The Pros and Cons of Fast-Tracking Inheritance
The decision to transfer wealth within a family before death is complicated by the inherently emotional nature of family dynamics. This issue was considered in a recent article in the Financial Post.
The article noted that a survey done by the Royal Bank of Canada found that 61% of Boomers planned to pass on money during their lifetime.
David Foot, author of Boom, Bust and Echo, is quoted: “Basically inheritances tend to go to one generation, they seldom skip a generation. But for the twenty somethings today if the inheritances skip a generation it will be their grandparents giving them money,” says Mr. Foot, noting the phenomenon is already taking root. “The people with a lot of the wealth are 75 plus or even 65 plus, ahead of the Baby Boomers.”
Commentators note that family wealth can be enhanced by early gifting. One example is where parents assist children in accelerating the payment of their mortgage thereby enhancing family wealth by the reduction of non-deductible debt. Another benefit of inter vivos gifts is the simple fact that the reduction in the size of an estate reduces the tax implications of deemed disposition of assets.
On the downside, parents may fear gifting money to a child and then losing the cash because the money is invested in a matrimonial home that may become the subject of family law proceedings.
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