It has been roughly 68 years since the end of World War II. What this means is that the baby boomer generation, those born in the population explosion in the years following the war, are now in their 60s and are beginning to retire. Many boomers are evaluating and considering their plans for retirement and for their estates. As nearly three out of 10 Canadians are baby boomers, we can expect to see a tremendous intergenerational transfer of wealth over the coming decades. Good estate planning is a must for baby boomers to ensure that this transfer takes place efficiently and avoids as much friction and litigation as possible.
One of the keys to a good estate plan is to make sure that it is current and responsive to major changes in circumstances. Boomers should revisit their estate plans every five years or so for a "checkup" to ensure that they are up to date. Major life events should also cue baby boomers to refresh their estate plans. These include things like a marriage or divorce, changes in the nature of their assets, the birth of a child or grandchild, or the death of a beneficiary.
The tragedy of giving gifts under a will is that the donor does not live to see his or her beneficiaries enjoy them. Under the right circumstances, it may be advisable for boomers to make gifts or donations during their lifetimes. There may be tax consequences to gifts between living persons (also called "inter vivos gifts"), and there are risks associated with giving away more than one can afford. Baby boomers should seek appropriate advice when considering this kind of gift. Inter vivos gifts may be a good way for boomers to support their families or their favourite charitable causes.
Gifts of this sort can be given outright, or can be managed through a trust. Creating a trust allows some control in how the assets are managed. Charitable trusts may be a useful tool to give to a good cause, and to keep on giving beyond the death of the donor.
Most Canadians have some expectation that they will inherit property from the generation that came before them. It is important that boomers address these expectations. Unrealistic expectations from children and other beneficiaries can lead to litigation and heartache down the road. Good communication is the key to managing expectations and discussing these issues with family can bring their expectations in line with reality. It can also avoid disappointments or missed planning opportunities for would-be beneficiaries. Involving advisors can yield creative solutions to any problems that may arise and keeping the family in the loop can prevent unforeseen difficulties.
As health awareness and technology continue to advance, more and more boomers are shouldering the dual responsibility of ensuring that both their children and their parents are cared for and looked after. Many do not consider these needs when planning for their retirement or for their estates. Although governments have responded to these needs in many ways, more and more boomers are finding themselves in a so-called "sandwich generation." Baby boomers should accommodate both the next generation and the generation before them when planning.
As the baby boomers enter retirement, these intergenerational issues will become more prevalent. Through careful planning and communication, many potential problems can be controlled or avoided.
*Ian Hull and Suzana Popovic-Montag are partners at Hull & Hull LLP, an innovative law firm that practices exclusively in estate, trust and capacity litigation. To watch more Hull & Hull TV episodes, please visit our Hull & Hull TV page.
