Quote:
Originally Posted by CliffFletcher
Becoming more popular, but still not close to being typical. I couldn’t find Canadian numbers, but only 2 per cent of seniors households in the U.S have a reverse mortgage. The people calculating the trillion dollar/year wealth transfer are taking things like seniors debt in and reverse mortgages into account.
While younger retirees can go through a lot of money with travel, new cars, etc., spending typically declines sharply as people move through their 70s. I’ve been in charge of my parents’ finances for a few years now, and expenses are low. Between CPP, OAS, a modest pension, and income from RIFFS, everything is more than covered. We’re actually having to stash my mom’s money in a TFSA, as at 80 her income exceeds her spending.
That’s not even getting into the increasingly common household type of middle-aged adults living with their aging parents and sharing expenses, which saves everyone money.
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The vast majority of people have passive approaches to their terminal return/estate. But many of them shouldn't be doing that.
It literally sounds like you're getting to the point your mom should consider getting a tax planning engagement done. Start doing some of the estate transfers to the beneficiaries/kids earlier and while mom is still alive. Pay more taxes upfront and regularly so that when a long enough timeline passes and they pass away, more of the assets end up in the hands of the beneficiaries instead of as taxes. Clean up any potential messy assets with the estate.
People need to have better conversations about how to deal with their estates while still alive and consider certain intervivos activities if makes sense for their asset holdings/objectives. Don't leave them to the terminal return when all the available options are no longer available. If you do that, the government typically wins.
Just be aware there's a ton of things you can do (ie: be idle or take action) but you shouldn't do (ie: take wrong action/be unaware of difference of tort/tax law implications, be idle when you needed to take action).
For instance, some people do things to avoid probate, which means they pay more taxes, but it's the cleaner better outcome based on the attitudes of the beneficiaries. But others don't need to avoid those fights (ie: one beneficiary), so doing that means they needlessly pay extra taxes by doing that. For some, transferring everything at the last possible moment (terminal return) means the best approach. For others (and I've seen and I don't understand this), multi millionaire parents with kids whose net worth are like <$250K... do a 10-15 year plan to steadily transfer certain assets to the kids so that more ends up in the hands of the beneficiaries/kids (plus growth) vs leaving all of the deemed dispositions at the last moment (especially if it's just one parent remaining situations). But if the kids are high net worth, then this makes no sense.
Also, there's too many kids who think that money represents the love their parents have for them. That's incorrect and kinda crazy to distill the relationship down into a monetary value. Some people will leave more than half of their estate to one kid and not the other, not because they don't like the other kid, but that the other kid is doing well (multimillionare) and doesn't need the financial help while the other is barely scraping by (perhaps no fault to their own). Doing your tax planning, death planning etc. isn't just about money. It's also stuff like making sure that anything that needs to be said and/or repeated is done before the chance to do so is gone.