Many of my regular readers here (thank you) will know that I am often writing about intergenerational wealth transfer. It is such an important topic and there are so many ways to do it wrong, or to simply neglect it and not do it at all.
This week the trend continues, but we are going to drill down a little bit to your grandchildren. Most Canadians understand that it is important to do at least some level of estate planning and hopefully have some kind of final needs discussion with your loved ones. There are often provisions put in place or at least some intention to transfer assets to the next generation in some form of orderly fashion.
Many times, there is some formula to distribute assets to children equally, with the assumption that when the time comes, the grandchildren will carry on the legacy they’ve left their own children and on it goes.
This week we will again be discussing segregated funds and a unique situation regarding the distribution of a death benefit
Let’s consider the family unit of grandparents, three sons and grandchildren.
- The grandparents set up the beneficiaries of their segregated fund to pay one-third to each of their sons.
- They also wanted to make sure in the event of one of the sons predeceasing them, that son’s share would go to that son’s children
Can this be done?
The answer is yes, and for those of us that don’t speak Latin, Per Stirpes means “by branch”. If we set up the beneficiaries using a “by branch” method, then the grandchildren will receive their late father’s share when the grandparents have passed away.
If it wasn’t set up this way, then the surviving two sons would split the proceeds at death.
From an administration point of view this will require a letter of direction with your segregated fund policy account. It only takes a sentence or two and it could make a world of difference.
If you would like some help setting this up for your family, please reach out to me free of charge here: CHAT WITH KB
This is a simple solution to an estate planning need that only insurance investment products can provide. Any other account with mutual funds, stocks, bank accounts, etc, would have to go through the estate process (probate, expensive, time consuming and public disclosure) and then be distributed to the grandchildren. Avoiding the public disclosure alone makes this worth it.
Your grandchildren will thank you.
As always, I look forward to hearing from you.
THIS ARTICLE IS PROVIDED AS A GENERAL SOURCE OF INFORMATION ONLY AND SHOULD NOT BE CONSIDERED TO BE PERSONAL INVESTMENT OR LEGAL ADVICE. READERS SHOULD CONSULT WITH THEIR FINANCIAL OR LEGAL ADVISOR TO ENSURE IT IS SUITABLE FOR THEIR CIRCUMSTANCES.