This is what I hear 鈥
鈥淲e鈥檙e worried our parents have not prepared properly for retirement. They won鈥檛 tell us anything about their finances. What if we鈥檙e on the hook to pay for things? We have our own families to care for.鈥
鈥淢y mom wants to give me her cottage. Are there tax consequences?鈥
鈥淎 will? I have no clue if they鈥檝e got one, or if it鈥檚 even valid.鈥
鈥淭hey bought their house 40 years ago for $165,000. It鈥檚 worth $3 million today. I鈥檒l never be able to afford to own. Why aren鈥檛 they sharing their wealth?鈥
鈥淢y Dad has plenty of financial advice. Is he getting any professional advice for himself?鈥
鈥淭hey want to help me. What鈥檚 the best way for them to move money to me?鈥
If you鈥檙e a boomer, it鈥檚 important to read this so you won鈥檛 get upset when your children ask you about your finances. Their intentions are almost always to understand how ready for retirement you are, what your wishes are upon your death, and, nowadays, to see if there’s any flexibility to help them with buying a home or supporting grandchildren with post-secondary costs. They don鈥檛 view the latter as rude, btw; with incomes that are not keeping up with inflation, asking for financial help is commonplace.
Try these ideas to ensure your children have the answers they actually need (this doesn鈥檛 mean you have to share every detail).
Give your kids a heads-up about how prepared you are for retirement
Assume they know nothing. For some adult kids, they鈥檙e OK being in the dark. Others spend sleepless nights worrying they鈥檙e going to be left holding the bag on your eventual long-term-care costs.
At a minimum, give them assurance that you have a plan, and that it鈥檚 been reviewed with your financial planner, adviser or qualified money coach. If you have not hired one of these people to prepare a plan for you, or to review the plan you鈥檝e made for yourself, do so. That way you鈥檙e not in the dark, too.
If your retirement plan shows there isn鈥檛 enough money to support your needs, give your kids a heads-up so that they can potentially make changes to their own financial plans now.聽
It is up to you to decide how much detail you want to share with your family about your retirement numbers. But, as a tip just for you, a solid plan will tell you:
鈥 How much money you can drawdown from your investments until you die (or, until it runs out);
鈥⒙燞ow much pension, OAS and CPP you鈥檒l receive;
鈥⒙燱hen you鈥檒l be ready to retire if you haven鈥檛 done so already;
鈥⒙燞ow much money you鈥檒l need every month in retirement;
鈥⒙營f you鈥檒l have excess funds or not enough.
Host a meeting with your kids about your will
You need a will and if you don鈥檛 have one yet, or if it鈥檚 out of date, get one set up as soon as you鈥檙e done reading this article. You don鈥檛 need to go through a lawyer anymore if your situation is straightforward (meaning you don鈥檛 own a business, you don鈥檛 have kids from a previous marriage, you don鈥檛 own complex investments). These days, you can make a digital will with companies like Willful, LegalWills and Epilogue Wills, and the cost starts around $100.
Here鈥檚 what you鈥檒l want to cover with your kids:
Who鈥檚 involved and how: Share who you鈥檝e chosen as executor(s) of the estate, as your power of attorney(s), and guardians of your children (if you still have minors). Walk them through what you want done with the assets/liabilities in your estate. Explain why you鈥檝e made these decisions.
Where things are located: Your executor(s) need to know where your will is located, where the accounts are located, where your insurance policies are filed, if there are medical action plans for your or any minor children. I advise families to put these details in a shared spreadsheet. If a financial adviser is involved, add their name and contact information.
Deal with problems now: Watch the opening scene from “The Gentleman” and you鈥檒l see just how badly things can go when family members are confused or surprised by your decisions. Your family doesn’t have to like your choices. But by clarifying your wishes, this will help to prevent feuding down the road.
Consider their financial requests carefully
Early inheritance. Buying/selling properties. Business ownership. Gifting cottages. Topping up RESPs. Life insurance policies. Charitable donations.聽
Giving while living can make a massive difference for younger generations. If you have the flexibility to help, explore their request. Before you move any assets or money, run it by your financial planner and accountant. You鈥檒l want to understand the tax implications (lots is changing regarding capital gains taxes). Get clear with your kids about any strings that might be attached, that you can all agree to.
Chances are you can鈥檛 overcommunicate with your kids about your money situation. So touch base as a family every few years to ensure everyone has the information they need, in order to navigate their respective next steps.
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