The ageing of the Canadian population is causing a dramatic redistribution of wealth. Younger generations will continue to benefit from the over $1 trillion that Baby Boomers are currently enjoying as an inheritance from their parents. Its magnitude is completely unparalleled. There has been a shift in the timing and manner of these monetary transfers. Increasing numbers of Canadians are opting to leave their riches to loved ones while they are still living.
Exactly what does the term "Living Inheritance" mean?
Normally estates bequests are communicated through wills and given out after a person's death, but when someone leaves money or other assets to their loved ones while they are still alive, they are said to have left a "living inheritance."
Why is there a rise in living inheritances?
Financially savy Canadians who have invested wisely, plus thanks to the dramatic increase in house prices, now have significant assets that on their passing will be passed onto their children.
Unfortunately, at the same time, with the increase in the home prices, many first time family members are finding it very difficult to buy their own home.
There is also the issue of strategic tax planning.
Why not pass some of your children's inheritance to them now, while you can see them enjoy it? There has been a recent trend toward an earlier start in the process of transferring wealth to heirs.
What a living Inheritance is and how it helps people?
It' s true that the concept of a living inheritance is novel and wasn't frequently used before, but its popularity has skyrocketed in recent years. More than 60% of baby boomers, according to some estimates, intend to leave a living bequest to their descendants. Canadians are increasingly choosing to leave their wealth to heirs who are still alive.
Housing market access
Rising housing prices make it more challenging for first-timers to enter the market. Many young Canadians have good jobs and enough money to pay their mortgage, but many have a hard time saving for a down payment. Many parents are now helping their adult children follow in their footsteps by assisting them in saving for a home's down payment.
Strategic tax planning
The taxation of inheritances differs from one jurisdiction to the next and from one form of asset to another. We recommend that you discuss this option with your accountant and financial planner to discuss the best strategies for transferring wealth to loved ones while minimising tax implications.
Know where your assets are going
It is a known truth that the wishes expressed in people' wills are not usually strictly adhered to. Beneficiary arguments are common, and they have caused more than one family breakup. To guarantee that your children, grandchildren, and other loved ones receive their fair share of you restate, a living inheritance is a great option to consider. Being present and communicating your intentions clearly to all parties helps avoid confusion and miscommunication.
This is the best part.
You get to see your children enjoy their inheritance while you are alive. Maybe it is a family trip that every member of the family goes and make life time memories.
Is it possible for me to create a Living Inheritance?
There are a number of steps you may take to ensure that your heirs receive a sustainable income stream from your estate. In certain cases, the quickest and most equitable way to divide up assets is through a sale and subsequent distribution of the funds.
A reverse mortgage is an alternative that is gaining popularity in Canada. Canadians over the age of 55 can apply for a Reverse Mortgage and take out up to 55% of the value in their house.
In exchange for never having to make a payment while you are living in the home, you get to stay there for as long as you choose, and you retain full ownership of the property so you can benefit from any future appreciation.
Many Canadians are beginning to see that it isn't necessarily necessary to wait until they pass away to start helping their families with the wealth they have accumulated. Considering the possibility of leaving a living bequest to loved ones and wondering if a reverse mortgage could help? Reach out to us at 250.212.4424 or through this contact here.
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