As the Canadian population grows older, a large shift of wealth is taking place around us. Baby Boomers are in the midst of a nearly $1 trillion inheritance from their parents, and the coming years will see a continuation of this wealth transfer to younger generations. This phenomenon is entirely unprecedented in its scale. How and when these funds are being transferred is also following a new trend. Rather than waiting until after passing away, a growing number of Canadians are choosing to pass along some of their wealth to their families while they are still alive to see their loved ones benefit.

What is a Living Inheritance?

Traditionally, inheritances are written into wills and are dispersed after someone has passed away. A living inheritance is a financial gift given while the contributor is still alive and well, allowing them to see their loved ones benefit from the transfer of resources.

Why are Living Inheritances gaining popularity?

The economic climate that we live in is different from anything that Canadians have experienced before. With low interest rates, it is more challenging than ever to make our money work for us, meaning that Canadians have to work harder to build wealth.

At the same time, expenses are on the rise. With a housing marking that continues to become less and less affordable for first time homebuyers, high education costs, and a general increase in the cost of living, younger generations are finding it more difficult to enjoy the same quality of life their parents have. Many have no choice but to increase their debt load to make ends meet.

On the other hand, many 55+ Canadians who were able to build equity in their homes and earn strong returns in the markets over decades have built a high degree of financial stability and wealth. Many are living without mortgages or other debt and have relatively low expenses. A growing number are choosing to begin the transition of wealth to their loved ones earlier.

What are the benefits of a Living Inheritance?

While a living inheritance may be a new idea, and one that wasn't widely used in the past, it has gained popularity by leaps and bounds over the past number of years. Estimates show that over 60% of baby boomers plan to pass on some type of living inheritance to their heirs within their lifetime. There are many good reasons that Canadians are opting for a living inheritance.

Access to the housing market

With home prices soaring, first time homebuyers are finding it harder and harder to enter the market. While many younger Canadians have sufficient income to service a mortgage, most struggle to come up with resources to make a down payment.

By passing along the resources necessary to make a down payment on a home, many parents are enabling their adult children to begin building wealth in their homes, just as they have.

Tax benefits

Depending on where you live and the type of assets you own, inheritances passed down after death can be subject to different tax treatment. Living inheritances can be structured to avoid losing money to the CRA as part of the wealth transition process. You should speak with your financial advisor about how to gift funds to your loved ones in the most tax-efficient way possible.

Ensure assets are divided as you intended

There is no denying the fact that wills aren't always carried out precisely as wished. Disputes and disagreements frequently arise among beneficiaries, and more than one family rift has been created this way. A living inheritance is an excellent way to ensure that your assets are divided among your children, grandchildren and other loved ones as you want them to be. You benefit from being physically present and making your intentions known to everyone involved so there can be no discrepancies or misunderstandings.

You get to see your gift in action

One of the most significant benefits that a living inheritance brings is the ability for you to see your gift in action. Not only do you get to help the ones you love, but you get to see them use your financial resources to better their lives while you're still with them.

How can I make a Living Inheritance possible?

You can do many things to make a living inheritance possible for you and your family. Some people choose to sell assets and distribute the proceeds.

Another method that many Canadians are investigating is the option of a reverse mortgage. Reverse mortgages are available to Canadians over the age of 55, and allow you to access up to 55% of your home's equity.

You never have to make a payment while you’re still living in the home, you can remain in the home you love for as long as you live, and you still own 100% of your home so you can continue to benefit from property price appreciation.

Many Canadians are realizing that waiting until they pass away to transition their wealth to their families doesn’t always make sense, when they can begin to help their loved ones today.

Curious if a reverse mortgage could help you provide a living inheritance to your loved ones? Give us a call at 1-866-88-BLOOM today or leave us a message here .

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