Wednesday, 15 February 2012

Is Your Inheritance a Fast-Track to Financial Success?

More than half of Canadians are waiting on a fat inheritance from their parents to help them out financially. And the majority of them expect more than $100,000. How realistic is this?

Not a fortune by any stretch!
According to the latest research from Investors Group, the estimated $1 trillion dollar  transfer of wealth forecast to occur in the next 20 years may result in fallen expectations for some.

Many who have received an inheritance (and are willing to disclose the amount) say the average is $57,000. One in five (18 per cent) who have already inherited said they received $100,000 or more while one quarter (26 per cent) received less than $5,000. 

Who can blame them.
Meanwhile, nearly half of Canadians aged sixty or more are concerned they are going to need their savings to fund their retirement and won’t have money left to give to their survivors. And most don't want to make  personal sacrifices to ensure an inheritance for their family.

“As people live longer and have higher expectations for their retirement, younger generations may have to adjust their own expectations about the anticipated transfer of wealth,” says Christine Van Cauwenberghe, Director, Tax and Estate Planning at Investors Group.

“Knowing the dollars and cents behind your inheritance can have an impact on your financial plans,” says Van Cauwenberghe. “It is smart to know what you can expect so you can plan accordingly and family dialogue is a good place to start.”

Mom and Dad when you're gone....
The poll reveals that many families are not taking the time to discuss or deal with inheritance issues. Four-in-ten Canadians whose parents have a will (39 per cent) say they have not discussed the terms of the will with their parents while sixty-one per cent of Canadians with deceased parents who had a will, admit they never had the talk.

“When it comes to wills in Canada, there’s not enough action and certainly not enough talk,” Christine says.  “Broaching the sensitive topics of wills and estate details with loved ones can be daunting but having “the talk” early on can provide security for planning and make the process easier when the time comes.”

Interestingly, those who have discussed will and estate details with family members indicate it was not a difficult conversation. Three-in-ten (31 per cent) said the discussion was very easy while only three per cent said they found it very difficult. 

Inheritance should be seen as a bonus to your financial portfolio, it's important to plan for your own retirement and keep your own debt in control. Relying on an inheritance can also create what is called "moral hazard," where you are spending money in anticipation that you will get more and be bailed out.  And never forget the tax man takes almost half of your inheritance when it's released to you!


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