Practical insights for families giving or receiving an inheritance in Canada | Kluge Wealth Advisory Group
Canada is in the middle of the largest generational wealth transfer in its history. The Chartered Professional Accountants of Canada estimated that $1 trillion would move from baby boomers to their millennial and Generation X children between 2023 and 2026. More recent research suggests the transfer will continue for years as aging Canadians pass wealth to the next generation, both through their estates and increasingly during their lifetimes.
Research on intergenerational wealth transfer by Williams and Preisser has found that that 70% of family wealth disappears following the transition. By the third generation, 90% of family wealth is gone.
The technical details of estate planning (wills, powers of attorney, trusts, beneficiary designations) are important and must be right. They are usually not, however, what determines whether wealth transfer succeeds. Communication, preparation, and family decision-making can be equally or more important.
Why do most estate plans fail?
The research on this is striking. According to Williams and Preisser, of the estates that fail, 60% do so because of a breakdown in communication and trust within the family. Another 25% fail because heirs were unprepared to receive and manage the wealth. The other 15% of failures are attributable to lack of planning and technical causes such as poor legal documents, weak tax planning, etc.
This reframes the conversation entirely.
Without preparation as well as a shared sense of purpose and direction, the technical documents become much weaker and, in most cases, cannot ensure success.
What does it mean to share more than your wealth in an estate plan?
The most important thing a family can transfer is context.
Conversations about why decisions were made, what wealth is meant to accomplish, and what values should guide how it is used turn an estate plan from a legal document into a lasting framework. Psychological research consistently finds that people who receive wealth with a clear sense of purpose attached to it are significantly more likely to steward it well.
The purpose does not have to be grand. “I want you to have financial security for your family and to pay it forward when you can” is sufficient. What matters is that it is articulated and not assumed.
This applies in both directions. If you are planning to pass on wealth to the next generation, these conversations are the most valuable thing you can do before any legal document is signed. If you are on the receiving end, asking those questions of your parents or grandparents is equally important.
How should Canadian families think about wealth transfer as a process?
Treat it as a process rather than an event.
Think of it like the 400-metre relay in the Olympics. One runner comes around the corner at full speed. The other runner is already accelerating. There is a zone in which the baton changes hands. Both runners are moving and the transfer is smooth because both are ready.
Gradual involvement works the same way. Heirs who are included in financial discussions early, who learn how to choose advisors, who understand how wealth is structured and why decisions are made, arrive at the transition with experience. Experience produces judgment and judgment produces good outcomes.
The involvement does not need to be exhaustive or immediate. It just needs to start before the transfer itself becomes urgent.
What should you do if you receive an unexpected inheritance in Canada?
Slow down.
That is the most important piece of advice, and it is the one most people find hardest to follow.
An inheritance is frequently one of the most significant financial and emotional events of a person’s life. Behavioural finance research is clear on this: grief, bereavement, and the complex emotions that follow the loss of a loved one make it much harder to make good long-term decisions.
Almost nothing about a sudden inheritance requires immediate reaction. Virtually every option available today will still be available in six months or a year. Responding to new financial circumstances is very different from reacting to them.
The key things worth understanding start with what you have inherited, who the advisors and executors are, and what the implications are for your broader financial plan. From that foundation, decisions about major purchases, gifts, or restructuring can be made deliberately.
What do Canadian families often miss about inheritance and taxation?
Canada does not have an estate tax in the way the United States does. That leads some families to underestimate the tax exposure associated with a significant estate.
What Canada does have is date-of-death taxation. The general rule is that assets are deemed to have been disposed of at fair market value and tax liabilities crystallized on the date of death. This can create a substantial tax liability if large registered accounts, investment portfolios, or a business are involved. A large estate that looks significant on paper may look considerably different once that tax is accounted for.
In a practical sense: gross numbers are less relevant than net numbers. Planning that focuses only on building the largest possible estate without accounting for the tax that will be triggered at death is incomplete planning. This is one of the reasons early coordination between a wealth advisor, an accountant, and an estate lawyer matters.
If your family is in the middle of an inheritance conversation, whether you are giving, receiving, or anticipating, reach out anytime. Getting the direction right is the most important step. The technical details fall into place from there.
Sources: CPA Canada / Radio-Canada “A trillion-dollar tsunami” (ici.radio-canada.ca) | TruePoint Wealth: “Why 70% of Estate Plans Fail” (truepointwealth.com) | Family Business: “Unready and Unadvised — The Silent Crisis in Family Wealth Transfer” (familybusiness.org) | WealthCo: “The Great Wealth Transfer in Canada” (wealthco.ca)
Conrad Kluge CFA, CFP®, Senior Wealth Advisor, Senior Portfolio Manager, leads the Kluge Wealth Advisory Group and is a financial advisor at Wellington-Altus Private Wealth, working with high-net-worth families in Calgary, Alberta. This post is for informational purposes only and does not constitute investment advice. Please consult with a qualified financial professional regarding your specific situation.