EXPERT ADVICE FINANCIAL
Leaving An Inheritance
Jeff Somers, BA, AIT, CFP, RRC Executive Financial Consultant
Another option is for boomers to hang on to their house until they die or until they have to move into an assisted living facility. The children can then sell the home and take the proceeds as an inheritance. This option can become difficult when the boomer parents have their retirement money tied up in their house — meaning they'll have to sell to access those funds. Whether to spend what they have now or pass some of it down is a decision that should be made through frank discussions between boomer parents and their kids. "Everyone should know what's happening," says Van Cauwenberghe. "Explain your motivations and be sure your true legacy is not just about money, but support for everyone's plans for the future." Your professional advisor can help you make the financial and legacy decisions that are best for you.
Not everyone wants to leave an inheritance.
But several studies over the last few years have shown that some boomers plan to spend what they have instead of passing it on. While Canadian data on this subject is sparse, a recent Australian study* found that one-fifth of baby boomers plan on dipping into their kids' inheritance to take trips. A 2016 U.K. study** found that one-sixth of people between 50 and 70 plan to spend all of their money before they die, while a 2014 report*** indicated that 66 per cent of people between 50 and 65 would rather spend their money than pass it on to their children. Christine Van Cauwenberghe, Vice-President, Tax & Estate Planning at Investors Group says that, in her experience, most boomers still want to pass down something to their children but many will likely end up spending a much larger chunk of their savings in retirement than their parents would have. "When boomers do a financial plan, it might become clear that they'll need the majority of their assets to support themselves, especially as they age and the need for costly medical care escalates. "People may need to use the money they've saved, but still want to leave something to their children. Insurance is one way to do both." If boomers buy life insurance, and if they continue making payments throughout their life, their children will receive the policy benefits upon the parents' death. The parents can then spend more of their money during their lifetime.
Until recently, passing down an inheritance was something to be expected. Parents would save enough money so their kids would receive some sort of windfall that they could then put toward their own retirements.
*https://www.seniors.eom.au/news-insights/seniors- abroad-the-australian-seniors-series
** http://www.dailymail.co.uk/news/article-3818803/ The-baby-boomers-spending-kids-inheritance-One- six-50-70- year-olds-say-plan-use-money-die.html ***Baby boomers spend the inheritance rather than pass it on, Financial Times: https://www.ft.com/content/9b4a7bfe-5933-ll e4- 9546-00144feab7de This column. written and published by Investors Group Financial Services Inc. (in Quebec - a Financial Services Firm), and investors Group Securities inc. (in Quebec, a firm in Financial Planning) presents general information only and is not a solicitation to buy or sell any investments. Contact your own advisor for specific advice about your circumstances. For more information on this topic please contact your Investors Group Consultant.
Jeff Somers & Associates 18 Queen Street, Suite 106 Charlottetown 902.368.1345 www.somersteam.com Investors Group Financial Services Inc.
84 www.pei-living.ca WINTER 2017
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