Minimizing Financial Conflict with Siblings

Minimizing Financial Conflict with Siblings

by Estate PlanningFinancial PlanningInheritance

It’s the sad reality of the world we live in, but conflict surrounding money within families is all too common. There are no set rules or guidelines when it comes to siblings and money. We have listed three typical situations that you may find yourself in that involve your family and money, and some strategies to help get through them while keeping everyone happy.

Inheritance

It is common practice for a parent to name one of their children as executor or estate trustee of a will. Unfortunately, this may cause some discord between siblings. A sibling that is not the executor may feel that key decisions should be made together, which could cause some conflict. The money involved in inheritance can also be a point of contention. One sibling might feel like the assets are being split up unevenly. These matters aren’t usually resolved overnight and can lead to delays and family conflicts lasting years. The best way to prevent this problem is by making your will as fair as possible. You should consider naming someone other than one of your children as executor as well. Speak with your financial advisor at The Beacon Group of Assante Financial Management Ltd. about your estate planning options.

Lending money

What do you do if one of your siblings comes to you and asks for a loan? It’s easy enough to give a loved one some help in their time of need, but you need to consider what the money is going to be used for. If your sibling is living a troubled life, giving them more money will enable them to continue. You aren’t likely to get this money back in this scenario either. If your sibling is looking for help to send their child to university, you will be helping them immensely and you are likely to get your money paid back. It is okay to put the loan and the repayment terms in writing. This will help legitimize the lending and help protect your relationship. You are allowed to say “no” to your family too. Either way, you should only loan money out if you can afford to lose it if it’s not repaid. There are so many choices when it comes to lending cash to siblings, but at the end of the day, you need to do what feels right to you.

Caring for a disabled sibling

If you have a sibling with special needs that requires lifetime support, what happens to them when your parents pass away? Is another sibling going to pick up the slack? Caring for your sibling could require bringing them in to live with you or organizing and handling the finances involved in caring for them. This is something you need to discuss with your parents long before they have reached the end of their life.

The financial advisors at The Beacon Group of Assante Financial Management Ltd. can help you with any financial matters concerning your family.

How to Choose the Right Estate Executor

How to Choose the Right Estate Executor

by Estate PlanningInheritance

Everyone knows that it’s a smart and responsible choice to have a will, but not everyone understands the importance of selecting the right estate executor to help manage their affairs and distribute their assets upon death. Picking the right executor will mean that your loved ones will receive their rightful inheritance in a timely manner. Picking the wrong executor could lead to a load of problems including tax issues and late payments. Read further for information on choosing the right executor and what that will mean for you and your family:

The role of an executor

An estate executor is the person named in your will that will be your personal representative after your death. This person is legally responsible for carrying out your wishes outlined in the will. An executor can be one of your children or your spouse, a family friend, a professional advisor, or a trust company. You will need to weigh the pros and cons of each option to find the right person or company for the job.

Choosing an executor

An estate executor must be willing to take on that role. Nobody can be forced to do it. Your executor should be trustworthy, organized, and have the time and availability to act if called upon. You can name more than one executor in your will but in these cases, it’s best to include a decision-making mechanism in your will. You should also consider naming an alternate executor in case your primary one is unable to act. If there is no alternate, the court will decide who will be your executor. It is important to get the approval of the individual(s) you plan to name executor in your will before putting them in your will. Doing so will help with the administration of your will when the time comes.

Executor compensation

Acting as an estate executor is not a charitable act. Every executor is entitled to fair compensation for the responsibility and time spent acting on your behalf. The compensation can be based upon the size of the estate, the time spent administering the estate, among other factors. Spouses and close family members tend to charge the least while trust companies will charge the most. The skills and expertise provided by an advisor or trust company can be well worth the extra cost, though.

If you have any questions about your will, estate planning, or naming an executor, contact a financial advisor at The Beacon Group of Assante Financial Management Ltd. today.

A Tax-Smart Guide to Giving Grandchildren Gifts

A Tax-Smart Guide to Giving Grandchildren Gifts

by InheritanceTax Planning

You love your grandchildren and you spoil them rotten, but beyond frivolous gifts like candy and toys, you would love to give them a good financial start in life by gifting them money. It goes without saying that a cash gift is not nearly as exciting as a new bike, but your grandchildren will greatly appreciate the help down the road. You will gain the satisfaction of seeing your gift make a real difference in your loved ones’ lives. It can also bring you financial benefits, as long as you are aware of the rules. Here is what you need to know about gifting money to your grandchildren:

Attribution

There is no initial gift tax in Canada, so no amount is payable after you give the gift to your child. However, if the money is gifted to a minor child and it is held in a non-registered investment account, any income generated by that gift money is attributed to you. Any capital gains are taxed to the child. No attribution applies if your grandchild is an adult.

In order to make your gift tax-effective and avoid attribution, you should contribute cash into their Registered Education Savings Plan, Tax-Free Savings Account, or Registered Retirement Savings Plan. RESPs, TFSAs, and RRSPs guarantee you won’t have to pay any tax on your gift and investments in these plans will grow and compound in a tax-deferred/tax-free environment.

Registered Education Savings Plan (RESP)

For RESPs, tax on income and growth is deferred. The tax becomes payable upon withdrawal, but it will fall into your grandchild’s hands and not yours. Make sure you plan this kind of contribution with the child’s parents so that you don’t exceed the contribution limit. Your financial advisor can help you come up with other strategies for flexibility, such as taking advantage of the maximum Canadian Education Savings Grant (CESG) with a $2,500 yearly contribution to an RESP.

Tax-Free Savings Account (TFSA)

If you want to avoid paying tax on funds that you intend to gift through your will, you can contribute that money to an adult grandchild’s TFSA tax-free. Canadians are allowed to make contributions to their TFSA after they turn 18.

Registered Retirement Savings Plan (RRSP)

Cash gifted into your grandchild’s Registered Retirement Savings Plan can grow and compound tax-deferred until they take advantage of it. The Home Buyer’s Plan allows first-time home buyers to withdraw money from their RRSP to put towards purchasing a home. The Lifelong Learning Plan allows you to take money from your RRSP to pay for full-time education. It’s also important to make sure there is enough contribution room available before giving the gift.

Contact a financial advisor at The Beacon Group of Assante Financial Management Ltd. today to help you sort out the best options for giving your loved ones the gift of financial security.

How to Cope With the Sandwich Generation Squeeze

How to Cope With the Sandwich Generation Squeeze

by AgingEducationFinancial PlanningInheritanceInvestment PlanningTax Planning

 

Picture a sandwich. The top slice of bread is the responsibility of taking care of your elderly parents. The bottom slice is your young adult children who have boomeranged back home or are involved in post-secondary education. You are the meat stuck in the middle, trying to take care of both while working towards your retirement. This, in a nutshell, is the crisis the “sandwich generation” faces today. If you find yourself in this situation, take heart that you aren’t alone and you have people fighting for your best interests. The following are steps you can take to manage being stuck in the middle of caring for two generations:

Eldercare

The health insurance provided by the government leaves many elements of care uncovered or only partially covered, including nursing care at home. If one parent is still independent of you, you may wish to ask this parent to sell their home in order to downsize for extra monthly cash flow. If you are personally assisting your parent with their care, there is community care available in most regions and there is always private caregiving assistance.

Kids’ Education

The cost of post-secondary education is rising every year. Parents with two children that are close in age really feel the squeeze when both kids are enrolled at college or university.

The first step is to plan ahead and start investing early in Registered Education Savings Plan (RESP). You should consider supplementing the RESP with Tax-Free Savings Account (TFSA) investments, family trusts, in-trust accounts, or a combination of these. The Beacon Group of Assante Financial Management Ltd. can help you reach your education savings goals.

Boomerang Kids

25.9%[1] of young adults in Canada between the ages of 25 to 29 live at home with their parents. This boomerang generation can burden their parents with extra cost or prevent them from a planned downsize of their home. The key to handling this situation is communication. Talk openly with your adult children about their plans, responsibilities, and expectations to help maintain a healthy relationship with them.

Contingency fund

Nobody can predict the future. You should consider setting money aside during your prime working years to cover the potential costs of supporting your parents or adult children. The Beacon Group of Assante Financial Management Ltd. can develop a plan to help alleviate the pressures of being in the sandwich generation while setting your family up for future care as well.

 

[1] Statistics Canada, Living Arrangements of Young Adults Aged 20 to 29 (2011 Census)

Why a Testamentary Trust Still Matters

Why a Testamentary Trust Still Matters

by Estate PlanningFinancial PlanningInheritance

Testamentary trusts have taken a hit recently and have had their tax savings advantages restricted. This doesn’t mean they are going away though –  it’s quite the contrary. Testamentary trusts are still a very effective way to maintain control of the money you will be leaving to your beneficiaries. Read on to learn more about what has changed for testamentary trusts and how they can still be useful when planning your estate.

Recent changes

As of the first of January 2016, testamentary trusts will be taxed at the highest marginal taxation rate, with two exceptions. A testamentary trust will qualify for graduated rates for the first 36 months after the date of passing and if the beneficiary of the trust qualifies for the disability tax credit.

Why you should still consider a trust

A trust is still a valuable estate planning tool. There are number of examples where they can be extremely useful:

Managing your children’s funds

If you are leaving a sizeable inheritance to a beneficiary that is a child, grandchild or other young relative, you may wish to control how these funds are received and used. If they happen to be a minor, the funds must be held in trust until they reach the age of majority. If they have a disability, you can still create a trust that benefits from graduated rates that will be able to help take care of them for their whole life.

Taking care of your spouse

If you believe that your spouse would be best served by having a financial expert manage their wealth, then you can use a trust and assign a professional to manage it. This is especially helpful when they are dealing with a disability or an illness.

Managing a second marriage

Speaking of spouses, you can provide your current spouse with a lifetime benefit that will benefit others down the road. If you want to support your wife from your current marriage, but have children from your first, you can set up the trust so the rest of the money will go to them once your current spouse passes on.

There are many ways that a testamentary trust can help you with your estate, even with the recent changes. If you are planning your estate, you should contact an estate planning advisor at The Beacon Group of Assante Financial Management Ltd. Our experts can help you make the best choices for your unique situation.

Why You Need an Estate Plan

Why You Need an Estate Plan

by AgingEstate PlanningInheritance

Estate planning is more than simply writing a will, although that is an extremely important part of estate planning. Planning for a time after your death might be a morbid thought process to undertake, but it is important to organize your estate in advance of death in order to make the process simpler for those ultimately involved in the administration process. It also allows the future deceased to be extremely clear where and how the assets are to be distributed upon death. Even if death is not in the foreseeable future, having a plan already laid out will mean that you have complete control over the situation.

Assess Your Assets

If the majority of your assets are in liquid form in bank accounts, simply add whomever you have as your executor as joint on all bank accounts and investments. This will help to minimize the necessity for probate and will provide immediate access to all funds. Be certain the person you have listed as joint on all accounts is someone you trust as they will have full access to all money with their name attached to it.

Have a Say in Your Funeral Process

If you have personal preferences as to how you would like your funeral to be conducted and how your body is to be treated after death, be certain to outline this clearly in your estate plan. There is no communicating once you have passed on, so make your wishes and desires abundantly clear in advance.

Guarantee Business Continuity

If you play a major role in a business and your death would change the dynamic of daily operations, it is important to outline clearly what it is you would like to have happen with your share. It is not always possible to predict your death, accidents happen all the time. If you play an integral role in your business it is the responsible thing to do to set up a contingency plan for future operations in the event of your death.

Not Just for the Wealthy

Estate planning is not a task simply for the wealthy. Everyone should plan their estate, even if by just writing a simple will and having your say on who will be in charge of handling your estate once you are gone.

Planning for death is not a desirable topic of conversation. It is, however, a very realistic and intelligent conversation to have. No one is going to live forever, so by taking some time to do diligent estate planning while you are still capable, you can help ensure the future of your loved ones. The Beacon Group of Assante Financial Management Ltd. offers estate planning and inheritance planning services to make the transition easier for your family.

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Managing Finances and Siblings

by FinancialInheritance

Even the most tight-knit family can come to blows if there is a dispute over money. Family conflict surrounding financial matters is common-place, and there are no set rules or guidelines when it comes to managing finances with your siblings. If you are much better off than another sibling, they might see you as an interest-free bank. If you become executor of your parent’s estate, you may have to deal with siblings who don’t believe their inheritance was fair. We have provided you with an outline of what to consider if you find yourself involved in these two scenarios.

Giving out Loans

What do you do if one of your siblings comes to you looking for a loan? It’s hard to say no to a loved one during their time of need, but you need to consider what the money is going to be used for. You don’t want to enable a sibling if you know that they are troubled. Not to mention that in this situation you aren’t likely to get your money back. If your sibling is looking for help to send your niece or nephew to post-secondary school, you would be helping them immensely and you are likely to get your money paid back. Even though it is family, it is recommended that you put the loan and the repayment terms in writing. This helps legitimize the lending and help protect your relationship. Just remember that you should only lend money if you can afford to go without it if it’s left unpaid.

Dealing with Inheritances

It’s common practice to name one child as executor of an estate, but that can lead to problems if there are other siblings involved. The children left out may feel that all of the siblings should be involved in the decision-making, which can cause some conflict. The inheritance can cause a lot of friction, even if the assets were split evenly. It all depends on the situation and the people involved. These types of conflicts usually involve expenses and delays. When writing a will for a family with siblings, it’s best to anticipate your family’s unique situation and the personalities involved.

When dealing with financial matters within a family, communication is key. Talking and gaining an understanding of each sibling’s needs and wants can help prevent potentially disastrous family conflicts. For help with such matters, you should contact a financial advisor at The Beacon Group of Assante Financial Management, Ltd.