Estate Planning, Children and Charity

One of the biggest challenges our clients face is around the ultimate disbursement of their wealth.

What should their will say?
Who gets what and when?
Will the wealth be a blessing or a curse?

We regularly work with our clients in contemplating some of these big questions. Often there are several million dollars of value that will transfer upon their passing.

Perhaps the most traditional approach is for the value of the estate to be distributed equally among the children, and leaving the entire estate to adult children may be a suitable decision. However, there could be other options to consider, such as grandchildren or other family and friends. We also encourage our clients to consider their favorite charitable causes in their estate planning. 

If taxes are due in the estate, a gift to charity will help offset that tax.  Unless there are obvious red flags, it is not our role to tell clients how they should distribute their estate. Instead, our objective is to educate them on the various options. 

The estate planning discussions always occur in the context of our client’s family and wealth circumstances, as well as their personal convictions about inheritance. We remind them that they are the current stewards who have the opportunity and responsibility of determining the next stewards. 

So where do people typically land as it pertains to their estate distribution? As you can imagine, it varies. Some are convinced that their children will be excellent stewards and therefore plan to leave it all to them. On the other end of the spectrum, we have clients who believe in helping their children with a warm hand, with most of their estate left to their favorite charities. Our clients will arrive at something in-between. They may determine a fixed dollar amount to charity with the balance distributed between the children. On the other hand, they may decide on a fixed amount to each of their children with the balance directed to charity. Another approach is to have “a child called charity”, which results in dividing the estate in equal portions among each child and the charities. 

Yet another method of wealth distribution is leaving sufficient funds to charity to eliminate the tax owed in the estate, with the balance divided between the children. While we don’t have a problem if clients wish to allocate a portion of their estate to their grandchildren, we recommend it be a relatively small percentage of the overall estate.

As family wealth advisors our objective is to serve as guides, providing counsel to our clients as they make their significant decisions about the future of their wealth. If you would benefit from guidance in this area, I invite you to contact me at mark@covenant.ca.