Large intergenerational transfer: Don’t rely on your inheritance to plan your retirement

As baby boomers prepare to transfer billions of dollars to their descendants, many young adults are banking on the inheritance they will receive to plan their retirement, a dangerous strategy in the eyes of an expert.

Castles in Spain

“If you want to do your planning, don’t rely on it,” says Dominique Bigras, lawyer and intergenerational transfer strategist at Desjardins, in an interview.

A recent Ipsos survey conducted for Sun Life showed that baby boomers who leave all of their assets to their children hope to pass on to them $940,000 on average.

This amount is enough to make millennials salivate, most of whom are struggling to put money aside due to the increase in the cost of living in recent years.

In this context, more than half of young adults who think they will receive an inheritance (57%) plan to allocate it to their retirement plan, which is equivalent, according to Mme Bigras, building castles in Spain.

“An inheritance is not a guarantee, and it is not a right either, so it is not something that is easy to predict,” she explains.

Photo provided by Desjardins

“The testator can change his will at any time, or he can live to old age and need his assets until the end of his days, so that at the time of death, the sum can be much smaller than this. which was expected,” recalls the lawyer.

“And those who intend to leave a legacy during their lifetime must ensure that they have the means to do so,” she adds. To do this, we must plan until the end of our days, and it is generally suggested to extend the evaluation until 95 years old.

“Afterwards, if there is any surplus, we can consider donating during our lifetime. Well-ordered charity begins at home!”

The price of carelessness

This is without taking into account that more than half of the population does not have a will, which makes it even more risky to rely on an inheritance to plan your retirement.

“The risk is as follows,” continues the lawyer. In the absence of a will and marriage contract, it is the legal devolution provided for in the Civil Code of Quebec which will apply, and not the wishes of the deceased.”

According to the established rules, it is the spouse of the deceased person who receives half of the net value of the family assets, before any distribution. The rest is then shared according to various rules.

Caught in a double vice

All of this leaves the descendants of baby boomers in a difficult position, between the promise of an inheritance that may never arrive and the inability to save due to the rising cost of living.

Remember that only a little more than a quarter of Quebecers (27%) manage to put a few pennies aside each month, according to a survey by H&R Block published a few weeks ago.

Major intergenerational transfer: Notaries are overwhelmed

The great intergenerational transfer gives work to notaries, who see more and more inheritance files landing on their desks.

“Yes, quite frankly, over the last five years, cases of death have increased, so we actually have more files on our desks at the estate level,” underlines notary Francis Langlois, who estimates the increase in volume between “ 20% and 30%.

“What we are seeing more and more, too, is upstream planning, people who wonder how they are going to transfer their assets and do their will planning,” he adds.


Courtesy

However, these operations represent a lot of work for notaries. “It’s very concrete,” observes Mr. Langlois. “Just when there is a death, there are several stages. We have to meet people to research the will, read the will, take inventory, close bank accounts, do taxes, settle debts,” he explains.

For the moment, however, the number of files remains “manageable”, and Quebecers do not have to fear being caught off guard in the event of the death of a loved one.

“Of course there are more complex situations, which cause all kinds of delays. We are able to serve our customers at the moment, but there are busier periods when it takes more time,” says Mr. Langlois.

“But the key is to do it in advance,” he adds, lamenting that more than half of the population does not have a will.

Remember that the largest intergenerational transfer of wealth in the country’s history is upon us, as young Canadians are to receive a total of $1,000 billion in inheritance over the coming years, according to figures from the Chartered Professional Accountants of Canada.

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