Planning For Your Children?s Inheritance

?Whether they are minors or adults, you should make plans for what your children will inherit when you die, and when they will inherit,? advises lawyer Fiona Hunter. If you don?t plan carefully, certain things may happen that you didn?t intend to happen, she says.

If your children are minors (under the age of 19) or are disabled, you need to think about certain things when creating a will. For example, think about how you would like the child?s guardian to use the money for the child?s care and education, at what age the child will receive the inheritance, and if your child dies before inheriting the estate, who else you would like to inherit your money.

If your child has special needs and is receiving provincial disability benefits, the child may lose all rights to those benefits if he or she inherits more than $3,000 when you die. You can prevent this happening by setting up a discretionary trust for your child so he or she does not receive the inheritance directly. (The Planned Lifetime Advocacy Network (PLAN) provides valuable information about estate planning for families with disabled children at http://www.plan.ca/.)

?Even with the best intentions,? warns Hunter, ?people make mistakes in planning for their adult children.? For example, you may have an investment portfolio valued at $150,000 and a house valued at approximately the same amount. You may think it?s a good idea to leave the portfolio to your son in your will and the house to your daughter, but if you sell the house and move into a care facility, you no longer have a house to leave to your daughter.

?In this case,? says Hunter, ?the proceeds from the sale of the house end up in the ?residue? of your estate and the children will not share equally in the estate.? The daughter will lose a significant amount of her inheritance.

Some people think it?s a good idea to put everything into joint ownership with their children, but that can cause problems, warns Hunter, because you lose control of your assets.

Think what would happen if you put your home in joint ownership with your son. You couldn?t sell the house without his permission. If you sell the house, you will be exempt from capital gains tax, but your son won?t be exempt from that tax. And, if your son goes into debt and has a creditor (or, more commonly, is involved in a marital dispute), you?ve exposed yourself to litigation, too. Once you put your house into joint ownership, you both own the house and legal consequences flow from that.

If you draft your will carefully, your children will inherit your estate as you intended. Talk to a lawyer so you understand all the legal principles involved in making your will.

Fiona Hunter is a lawyer with Horne Coupar in Victoria. She practices exclusively in the area of wills, estates and elder law.

The purpose of this article is educational in nature. It is not intended as legal advice. It offers general information only. If you have a legal problem, you should seek professional advice.