Key Inheritance Questions

What are the key questions that people should ask themselves about inheritance planning to avoid future family feuding? The Wall Street Journal canvassed advisors, lawyers, and therapists, and came up with a list that included the following question - and possible answers (albeit this came from a US study, the issues are the same in Canada):

"Should I talk to my children about their inheritance?"Some parents have legitimate worries that if their children learn what they're going to inherit too early, they will get lazy or gripe about how things are "carved up". But discussing plans in advance offers the big benefit of allowing parents to assess their childrens' reactions. Parents should tell each child separately that they are trying to decide what to do, thereby offering an opportunity to learn what their children expect and want.

"Should each child get an equal piece of the pie?" Not necessarily, since the parents probably have helped them financially in different ways over the years. "The parents aren't keeping a scorecard, but the children are," says Jeffrey Condon, a lawyer and co-author of a book on inheritance planning. He says they'll recall earlier gifts and expect a rough equalization overall.

"What if I have a blended family?" The Wall Street Journal warns that the worst solution is also the most common - leaving everything to the second spouse for use in his or her lifetime, with the assets passing to the children. Sorting through the other possibilities, - how much each child and the spouse should get, and how to affect the transfer through trusts or other mechanisms - is a process that should be considered in this situation.

"Should I include my grandchildren in my inheritance plan?" People considering this should be warned to talk it over with their children, who may see it as usurping their authority if the children are of college age or younger.

"Who's going to manage all this when I am gone?" An advisor can offer counsel on arranging for an executor and any trustees that may be required.

THE BOTTOM LINE: Inheritance is a crucial issue for families. Open communication is the only way to ensure what expectations there may be and what they should be.

Carol Tichelman is with Partners in Planning Financial Services in Chilliwack, BC, and can be reached at 604 792 8111.