A massive financial shift is set to take place in the coming years as baby boomers pass their assets down to the millennial and gen Z cohorts. But many parents aren't preparing their adult children to handle that wealth.
CPA Canada says it's expected to be the largest generational transfer of wealth in 好色tv history, with younger 好色tvs expected to receive a combined $1 trillion in the next few years alone.
But talking about money is still taboo for many families, said Thuy Lam, a certified financial planner with Objective Financial Partners, a fee-only firm in Toronto.
鈥淭he reality is a majority of parents do not sit down with their kids. Not even a third of parents will sit down with their kids,鈥 Lam said.
Even after being in the finance industry for more than 20 years, she said she's still shocked when a family has had an open discussion with their kids because it's so rare. Having this discussion is always something she encourages, though.
The unfortunate irony of this silence is a major fear among parents is that their children lack financial literacy 鈥 they worry their kids don鈥檛 know how to manage money, Lam said. But it鈥檚 hard to learn a forbidden topic, especially if parents have specific wishes for their wealth. Lack of communication, Lam noted, can create family chaos around inheritances.
There鈥檚 extra sensitivity about inheritance because it involves death, said Tracey McLennan, director of the client consultation group for Edward Jones Canada.
鈥淲e don鈥檛 like to talk about mortality either,鈥 she pointed out. 鈥淪o now we鈥檙e pairing up money and mortality."
However, parents are talking to their advisers. And it turns out they have a lot to say.
The top concern for this asset-rich generation is the financial literacy of their children, Lam said. The second biggest concern is their children鈥檚 spouses.
鈥淎lthough the marriage amongst their kids and spouses are currently going well, you know, that鈥檚 sometimes a concern,鈥 Lam said. 鈥淭hey want to be able to protect any inheritances from potential breakdown.鈥
McLennan sees that too.
鈥溾榃e love our daughters- and sons-in-law, but what if the relationship doesn鈥檛 last?鈥欌 she said parents often ask.
鈥淚 think that we also hear parents are concerned that they don鈥檛 want to give the wealth too early, or in a way that will affect their children鈥檚 life or relationships.鈥
The older generation has worked hard for their money, and worked hard to save it, McLennan said. Her clientele tells her they鈥檙e concerned about their legacy being wasted 鈥 they want the inheritance to have meaning.
鈥淭hey want to make sure that they are going to impact the next generation in an important way, and it not be wasted,鈥 McLennan said. 鈥淥r if there鈥檚 enough funds, that it鈥檚 actually available for even more than one generation.鈥
Sometimes parents鈥 vision for the wealth can be very specific, she adds: paying for the grandchildren's education or used as extra money for vacations their kids couldn't otherwise afford.
They might also want security for heirs that are self-employed or work for the family business, or perhaps have a disability or addiction.
Adult children can sometimes get the conversation started if their parents have not. Sometimes Lam finds herself coaching the younger generation on how to open a dialogue: start by asking about the executor role.
鈥淚t鈥檚 in the positioning, right?鈥 Lam said. 鈥淎nd it鈥檚 very genuine, because the estate plan has not only to do with the distribution of the assets, but also the executor role. Who鈥檚 going to take on certain roles of settling the estate?鈥
It might be a year between a parent鈥檚 death and the settlement date, she adds. 鈥淚magine trying to learn that role and learn how to manage a big amount of money within a year鈥檚 time 鈥 that鈥檚 not a very long timeframe.鈥
As a conversation starter, McLennan recommends offering assistance for what may be a stressful time for parents. Working with advisers, she adds, can help bridge the gap between family members by adding a mediator.
鈥淓verything from making sure that we share instructions about documents, wills, powers of attorney to making sure that they understand what their parents鈥 wishes are.鈥
Adult children can start their own financial education by reading news, listening to reputable podcasts, and seeking expert advice, Lam said. Long before an estate lands in their lap, they can gain confidence about investing, debt management, and financial health overall.
This confidence, Lam said, can help with some of the anxiety heirs experience when suddenly managing large amounts of money.
McLennan agrees 鈥 adult children recognize the responsibility of the gift they鈥檝e been given, which may impact the rest of the family, a business and a community.
鈥淭here鈥檚 a bit of fear, you know: 鈥榃hat if I make the wrong decision? What if I invest and markets go down?鈥欌 McLennan said.
鈥淚 think there鈥檚 a great deal of worry, sometimes, about that role to steward. Most kids want to fulfil their parents' wishes. And they want to make sure they do it well.鈥
This report by 好色tvwas first published Feb. 6, 2024.
