Be Mindful of What you Read


One of the accepted truisms of the last decade or so it that, by reason of an ageing population, there will be huge impacts on our economic and societal structures, most of which are reported rather ominously.

The media is tasked with making sense of all the change that is occurring and, therefore, must have a “lens” through which to capture events and significant shifts.  The result is that the media often moves in a pack-like manner, latching onto an idea and examining all of its angles.  However, every once in a while, someone looks at that data or trends from a different perspective.  What had once been accepted as a truism, becomes open to challenge and debate.

There are a few hints that accepted truisms are being refined in the discussion of the wealth shift that is expected to take place between baby boomers and their parents, and again between baby boomers and their children.  Certainly those lawyers involved in planning and litigating estates can point to an increase in large estates, primarily due to the increase in real estate values.  However, there remain many smaller estates.  Many individuals are living healthy lives well into their 80s and beyond, meaning that wealth transfers are occurring later.  This reality led the National Post, in one of its recent themed publications, to highlight a growing problem: “a nation of waiters”.  Indeed, it was not referring to those working in the food service industry.  The article looks at an emerging trend of people banking on their inheritance, and spending it before it arrives.

David Foot, author of Boom Bust & Echo, is quoted in this article cautioning that all of the statistics one hears regarding the impending wealth transfer must be seen as averages.  There are very wealthy individuals who bring up the numbers and many more individuals who do not have large estates.  Further, he notes that the baby boomers often came from larger families, where the estates are divided amongst four or more children.  He makes the point that the boomers only have, on average, 1.5 children.  The greater wealth transfer might take place in a more gradual pace, over two generations.  This is an interesting perspective that does not challenge outright the well-known 2006 Decima Research study that forecasted over $1 trillion dollars passing to the next generation in 20 years.  That analysis is still accurate, but looking at the issue with a little more realism just might mean that every Canadian over the age of 55 should not expect an early retirement as a millionaire through inheritance.

The best advice from those in the business of wealth transfer?  Continue to do the right things.  Do not rely on an inheritance.  Lead your own healthy and productive life.  Create your own wealth.  Do your own estate planning.  If you play the new Canadian “waiting game”, you just might find yourself disappointed.