July 18, 2023

How to make your money last for generations

By Marie-Claude Marsolais

Careful tax and estate planning can ensure your legacy lasts for generations.  

For many people, saving money comes down to these two options:

  • Having just enough money to fund their retirement.
  • Leaving a little something to their grown kids.

What if your situation is different? A growing number of wealthy people want their money to last for more than one generation.

Some people have a prosperous business. They’d like their grandchildren to run the company one day. Others have amassed enough wealth that they can help future generations no matter what life brings.

“Over the last two decades, an amazing number of people who have come from modest backgrounds have built up businesses. Some of them are worth millions of dollars,” says Ron Walsh. He’s a partner with Walsh King, a chartered professional accountant firm in Vancouver.

“Those successful entrepreneurs are now setting up legacies for their children – and beyond.”

People who want their money to last for generations need to plan carefully.

It’s important that their assets keep growing and are protected from:

 Here are some strategies to ensure your money will last for generations. 

Want to create a long term financial plan for your assets?

A Sun Life advisor can help you make it happen.

Set goals

Outlining your investment goals is key. Your plans should be based on the returns you require and the risks you are prepared to accept.

Do you want the money to last for several generations? You’ll need to invest it differently than you would when transferring your wealth to your immediate children.

Create a framework

One way you can make your money last is by putting assets into a trust. The trustee can then direct how the money is invested, according to your wishes. This can help safeguard the money from heirs who might make investing mistakes.

You can set up a trust to pass money or assets to your descendants. Trust assets are protected from creditors or divorce. Assets in trust that are not created as part of a will can also bypass probate.

You can also establish careful parameters around payouts.

For instance:

  • Beneficiaries may get different sums at different ages.
  • They may be required to complete university or reach other milestones.

You don’t want those large sums causing more harm than good, do you? Ask an experienced lawyer to draft the trust. They can make sure that any requirements in it can be enforced.

Consider segregated fund products

Many benefactors with a moderate-sized nest egg find that segregated fund products can also offer the security they want.

Segregated fund contracts are sold by insurance companies. They resemble mutual funds in that they offer market-based investments. But they come with added guarantees. They provide a guaranteed amount to your beneficiary (or the contract holder) at maturity.

As well, because these are insurance contracts, they offer potential creditor protection. That’s an advantage you don’t have with typical non-registered investment products.

Segregated fund contracts also offer estate planning benefits. If you name a beneficiary, the fund “death benefit” will be paid directly to that beneficiary. Similar to life insurance, the money will not pass through your estate.  Therefore, it will not be subject to probate.

This means that:

  • The settlement stays private;
  • The wealth transfer process is quick;
  • There are no additional legal and accounting fees.

Invest widely

In terms of where and how to invest, Walsh suggests opting for variety.

“The more diverse the asset mix, the better,” he says.

People with more capital and longer time horizons have more choices. They can consider more hedge fund strategies or real estate development projects.

“Most investors should put money in stocks or funds that cross all sectors – tech, natural resources and global markets. You’re trying to make sure you catch the things that are doing well. And avoid sectors where you might take a big loss,” Walsh advises.

To build your legacy, consider a more growth-oriented investing approach. For instance, opt for emerging markets or smaller companies that are poised to grow.

Income-producing investments such as bonds are effective for retirement savings, but may have limited value for building a legacy.

Keep fine-tuning the structure of the estate and the asset mix. And be sure to talk to your heirs about money. That includes how to share and protect it.

This article is meant to provide general information only. Sun Life Assurance Company of Canada does not provide legal, accounting, taxation, or other professional advice. Please seek advice from a qualified professional, including a thorough examination of your specific legal, accounting and tax situation.

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