Leaving a legacy

March 30, 2010

By Bruce Ball and Dona Eull-Schultz

As the baby-boom generation prepares to retire, the potential transfer of assets to subsequent generations is unparalleled.

While wealth transfer amounts could approach $1 trillion in Canada alone, succession planning  is often overlooked.

Individual who has accumulated wealth should address two questions:

  1. Have I a succession plan for my wealth?
  2. What sort of legacy do I want to leave to future generations?

It is important to draw a distinction between basic estate planning and legacy planning.

The goals of estate planning are specific:

  • Maximize and preserve the value of your assets;
  • Minimize and defer tax and other costs that will arise on your death;
  • Allow for an orderly transition of assets to your beneficiaries; and
  • Providing for your dependants.

Legacy planning takes estate planning one step further by dealing with issues such as:

  • Educating the next generation on issues surrounding wealth management;
  • Improving communications within your family, ensuring that you share your intentions, hopes and concerns;
  • Establishing family values; and
  •  Establishing philanthropic goals.

Before you develop a plan, you’ll need to gather some information and give thought to a number of key questions.

The goal is to reach some conclusions on important issues and draw a clear picture of your financial and non-financial goals, including:page3image37384

  • What am I most proud of accomplishing over the course of my life?
  • What are the top three impressions I want my family and or my community to associate with me?
  • Is my family prepared to assume full responsibility for the business and financial matters currently under my management?
  • Does my family know all of my key trusted advisors?
  • Which family members will share in my estate?
  • Where a vacation property is owned, will it be kept in the family or sold?
  • Do I have philanthropic interests?

The second part of the process is to take this information and develop a plan to meet your goals. As the plan is developed, key components may include:

  • A will, which is reviewed and updated regularly;
  • Setting a process for open communication;
  • Outlining how your wealth will be divided and why;
  • Assessing whether your family is capable of managing your financial affairs;
  • Reviewing your tax issues and considering any tax planning alternatives;
  • Addressing your insurance and retirement needs;
  • Determining the use of a retained vacation property; and
  • If you have philanthropic interests, setting a plan to identify the charities you want to benefit.

While the experience may seem overwhelming, remember that planning for your legacy is a process and these issues are best dealt with over time with the help of your investment and tax advisors.

Bruce Ball is a National Tax Partner at BDO Canada Ltd. and Dona Eull-Schultz is Chief Operating Officer and Portfolio Manager at Leon Frazer & Associates. This article was originally published as a BDO client communication. BDO has 95 offices across Canada, with 1,600 professionals and more than 300 partners.