During the virtual IPC Fall Summit on October 21, 2020, I had the pleasure of listening to a presentation by Brad Smith, Advice First Wealth & IPC Securities Corporation, Kitchener, ON. Brad, a fellow Certified Kingdom Advisor®, has been working in the estate planning area for many years. Much of his work is influenced by Ron Blue’s book, Splitting Heirs: Giving Your Money and Things to Your Children Without Ruining Their Lives. Brad challenged advisors to help clients finish well and to incorporate six decisions for successful wealth transfer in our estate planning discussions. The six decisions are:
1. Transfer Decision: When we die, we have 3 choices as to who will receive the wealth God has given us: the government via taxes, our heirs, and charities. We can choose one, two or all three. There are three guiding principles to help us with this decision:
- Treasure Principle:
- This is the last stewardship decision you will make while on earth.
- Remember that you cannot take it with you, but you can send it ahead by paying it forward.
- Consider how taxes can affect your choices. Alberta residents receive a 50% combined federal and provincial donation tax credit which will offset any taxes due and payable on death as the top marginal tax rate in Alberta is currently 48%.
- Unity Principle: Aim for unity between spouses and ideally within a family. Your spouse completes you; spouse does not compete with you.
- Wisdom Principle: First pass on wisdom before you pass on wealth. Wisdom can create wealth, but wealth never guarantees wisdom. Prepare the next steward to use wealth wisely.
2. Treatment Decision
- Love your children equally but treat them uniquely. When making wealth transfer decisions, consider the need, life choices, and past spending choices of your children. (For example, consider dependencies such as gambling).
3. Transfer of Title Decision
- Consider transferring assets such as businesses, farms, or cabins to the next generation or to charities without first liquidating or selling.
- Ensure that those receiving these assets have an appreciation for how the wealth was created.
4. Timing Decision
- Optimize the timing of asset transfers to maximize the asset’s use to you, heirs, and charities.
- How much is enough? Do I have enough? If yes, consider giving away some of the wealth God has given you now (with a warm hand) versus on death (with a cold hand).
5. Tools & Techniques Decision: Invite a lawyer and if necessary, an accountant and others to help achieve goals.
6. Talk Decision
- Inform designated persons of their roles in the event of your incapacity or death.
- At a family meeting, discuss decisions made, bridge expectation versus reality, speak into the next generation and answer questions they might have. This will:
- Promote family harmony
- Train the next generation
- Share values with next generation
- Ensure formal transfer of the stewardship of assets
Estate Planning and the corresponding wealth transfer decisions are complimentary services provided to Lighthouse Financial clients. For non-clients, Estate Planning is a fee for service. If you would like help in this area or could use a review, please let me know.
Jim Hummel, CFP® CKA®