A Modern Approach to Building a Financial Legacy

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Building a financial legacy used to mean accumulating wealth and making a sound plan to transfer it to the next generation. Modern families have become more complex, and they’ve also redefined wealth, giving investors and business owners new factors to consider when passing on generational assets.

Mary Lou Miles, Director of Wealth Management at Genus Capital, and Grant Conroy, Portfolio Manager/Partner at Genus, share their insights on how to leave a legacy that goes beyond simply passing down an investment portfolio and includes considering how family businesses and charitable donations can create lasting legacies, and how to take multiple needs and modern family structures into account.

Passing Down – Or Restructuring – the Family Business

More than 63% of private-sector firms in Canada are family owned, according to research from Family Enterprise Canada and the Conference Board of Canada. So it’s not surprising that parents often dream of passing down a thriving business built over the decades. “Most business owners work hard to create something for their children, and their children’s children,” Conroy says. “They want their business to survive to help the next generation.”

But what if the enterprise doesn’t align with the children’s passion or their skill set? Deciding how to continue the company legacy starts with having a productive family dialogue.

“Those conversations are always very difficult,” says Miles. She suggests discussing long-term goals, considering factors such as who is in control of the business, as well as possible exit strategies like selling assets or taking the company public.

Discussions like this are important, Conroy adds, to ensure adult children understand and have input into the vision, and so that they understand the intricacies of business operations – in order to ensure a desired outcome.

Miles suggests talking to your portfolio manager and consulting other experts, too. “It comes down to having a great team of lawyers and accountants to structure the business in such a way — and have the communication between the family members — so they know what’s going on and they’re making the decision together.”

Contributing to a Foundation or Charity

Rather than thinking of “legacy” as solely future-focused, it might make sense to start sooner and set up a family foundation. The long-term income generated will ensure your legacy endures, plus you’ll instill a sense of philanthropic values among family members. Get everyone involved at the outset to decide how to give back, whether to a local community cause or to a global issue such as climate change.

Remember, once you’ve donated, you get the tax benefits, “but you lose control,” says Miles. “You are restricted on what you can do with funds legally and from a tax perspective with the Canada Revenue Agency.” Not comfortable with the time or expertise required to manage the family foundation? Engage with an organization that can administer the foundation and ensure it achieves your intended impact.

Another immediate way to start building a financial legacy is to donate to a charitable cause, says Miles. “Maybe you’ve been doing some estate planning or have sold off an asset and you have capital gains — take some of those gains and contribute them to a charity that’s a passion for your family.” To help fulfill the family’s long-term goals of giving, ensure individual members understand the intrinsic motivation behind your choice of charity.

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Communicate Your Plans Clearly

Families are complex emotional systems, so when navigating the intricacies of shared wealth, start with a discussion about family, money, and purpose. Conroy suggests establishing a plan, including education and possibly regular family meetings, to ensure all those involved understand the financial legacy you wish to leave. “A lot of people don’t have a plan beyond the will or complex technical structure. If you can’t fully explain it, how do you expect the next generation to understand it? Communication, including feedback, around the plan is essential.”

Lay your plans out clearly in your will, and ensure you take all family dynamics into account: divorce, remarriage, and the addition of children. This can be tricky terrain to navigate, but it’s critical that your will clearly outlines your wishes for everyone involved.

Although legislation differs among provinces, the BC Wills Estates And Succession Act sets out parameters for the distribution of the estate, which can be complicated if there is no will, especially if the decedent has children or more than one spouse entitled to a share. So keep your will updated when circumstances change. As Miles notes, it’s always helpful to reach out to unbiased third-party experts. This way you can support both the people and causes you care about when passing on generational wealth.

Finally, keep in mind that the way you invest your money leaves a legacy, too. You can invest to make money and to make the world a better place for generations to come through sustainable or impact investing. Your investment dollars help sustainable companies thrive, and help to create a stronger future for your descendants.

Interested in exploring how to build your financial legacy? Talk to a Genus Advisor today. 

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