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Why and how you should start talking about family wealth

28 February 2020 by National Bank
Alternative minimum tax

Inheriting a small fortune from an old uncle you haven’t heard from in 15 years is pretty rare. Still, many families avoid talking about money and inheritance at all cost. And yet, not talking about it is often the source of family conflicts. Sophie Ducharme, associate vice president at National Bank Private Banking 1859, shares her advice. 

From wealthy brothers fighting over their mother’s Christmas dinnerware set, to a family expecting a hefty inheritance but finding themselves with a ton of debt, to a child getting inexplicably disinherited, Sophie Ducharme has seen it all. Here’s some advice from the notary and family wealth management expert on breaking the taboo of talking about money.

Why is it important to avoid keeping secrets from your family?

“You can avoid a lot of conflict if you just talk to each other!” insists Sophie Ducharme. “Even if you’re a young couple, you don’t want to find out, once you’re ready to buy a home and build your life together, that your partner has a ton of debt, terrible credit, and no borrowing capacity. You’d feel cheated!” Couples where one person takes care of the finances by themselves should also be vigilant. You could end up with nasty surprises later on when you look at your joint budget. Also, think about your estate as early as possible to avoid adding the taboo of talking about money to the fear of dying. “Many families never talk about it, but you don’t want to be surprised,” warns Sophie Ducharme.

What aspects of family wealth do you need to talk about?

“Everything, from sums of money to the way these will be divided. Many people tell themselves that their children will take care of their will and everything after they die, but it isn’t always easy, especially when they don’t understand the person’s choices.” Taking the time to talk to each other helps protect the relationships in your family.

Blended families present particularly delicate cases when it comes to the division of property between the new spouse and the children. What are the worst-case scenarios?

“The worst thing would be to leave everything to the new spouse and nothing to the children, but that’s rare! What you often see is a well-off man who starts a new life with a partner that’s close in age to his children. If he creates a trust fund and his partner continues to receive benefits from his estate, with his children only receiving the capital upon that partner’s death, it will probably be a good, long while before the children get their money. And, often, the partner can impinge on the capital to maintain their lifestyle, which can be very subjective,” explains Sophie Ducharme.

You should therefore avoid clauses that are open to interpretation. There are many possible solutions for each particular situation, like leaving part of your assets to your children during your lifetime or dividing your assets between your spouse and your children.

Do you have an example of a family that’s able to talk about such difficult topics?

“Yes, there’s this entrepreneur and his three daughters. He’s always talked openly about his finances with them,” says Sophie Ducharme. “When he wanted to sell his business, he asked them if they wanted to buy it. But they preferred not to. He has already handed things down to them and written his will, and they know exactly what will happen after he passes away. This greatly reduces any risk of conflict. But this family represents an exception to the rule.”

When is the right time to talk about family wealth management?

Sophie Ducharme recommends avoiding Christmas and family birthdays. “Those are times to celebrate, not to talk about money! Plan ahead for a time to do it, like during a small dinner. Often, families decide to talk about it without the children’s spouses. This meeting can also take place with a notary.”

What’s the advisor’s role in all of this?

The advisor will be able to give you personalized recommendations to help you manage your money in a sound way, depending on your objectives. By setting up a good savings and investment strategy, they will help you plan your goals, going as far as looking at withdrawal scenarios with you, if necessary. “And if your advisor determines that your family’s financial needs are more complex, they’ll feel comfortable referring you to a wealth management expert,” concludes Sophie Ducharme.

Need help?

Start by meeting with an advisor. They will guide you on the next steps according to your needs.

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