There may be better reasons than cold favouritism for clients to give more to one child.killerb10/iStockPhoto / Getty Images
There’s only so much you can do if a client confesses to liking one of their children more than the others. There may be defensible reasons for it. Best to stay out of it – except when it comes to bequests.
As Alison MacAlpine wrote this week, with an inheritance, equal isn’t always fair. There may be better reasons than cold favouritism for clients to leave more to one child than another. One child may be a single parent with four kids while the other married rich. One may have already received extra financial help for school or to buy a home.
Still, leaving different sums to children can be tricky. Advisors can strategize with clients about how to make unequal bequests if a client brings it up first, but they should never suggest the estate distribution be structured in any particular way, says Leanne Kaufman, president and chief executive officer of RBC Royal Trust in Toronto.
In addition to creating family tension, an unequal bequest may increase the likelihood of a will being contested. Rod Mahrt, senior portfolio manager and senior investment advisor with Mahrt Investment Group at Wellington-Altus Private Wealth Inc. in Victoria, emphasizes that “even if the unequal distribution is well-intentioned, it can still be perceived as favouritism.”
That’s why it’s important to outline the rationale to heirs in a family meeting or a letter of explanation attached to the will. It also means understanding that rationale by getting to know clients and their families.
The article outlines the potential complications with unequal inheritances and includes more suggestions for managing such situations.
New reporter at Globe Advisor
Globe Advisor added a new reporter this week. Rudy Mezzetta has covered the Canadian wealth management industry since 2005, with a focus on tax issues, and trusts and estate planning. I had the pleasure of working with Rudy at Investment Executive and Advisor.ca, at which advisors and estate planners followed his meticulous tax reporting closely. We’re looking forward to more of his industry-leading coverage with Globe Advisor.
Rudy is filling the position vacated by reporter and podcaster Brenda Bouw. Fortunately, Brenda will continue to freelance for us. You’ll see her byline on her regular profiles of portfolio managers, retirees and advisors (and hear her voice as host of our new Behind the Advice podcast), and she’ll continue to develop other stories and projects, as she did with her excellent Planning for the CPP series.
Questions? Comments? Send me an email: mburgess@globeandmail.com
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