Legacy Planning – a Conversation



Cecilia Tsang

Financial Advisor & Associate Portfolio Manager


This article stems from real conversations I have had with some of my valued clients.

“I have been thinking about my legacy. Now that I’ve sold my home, I have been thinking about what to do with the funds. I’ve never had so much money in my hands before. It is all a little bit daunting.”

“Yes, Josephine, it is definitely not a situation that you encounter often! You certainly have a lot to figure out. We will work through all of it together. How are you enjoying your new home? Have you settled in well?”

“I have made some friends here. It’s great that I don’t need to cook or clean. There are many different levels of care, so I will be able to stay here even if I ever need 24-hour care.”

“That’s good to hear, Josephine. I hope you will be very comfortable. With regards to your legacy, have you thought about what is important to you and what you want to do with your money? You may wish to gift some of the money now. We can work together to figure out how much you need to set aside to be comfortable for the rest of your life, and then we should figure out what you want to do with the remaining amount. You already have a joint spousal trust in place, and this will allow almost all of your assets to bypass probate, which is a goal for you.”

“I do want to gift some to my family now. I have five children and 12 grandchildren. I have a couple of grandchildren that I worry may not use the gift wisely. This concerns me, as I want to be fair, but not everyone may be responsible. Is there any way you can help guide these two grandchildren so I don’t have to worry?”

“Absolutely. There are many good solutions for this specific concern. You may be able to make gifts for these two grandchildren directly into investment accounts (even with non-registered money) in their own names (so that the income is taxed in their names) where a responsible irrevocable beneficiary may be named, such as a parent or aunt or uncle. The grandchild with this account is not able to make significant changes or withdrawals without the consent of the irrevocable beneficiary. This allows for the money to be controlled by the irrevocable beneficiary, and your grandchild wouldn’t be able to spend the gift frivolously. Another excellent feature of this type of account is that probate can be completely bypassed, since beneficiaries, both revocable and irrevocable, can be named.”

“Cecilia, that is interesting. I’ve never heard about that before. I will have to consider everything.”

“There are still additional potential solutions to consider for your circumstance, Josephine. Another idea I have is that when you gift each grandchild a lump-sum amount, you may wish to gift some of your grandchildren the same amount (or different amounts … it’s all up to you, Josephine), in the form of an annuity. The annuity can be a fixed-term annuity, or a lifetime annuity that gives a certain amount of income over time, with interest. This gives them ongoing income and you don’t have to worry that they will spend it all at once.”

“Cecilia, that is what was set up for me, years and years ago with our RRSPs, and it worked out so well.”

“Your annuities have certainly benefited you. It was certainly a good choice that you made to convert your RRSP money to monthly ongoing lifetime income.”

“Yes, I am so thankful that we did that so many years ago. Cecilia, in addition to leaving my money to my family, there are some charities that I am particularly fond of.”

“Thank you so much for letting me know. This is something we can definitely explore. Josephine, there are many different ways to donate to charity. It can be done through your will, through an insurance policy, and you can even set up a type of foundation where the interest and growth of the investments are allocated to your favourite charities not just once, but every year in perpetuity. This can definitely be a lasting legacy that you create. You could set up a charitable endowment fund and call it the ‘Smith Family Foundation.’ You can make a donation into it and other people would be able to donate to it as well, while getting tax receipts for the year of donation. Then each year, grants can be recommended to your designated charities and continue indefinitely. This is something we should absolutely explore.”

“My goodness, Cecilia, you’ve given me so many things to think about. How am I to figure all of this out? There are so many options.”

“We will work through everything bit by bit. Right now, as you know, the breakdown of your trust and will are by percentages. You also have TFSAs where you have named beneficiaries; these completely bypass your trust and your will. What I believe would be beneficial to you is to be able to look at the total dollar amounts of the numbers each person would receive, instead of simply working with percentage breakdowns. This is also because some of your investments, such as TFSAs, bypass your trust and your will, and won’t be split by the same percentage. When we go through the exercise of figuring out actual dollar amounts to each person, you will be able to better understand how your wealth would currently be allocated, with true approximate dollar amounts that each person would currently inherit. Then, you can decide if the approximate dollar figures are what you would truly want each person to receive, and we can make changes as needed, such as changing the TFSA or other beneficiary designations and percentage allocations. You then could also make better decisions to figure out whom and how much to gift to now, as well as how much to gift over time.”

“Thank you, Cecilia. This gives me a lot to think about and I didn’t realize there were so many things to consider.”

“Everything is intertwined, Josephine. The named beneficiaries you have will need to be taken into consideration with your trust and your will. What you gift now and over time will change the outcome of what goes through the trust and will. We need to first look at the bigger picture; it cannot be analyzed very well individually. From there, once we know what you wish for your legacy, we will work with all the various tools available to you to implement your wishes. You have many different possibilities and we can work together to figure out what amounts to keep for you to be able to live very comfortably, how much to gift now, how much to gift over time, how to most efficiently donate to charity, and how to manage your trust and your will to ensure that you know how your legacy is going to unfold.” ■

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