Content area
Full text
INTRODUCTION
Nowadays, "living inheritances" have become more common, in part due to the tax benefits that they present, the fact that it has become increasingly difficult for young adults to break into the housing market without this financial assistance, and a general attitude change towards finances and wealth transfer. Books like "Die With Zero: Getting All You Can from Your Money and Your Life"1 have shifted the mindset of many from constantly saving for retirement to focusing on the importance of enjoying wealth and passing it on to loved ones while alive (allowing the donor the benefit of watching loved ones enjoy it and the loved ones the benefit of better using the funds at a time when they are more likely to "need" it).
In 2019, Forbes Magazine reported that the Baby Boomer generation (those born between 1944 and 1964) is expected to transfer $30 trillion in wealth to younger generations over the next many years.2 Financial experts refer to this as the "Great Wealth Transfer"3. The Baby Boomers, after decades of prosperity and economic growth, have amassed significant financial wealth and are believed to control approximately 70% of all disposable income, according to a 2015 report.4
While these statistics originate from American reports, Canada has also reported an increase in the sharing of wealth with family members, including through gifts (or loans) given to younger generations to purchase homes, pay down debt and to generally to enjoy more financial freedom and increased standards of living.5
Naturally, there are substantial benefits associated with financial assistance and wealth transfer from third parties (family or otherwise). Even a one-decile increase in the wealth position of parents is associated with an increase of about four percentiles in their offspring's wealth position in adulthood. Research has also shown that ". . .grandparental wealth is a unique predictor of grandchildren's wealth, above and beyond the role of parental wealth, suggesting that a focus on only parent-child dyads understates the importance of family wealth lineages".6 Research also suggests that the common focus on inheritance (after death) is "misguided, since most of the advantages arising from family wealth already accrue from investment that begins much earlier in the life course, especially education and home ownership".7 Regardless of who provides the funds,...