The critical role a surviving spouse plays in managing and maintaining family wealth for future generations is the subject of a new report by RBC Wealth Management.
An estimated $1 trillion, or more, is positioned to change hands in Canada over the coming years as baby boomers age and assets begin to transfer to younger generations. The country’s high-net-worth population alone held close to $900 billion in investable assets in 2013, according to RBC Wealth Management, and with improving economic conditions that figure is likely to grow.
This impending transfer of wealth is putting the onus on baby boomers to ensure that their estate plans are crystal clear about how a lifetime of hard-earned assets are to be managed upon their passing.
“No one likes to think about death, let alone build an actual plan around that fateful day,” says Tony Maiorino, vice president and head, wealth management services at RBC Wealth Management. “But one of the most important financial decisions you can make during your lifetime is to take the time to develop a well-thought-out estate plan to ensure assets are seamlessly transferred according to your wishes.”
“We find that when we talk to couples about estate planning, most of them naturally focus on their kids,” Maiorino says. “Children are an important part of the decision-making process, no doubt, but a comprehensive estate plan needs to consider an important step before the kids, and that’s the surviving spouse.”
The RBC report, Until Death Do Us Part … Then Everything Can Change, provides a comprehensive, plain-language look at estate planning essentials for married couples in Canada, including the various ways to leave assets to a spouse, while allowing the estate to seamlessly flow through to the next generation.
“It’s important that your spouse is familiar and comfortable with the tasks they will face,” Maiorino says. “And, just as important, ensure you communicate your plans to your children.”
Maiorino adds that many couples also revert to the common estate planning approach of simply leaving everything to the surviving spouse, without taking other family members into consideration, which isn’t always the best course of action either.
“The suggestion isn’t that the surviving spouse won’t do their best in honouring your legacy,” Maiorino explains. “Rather, the surviving spouse may simply not be experienced enough in managing finances, they may become ill, they may develop solvency or creditor issues, or they may re-marry, while other family members might contest the estate in court believing they were entitled to certain assets.”
Maiorino says clients today are looking for an increased level of support around how to achieve their life goals, including how and where they will retire, how will they manage their business, how they can ensure their children are taken care of, having the right amount of insurance, and how they can contribute to philanthropic causes.
“Having these discussions during your lifetime may help alleviate any misunderstanding and problems that arise in settling your estate,” says Maiorino.
“Most importantly, it will provide peace of mind that your goals and objectives will be met.”