’s affairs can be a particularly sensitive issue. There are many potential conflicts that must be worked through. These include:

  • competition among the heirs;
  • questions arising from divorce and blended families; and
  • what to do about children who are unfit for one reason or another to manage an inheritance.

Start with a family meeting

So, where to start? A family meeting is usually the best place. Getting family members together for an open discussion is an opportunity for everyone to explore the various issues and come up with an action plan for the future.

The meeting doesn’t have to be too formal, but it’s a good idea to have some structure to facilitate focused and constructive discussion. This means an agenda and a chairperson.

It’s important for each person to come as prepared as possible. What vision and values should guide the family in the future? What issues do you see and how do you propose to deal with them? 

Here, a trusted advisor can be invaluable in bringing the family together and acting as a guide, resource and referee, as necessary.

Tough but necessary conversations

There’s no doubt these can be tough conversations. But delaying them, won’t make them go away, and will likely make them worse. Open communication is essential and should be an ongoing process over the course of years.

The good news is that working through issues and preparing the next generation will give your family the best chance of flourishing for years and decades to come.


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