Legacy: The Gift You Give To Those You Love

What gift do you want to give your children? 

Whether it is planning for and funding their education, or passing on assets to them in your estate, do you know what you want that gift to look like? How do you want them to feel about it?

No one sits down in our offices and says “I want to leave my kids a legal mess. I want the family to break down. I want to make sure the siblings all hate each other.” But sometimes, this happens, driven by uncertainty and a sense that the distribution of those gifts was unfair. 

The real challenge when planning your estate or gifts to your family is arranging that gift within the context of your family’s situation, which is often forgotten about when wrestling with the technicalities of estate planning.

Fair or Equal?

One of the difficulties in deciding how to gift assets to your children is deciding how to treat them: equally or fairly? Sometimes, equal is not fair. 

The simplest option that people often default to is to divide assets equally. For example, if you have two children, each gets half of the assets – a straight-line division. 

But that may not be the fair option.

What if one of those children has a different set of circumstances that requires more financial or non-financial support? 

What if one of those children has special needs? Are you spending more time and resources to make sure they are supported? Or, knowing that one child has required more of your time, resources and energy, are you trying to redress the balance?

What if you have a Registered Education Savings Plan (RESP) for the children as a family plan – meaning it’s a pool of money for more than one child – but only enough saved to send one child to school for a full four-year program? Do you split the plan equally between each child when the first one reaches school age? Does the first child get all of the funding? What if you hold some assets back for the second child and they never go to school? Who makes up the shortfall? 

What if you own a farm, but only one of your children is actively farming? Do those actively working the farm get all of the farm assets, including the land? Do the non-farming children get some of the land with a lease-back opportunity for the faming child? How do you account for the difference in value of the income off the land vs. the sale price of the land?

It becomes apparent very quickly that equal division of assets is not always fair, and it can be incredibly difficult to navigate these situations. There is no easy solution – it depends on your family dynamic and what is perceived as unfair, and that perceived unfairness is what creates problems within the family. 

Preserving The Family

The real challenge when doing legacy planning is often not the actual strategies or documents – it’s making the decision about who gets what, and communicating that in a way that will not create issues among family members.

This is complicated by the fact that what your heart would like to give your kids might be different than the logical reality of making it happen. 

And if you and your significant other are planning together, you might have very different views about what should happen. Sometimes, when a couple sits in my office and we start to talk about this topic, we discover contentious points that they have never addressed just because they are contentious.

Beyond the discomfort of these conversations and making the decisions, you may also wish to take into consideration how your children may perceive the gift that you plan to give. 

Making A Plan

When a client meets with me and our team to discuss their legacy plan, we start every plan with an open discussion. None of the conversation is about money – it’s about the gift, the goals, and what a couple or person wants their children to be left with.

Remember, the actual plan – the strategy and documents – are just tools to support those goals. A financial and legal professional can help you put those together. However, when we have that total wealth conversation, we find that our role tends to become one of a coach. We can ask questions to help guide the discussion and offer an objective opinion. Then, once you have decided on those goals, we can help create the strategy to actually give the gift. 

If you are doing some legacy planning for the gifts you would like to leave your family, you may want to consider these steps: 

1. Sit down and discuss your gifting goals. What is fair? Will your family understand?

2. Write down those goals. 

3. Working backwards from those goals with a legal and financial professional, build a strategy to achieve them, and the documents to support that strategy. 

4. Discuss the plan with your family. Explain your reasoning to avoid surprises, unclear messages, and potential fights.

Sometimes, the best gift you can leave your family is an easy, peaceful transition. Consider making sure that you have been as clear as possible in your wishes to make it smoother for them!

CIBC Wood Gundy is a division of CIBC World Markets Inc., a subsidiary of CIBC and a Member of the Canadian Investor Protection Fund and Investment Industry Regulatory Organization of Canada. Clients are advised to seek advice regarding their particular circumstances from their personal tax and legal advisors. If you are currently a CIBC Wood Gundy client, please contact your Investment Advisor.