Estate Value
Grow It or Gift It?
Personal financial plans are very focused on the size of your estate at the end of your life. Plans on where to draw funds from and when to do so are often driven by having the maximum estate available for your heirs – be it your children, family or charity.
But Grow It isn’t the only option.
The other Canadian option is to give gifts while you are alive. Let’s look at some pros, cons, and actions that come from choosing the Gift It approach.
Pros
You get to see the benefit of your gift during your lifetime. In our scenario, seeing our children experience the benefit of a financial leg up now is greatly preferred by us instead of them receiving part of an estate when they’re 50-60 (assuming a long life for us) and set up in life.
Intentionally, proactively discussing this with your inheritors early and often will avoid any false hope on waiting for a future estate. Rather it may indeed further encourage them to make it on their own, as most of us with savings have done.
Also, there is no gift tax in Canada, with some exceptions around property. This is a great Canadian advantage that many countries do not have.
Cons
Once the gift is given, you lose control of what happens with it. If your unique situation suggests the probability of an unwanted outcome from giving up control, then maybe gifting isn’t for you.
An estate, once taxed by CRA, is distributed to the beneficiaries for them to control, like the transfer of control with gifts, just at a later timing. The exception is discretionary trusts where the estate names a trustee to direct distribution.
Action
Once you have emotionally committed to Gift It while now rather than transfer through your estate later, you need to intentionally work through the timing and size of gifts with your financial planner. A proactive plan gives you the best chance to ‘go to zero’, meaning end up with near-zero estate when your life ends.
It’s the same effort you’re putting in now to ensure there’s enough until the end, just with a smaller buffer.
The additional key action of the Gift It approach is to discuss this with your inheritors early and often.
Summary
The important information is that you have a choice - Grow It or Gift It.
For you and yours to Be Prepared for the future, know your choices and be intentional on your decisions.