After years of working and saving, strategizing and goal-setting, it’s not uncommon to want to ensure you can pass on the money you’ve built up to future generations.
A financial advisor can provide you with professional suggestions customized for your individual needs and aspirations. Some advisors even act as “quarterbacks,” leading a team that includes your lawyer and accountant to ensure your needs are met.
Here are the top 6 ways to help make your money last for generations:
- Keep your beneficiaries in the know. You should ensure your children and/or favoured charity are aware of your desire to leave them a legacy, what kinds of products you are using and how they work, says Cliff Steele, a financial advisor with Sun Life in Cambridge, Ontario. “Your advisor can create a great legacy plan for you. But if your beneficiaries and heirs aren’t on board, it can make things more difficult for them in the future.”
- Be sure you have a financial plan. A financial plan is the most significant method you can use to achieve your short-, medium- and long-term goals and aspirations. A plan can help you make sure you are on the right track and moving in the direction of achieving your goals, says Patrick Fitzgerald, an Ottawa-based Sun Life advisor. Outlining your goals lets you plan well in advance and be certain that you have the proper tools in place to meet these goals.
- Keep your will up to date. If you want to leave a legacy to your children, other relatives and/or charities, it’s imperative to have a current will. It’s a key component for risk management, says Fitzgerald. The terms of a will can change with time, as you accumulate wealth, get married or divorced, or have children or grandchildren. “It’s something to dust off every couple of years and review with your legal partner,” he says.
- Watch out for taxes now… Different kinds of savings accounts, such as RRSPs, TFSAs and non-registered products are taxed differently when you withdraw funds from them. This can be a major influence in the speed at which you use up your wealth, says Steele.
- … and watch out for taxes later. The executor of your estate must file a tax return for your estate for the year of your death. With proper planning, you can often reduce the tax burden on your final return and leave more of your estate intact, says Chris Poole, a Toronto-based Sun Life advisor who handles high-net-worth clients daily. For example, an RRSP can be rolled over to a spouse without triggering a tax bill. But when the second spouse dies, major taxes can become payable. Still, there are ways you can reduce or plan for those costs: Beneficiaries can be established on registered funds (like RRSPs) to bypass probate fees, tax on capital gains can be managed with the proceeds from a life insurance policy and guaranteed cash needs can be looked after through certain kinds of segregated funds. You’ll need professional advice for many of these tactics.
- Be ready for both controllable and uncontrollable events. There are controllable events and activities such as planning for retirement, reducing debt and saving for children’s education. But becoming disabled or critically ill can disrupt your plans and put a major dent in your hopes of ensuring that your money lasts for generations. A number of different risk management options are available, including critical illness insurance, long-term care insurance and personal health insurance, says Poole. Consider these as a health hedge against the financial impact of having your plans unexpectedly derailed.
Expert advice about estate and financial planning can help you not only leave your estate in good shape, but also make the most of your retirement years.