Last week, in the run up to Halloween, the National Post ran a series of articles on death and dying.
I can only imagine the editorial meeting that preceded this decision, no doubt a discussion on the ever increasing popularity of TV shows like The Walking Dead and our aging population’s obsession with end of life issues had something to do with it. As a Financial Security Advisor I am confronted with the later on a daily basis and one of the articles in particular caught my eye, you can read it here:
Are You Betting on an Inheritance to Solve Your Money Problems?
As many of my regular readers can likely imagine this is a bit of a pet peeve of mine. We live in a society that has mortgaged its future to live for today. Over 75% of Canadians are in debt, with the average credit card balance in excess of $16,000. According to Statistics Canada the average citizen is committed to making bill payments in excess of 162% of their income. It doesn’t take a mathematician to figure out that this is unsustainable.
And yet we continue to do it. Why? According to this article and other research, because we figure we can cash in when our parents pass away. Kind of like the title of this old Western from 1971 suggests, are we banking burying our parents in on a coffin full of dollars.
Now I’m not saying that it is wrong to give an inheritance to your kids. Believe me it’s better than the alternative, leaving behind a sloppy estate which gets eaten up by taxes and serves only to enrich the lawyers that are hired to straighten things out, but really why are people in their 40s and 50s so bad with money that they need these inheritances to avoid financial catastrophe of their own? What kind of legacy and example are they giving their own children by living beyond their means? And are they really honoring the memory of their parents by squandering their inheritance on debt repayment instead of something more lasting?
Not to mention the fact that most people I talk to have absolutely no idea how things like capital gains and probate taxes effect the amount of money they will eventually receive. Nor, with people living longer and longer, have they taken into consideration the costs associated with other end of life issues such as an extended stay in a long term care facility. All this to say that even though there may be up to a trillion dollars transferred between generations over the next few decades, as the article points out, most individuals will receive far less than they are currently anticipating.
The only solution, to my mind, is for people to live within their means now. That way, any inheritance you receive will come as a bonus and can be used to finance a true legacy not disappear into a black hole of debt created by your own ignorance, arrogance and stupidity.
For more information on tax and estate planning and how best to manage your life in anticipation of either giving or receiving an inheritance write to: firstname.lastname@example.org