How to assist blended families with wealth transfer

Manulife senior manager on preparing clients and advisors to deal with complicated family scenarios

How to assist blended families with wealth transfer

Baby boomers inherited their parents’ wealth in the heyday of the stereotypical nuclear family. It was a time where 2.4 children and lifelong marriages were more common, typically making the issue of inheritance a more simple process.

Financial advisors today must prepare their boomer clients to pass on their assets as part of the biggest wealth transfer in history—but they are often faced with complicated family scenarios.

John Natale, Head of Tax, Retirement and Estate Planning Services at Manulife Investment Management, told WP how he’s preparing clients and advisors to operate in a complex world of blended families, second marriages and stepchildren. He’ll be sharing those deeper insights in a live webinar on November 13, from 12-1pm EDT, entitled Wealth Transfer: Maintaining the Next Generation of Clients. Details on the webinar and how to register can be found by clicking on this link.

Natale gave the example of clients on a second or third marriage, who want to make sure that children from a first relationship remain beneficiaries of their estates. He operates with a deep kit of options for those clients, but one of his favourites is segregated funds with attached irrevocable beneficiaries.

“You could give assets to one family member, let's say a second spouse,” Natale told WP, “but by using an irrevocable beneficiary, you can preserve whatever residual is left to go to your kids from a first marriage, for example. You provide income for a second spouse, but you preserve capital for children from an earlier relationship.”

Natale believes segregated funds are under-utilized as an estate-planning tool, especially in blended family situations where privacy may be a priority. Unlike wills, which in some cases can become a matter of public record, the potential enhanced confidentiality segregated funds offer leaves them less open to the kind of arguments, recriminations, and hurt feelings clients fear their beneficiaries may suffer over their inheritance.

“The privacy benefit can be a huge advantage in the blended family situation,” Natale said, “where you might want a little bit of privacy about giving assets to certain individuals and not upsetting others.”

There’s a bottom-line benefit to bypassing traditional wills, too. Segregated funds with a named beneficiary don’t pass through your estate and as a result aren’t subject to estate administration fees based on your clients’ assets. Reducing the overall assets that flow through an estate and probate where applicable, by placing some in a segregated fund, can also potentially save your client’s beneficiaries thousands of dollars in probate fees depending on the province.

Where those beneficiaries might have to wait months to receive assets from a will, the segregated fund can start paying them as early as a week after the formal death notification is received. “Segregated funds have a lot of both financial and non-financial benefits from an estate planning perspective,” claimed Natale. “I think when people are looking at their estate plan, they should at least consider these.”

The webinar will provide great tips and advice on how to build these relationships and think strategically about how to retain client assets through the use of effective estate-planning strategies.

For more details on the topic and how to register click on this link.