One of the increasing challenges facing parents and other family members
today is achieving success in their estate planning – passing on their
wealth well. But how should we define “success”? From a professional
viewpoint, much of estate planning focuses on ensuring a tax- and
cost-efficient transition of wealth to future generations and focuses
primarily on financial aspects. But in doing so, have we lost sight of the
forest for the trees? What is the overarching purpose of passing on wealth?
Is it just about the money?
Those planning their estates, given the abundance of “affluenza,” are
increasingly concerned that focusing just on ways to increase the amount of
wealth passed on to children and family members results in a lack of focus
on the key issue of whether leaving a substantial inheritance to a child or
family member is a good thing or not. As parents, we want to do the best
for our children. Many are troubled that leaving a large inheritance to
their children will be harmful, and even destructive – that it will
decrease their self-reliance, ambition, and ultimately their self-esteem,
if not handled correctly and without a proper plan.
These concerns are not new. The great industrialist and philanthropist
Andrew Carnegie said at the beginning of the 20th century: “Why
should men leave great fortunes to their children? If it is from affection,
then it is misguided affection because great sums bequeathed often work
more for the injury than the good of the recipients.”
The modern day financial prophet Warren Buffett is well-known for
subscribing to a similar view, and he along with Bill Gates have propounded
the Buffett-Gates Giving Pledge, which has resulted in scores of
billionaires pledging most of their wealth to charity.
As the saying goes, “It is easy to give away money; what is difficult is to
give it away well.” The values we pass on to our children, the
education and life experiences we encourage them to have, including skills
to become financially savvy and astute, are all part of this challenge. The
lack of a balanced approach and the pursuit of money as an end in itself –
as opposed to a means to provide opportunity for growth and to explore and
enjoy all that life has to offer – is a challenge in our competitive
society, which often measures success by financial achievement. We need to
go back to fundamental principles and have clarity on our values in
planning to pass on our wealth.
The idea of family meetings, family mission statements, and a re-emphasis
on values important to each family is becoming a part of the wealth
planning and succession discussion. In a past blog entitled “Ethical Wills,” I
discussed the non-financial legacy we can leave and how an ethical will can
be part of passing it on. In a post earlier this year, I focused on the
importance of financial literacy and breaking the silence on talking about
money and inheritance, and preparing our children and other family members
to handle and manage their inheritance “The family wealth conversation – too little, too late?”
There is an increasing amount of literature on these topics. One of my
favourites because of its clear and succinct messages isWealth in Families by Charles Collier. Chris Clarke’s new book True Family Wealth: Love Money & an Inspired Life provides a
roadmap for goal-based wealth planning and drills down into the financial
and non-financial meaning of wealth and its importance in achieving a
As we look to the future, it seems there will be an increasing focus on
what are sometimes dismissively termed the “soft” issues of estate
planning, as opposed to the so-called “hard” issues, which deal primarily
with tax minimization and financial optimization. Paradoxically, the “soft”
issues are often the more difficult issues to solve than the “hard” issues.
All which is good news, as estate planning will become more balanced and
holistic, and in doing so, we will put the “success” back into succession
Courtesy Fundata Canada Inc. © 2017.
Margaret O’Sullivan is the principal of the Toronto-based trusts and estates law firm
O’Sullivan Estate Lawyers. This article is not intended as personalized advice.