Estate Planning

Inheriting an unexpected, or even an anticipated, lump sum can fill you with mixed emotions – if your emotional attachment to the individual who has passed away was strong then you are likely to be grieving and the thought of how to handle your new-found wealth can be overwhelming and confusing but also exciting. One of the best pieces of advice in this situation is to give yourself some time before making any binding financial decisions. The temptation to quickly put the money to so-called ‘good use’ or to rush out and spend it can be strong but you must allow the news to sink in and also take some time to consider your options before you embark on the process of dealing with the inheritance. In the short term, put the money away in a high interest savings account and take time to research and think carefully about your financial goals and objectives and how this inheritance can help you to secure and maximize your financial future in the best way.

How to Make the Best of Inheritance Planning

Inheriting an unexpected, or even an anticipated, lump sum can fill you with mixed emotions – if your emotional attachment to the individual who has passed away was strong then you are likely to be grieving and the thought of how to handle your new-found wealth can be overwhelming and confusing but also exciting. One of the best pieces of advice in this situation is to give yourself some time before making any binding financial decisions. The temptation to quickly put the money to so-called ‘good use’ or to rush out and spend it can be strong but you must allow the news to sink in and also take some time to consider your options before you embark on the process of dealing with the inheritance. In the short term, put the money away in a high interest savings account and take time to research and think carefully about your financial goals and objectives and how this inheritance can help you to secure and maximise your financial future in the best way.

Although there is no one-size-fits-all approach to dealing with larger sums of money, here are some useful ideas of where to start.

Reduce your debt burden

If you have significant or high-interest debts, one of the safest options of all is paying this debt down. Not only will you achieve a guaranteed after-tax rate of return of your current interest rate, it can also add to your feeling of financial security and potentially offer you a more consistent financial picture. Debt often carries with it a significant interest rate – particularly on credit cards and overdrafts for example – so in many cases, eliminating this burden should be considered as one of your main priorities.

However, you may like to take careful note of the option below regarding investing the money instead as much depends on the prevailing interest rates and, of course, your appetite for risk, as you may well find an investment option with a potentially higher return more attractive.

Make investments

A particularly effective way of investing an inheritance is to add it to your retirement savings – especially if your nest egg is not looking quite as healthy as it should due to missed savings years for example. Those with lower or less reliable incomes should look upon this option as a great choice in particular.

Be charitable

After considering your own future financial needs, giving some of your wealth away to either charities or to family and friends is a good option to share out some of your inheritance to those who could benefit from it. What’s more, donating to charity can also offer you some tax breaks which may reduce your overall tax burden.

Many individuals see this philanthropic route as offering them the opportunity to do something meaningful and rewarding with their wealth and contributing towards their own sense of moral duty and emotional wellbeing.

Make a spending plan

Of course, you are likely to be keen to spend some of your wealth on yourself and your family, particularly if your financial situation means that you have previously had to be more careful and prudent with money than you would have liked. A great way to do this is to create a spending plan so that you can enjoy the benefits of spending, without it significantly eating into money set aside for your financial planning goals. You could, perhaps, aim to set aside 10% of the inheritance just for yourself and loved ones to enjoy. The proportion will naturally depend on your circumstances but, in principle, it’s a great idea as it allows you to balance sensible saving and investments with some short-term enjoyment of your wealth.

Talk to us, we can help.

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In today’s uncertain and sometimes volatile financial world, the importance of putting tangible steps in place not only to protect, but to maximise your investments and wealth has never been more crucial.

In today’s uncertain and sometimes volatile financial world, the importance of putting tangible steps in place not only to protect, but to maximize your investments and wealth has never been more crucial. Without the gift of a crystal ball, we are unable to confidently predict the precise landscape of the financial outlook a year in advance, let alone decades ahead. This is where the importance of forward and contingency financial planning comes in. Let’s explore some of the key areas in this field:

Planning for Your Financial Future

Risk management is a term given to the strategies to help to protect your capital from unexpected events which can have a critical effect on your finances, such as unemployment, disability or critical illness. 

In case of unemployment, you should have an emergency fund (usually about 3 months of income). The benefits of disability insurance policies are that in case of disability and you can not work, the insurance will provide you with a portion of your salary. 

In case of critical illness, you can use the benefit to maintain financial stability and recover without financial worries. 

Considering Segregated Funds?

Dabbling in equities markets can sometimes feel daunting and many people worry about the risks of investing their capital in the market over which they have no direct control. If this is something that concerns you too, segregated funds could provide you with a good compromise. They have similarities to mutual funds in that that they allow you to benefit from the financial growth of your portfolio of securities, but offer you more protection by the means of a maturity guarantee and a death benefit guarantee, further securing your investment.

We end this article with a nod to the crucial area of estate planning. Essentially, this involves ensuring that you create and maintain an up to date and legally binding Will, as well as choosing your executor, beneficiaries, trustees and also naming a legal guardian for your children, if you have any. This will help to ensure that your financial wishes are carried out correctly and effectively, minimizing upset and disruption at a difficult time.

By taking the time to think carefully about your current financial position and the priorities that you have for your and your family’s future, you can take advantage of some of the strategies, products and services out there to provide extra security for your financial future and added peace of mind for yourself and your family.

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For most of the people, a watertight estate planning means finding the best ways to equip themselves for contingencies, reduce the tax liability for their estate, and signing up for investment plans to ensure that their money continues to earn money for them.

 These 4 reasons will compel you to revisit your estate planning 

For most of the people, a watertight estate planning means finding the best ways to equip themselves for contingencies, reduce the tax liability for their estate, and signing up for investment plans to ensure that their money continues to earn money for them. Undeniably, the components mentioned above underlie at the core of estate planning. However, there are a couple of crucial aspects at the periphery; which, when addressed effectively will provide a layer of protection to your estate planning. Unfortunately, most of the times they either get ignored or else are dealt rather inefficiently.  
 

Here are the four key components that will fortify your estate planning: 

Make a Will 

You never know what tomorrow has in store for you. Therefore, irrespective of your age get a will done first thing first. A survey done by CIBC last year revealed that almost 50% of Canadians do not have a will. It’s a fact that shouts out widespread ignorance prevailing in the arena of estate planning concerning the significance of making a will. Another prominent rationale behind creating a will is that if the deceased one leaves no will behind him/her, the government becomes the ultimate authority to decide how the execution of the estate will take place. In such a scenario, the chances are that your assets never reaches your loved ones for whom you had created it and may go to the wrong people indeed. Creating a will is one of the most emotional decisions of your life. However, they come out best when approached pragmatically. Take some time out of your busy schedule to safeguard the interest of your people. 

Reassess your estate plan when encountered with a sudden life event 

Life is a zigzag graph and never a straight line. Major occurrences might just come across you path in the most unexpected ways and at the most unanticipated times. It could be marriage or divorce. It could be the second marriage. Or else, it could be a sudden financial upheaval or abrupt gains. In such a situation, never forget to reassess your estate plan and make the necessary adjustments that suit your existing situation best. Otherwise also, doing a periodic reassessment of your estate plan keeps you future-ready.

Share your estate plan 

Talk about your estate plan to your loved ones. Share the details of your estate planning with your family. Agreed that managing expectations of one and all and gratifying every member’s desire is a task, which is so hard to accomplish that it never happens. Still, let your kin sneak a peek into your estate planning. You can always reason with your family about your decision and your motive behind it. Besides, they also get a chance to present their opinion to you about your verdict when you are still alive and eating dinner with them.

While planning your estate rather choose your heart than the brains 

However, in your quest to create a mastermind estate plan, do not lose your focus. So many times just to save on paying taxes; you may end up taking decisions that may make you regret later. Let your heart rule when it comes to matters of succession and transfer of your estate. 

Please don’t hesitate to contact us for a review of your estate plan.
 

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