The Downside of Inheritance
Peter Katevatis - Oct 06, 2015
When a member of the family passes away it is a time for sorrow, reflection, and unity for the family. Relatives and friends often travel long distances to support the family and celebrate the memory of the lost family member. However, if the decea
When a member of the family passes away it is a time for sorrow, reflection, and unity for the family. Relatives and friends often travel long distances to support the family and celebrate the memory of the lost family member. However, if the deceased happens to be a wealthy person, it can often get ugly.
Since our civilized society does not match Game of Thrones you would think dealing with estates would be clean and simple. The executor follows the Will and distributes the assets as per the wishes of the deceased. Unfortunately, it is not always this simple.
If a person dies without a Will they are considered to have died “intestate”. This means the provincial government decides how your assets will be divided, not you. Often people will leave verbal instructions, audio recordings, or even label the items but these methods can be challenged. The safest way to make your bequests legally binding is to include them directly in your Will.
Besides the unfortunately common disputes over assets, another less publicized downside is TOO MUCH inheritance. Similar to winning the lottery, some people thrive with this once-in-a-lifetime opportunity to put their financial house in order. However, some people go to the other extreme and end up declaring bankruptcy in a few years.
To avoid making your bequest have negative consequences, consider carefully the person you are leaving money to. Are they financially literate? Do they have issues with substance abuse? Do they have ambitions, dreams, goals?
For young beneficiaries or those lacking financial acumen, consider an Incentive Trust. These trusts are designed to encourage certain positive behaviours. This could include mandatory post-secondary education, minimum full time work hours, type of work (family business), or must do some volunteer work. It can also be used to keep the beneficiary from negative behaviours such as refraining from substance abuse (drugs or alcohol).
Incentive Trusts have their pitfalls too. For example, the trust might read that a child must attend post-secondary education but a potential dream job might be passed up. Also, if the trust says the beneficiary must stay married it would put pressure on them to stay in an unhappy marriage or even an abusive one.
It is very important that you have a will so that your estate is divided the way you wish. Even if you don’t care (Why does it matter, I’m not dealing with it!) your family will appreciate the guidelines to minimize disputes. If you need some help finding the right estate lawyer or notary to guide you through the process, let me know. I’d be happy to point you in the right direction.