Estimates predict that the transfer of wealth from baby boomers to the next generations will be in the range of $1 trillion to $2 trillion in Canada within the next 10 to 20 years. (Credit: Getty Images\/iStockphoto) <\/p>\n
There are numerous estimates predicting that the transfer of wealth<\/a> from baby boomers<\/a> to the next generations \u2014 mainly millennials<\/a> or gen-Xers<\/a> \u2014 will be in the range of $1 trillion to $2 trillion in Canada within the next 10 to 20 years. The taxman, of course, is poised to take a significant bite of that wealth.<\/p>\n Given this looming transfer, the estate planning<\/a> business has been thriving. Estate planning involves the planned transfer of wealth in an orderly fashion and requires a multitude of disciplines, including tax, legal, accounting, investment planning, insurance, trust administration and philanthropy.<\/p>\n Many of these professions offer courses on estate planning, but there are few organizations that encompass the multitude of disciplines required to plan and implement a good estate plan. The designation granted by the Society of Trust and Estate Practitioners<\/a> (STEP) is one of them. It offers numerous courses, conferences, articles and other expertise to help practitioners plan their clients\u2019 affairs with the multidisciplinary approach that is a must. STEP\u2019s rigorous training equips practitioners with great tools.<\/p>\n There are no cookie-cutter approaches to estate planning. You might expect that your local accountant, insurance adviser, investment adviser or lawyer will have all the answers. They probably don\u2019t.<\/p>\n I recall reading a full-page newspaper article about estate planning while vacationing more than 25 years ago in Saskatchewan. It was written by a local insurance adviser who espoused a method of estate planning that advocated having \u201cmom and dad\u201d sit down with all their ultimate beneficiaries around the \u201ckitchen table\u201d in a planned meeting facilitated by him where the ultimate estate plan would be laid out. If there were any problems or issues, they would be dealt with right then and there.<\/p>\n I was happy that approach worked for him, but I knew that taking that kind of approach with most of my clients would be a disaster. For Seinfeld fans, it reminded me of Festivus<\/a>, where everyone gathers around a pole at dinner for an \u201cairing of the grievances.\u201d<\/p>\n Estate planning can involve highly-charged emotions that are not usually resolved by simply sitting around a table and having it out or airing one\u2019s grievances. It involves careful coordinated planning with the various disciplines and an appreciation of the complex emotions and psychology that are often at play.<\/p>\n It also involves aggressively keeping up to date since laws and government administrative procedures can quickly change and materially affect an estate plan. For example, you have to consider if another country has jurisdiction over some of your assets that you wish to pass along. Many countries will charge a tax \u2014 in some form or fashion \u2014 on the transfer of those assets, such as real estate, either during your lifetime or on death.<\/p>\n Story Continues <\/p>\n The most obvious example is the estate tax in the United States<\/a> that applies to its citizens and U.S. domiciles. Americans can take advantage of an exemption, but the amount has been a political football over the years.<\/p>\n For 2025, the amount is US$13.99 million, but it was scheduled to decline to approximately US$7 million at the end of this year. However, President Donald Trump\u2019s One Big Beautiful Bill Act<\/a> has erased that possibility by making the exemption amount US$15 million for 2026 and indexing it to inflation for every year after.<\/p>\n U.S. estate tax rates are progressive, with 40 per cent being the top rate. Any assets in excess of the exemption amount in the year of death will be subject to the top rate on worldwide assets for U.S. citizens, regardless of where their wealth is held.<\/p>\n The U.S. estate tax also applies to non-U.S. persons, including many Canadians, if they hold U.S. assets such as stocks and real estate at death. Can affected Canadians avail themselves of the full exemption amount? No.<\/p>\n However, Canada is one of a handful of countries that the U.S. has agreements with that enable affected persons to use a portion of the exemption amount, with the portion being the ratio of the fair market value of U.S. assets at death compared to the deceased\u2019s fair market value of worldwide assets multiplied by the current year\u2019s exemption amount.<\/p>\n For example, let\u2019s say Mr. Jones, a Canadian who is not a U.S. person, owns US$1 million of Apple Inc. stock at death and a US$2-million home in Florida. His worldwide estate is worth US$20 million when he dies on Feb. 1, 2026. His U.S. assets are US$3 million, or 15 per cent of his estate. Accordingly, he would be entitled to 15 per cent of the 2026 exemption amount of US$15 million, or US$2.25 million.<\/p>\n Overly simplified and ignoring any currency implications, Mr. Jones\u2019 U.S. estate tax liability would be US$300,000 (US$3 million minus US$2.25 times 40 per cent).<\/p>\n The above would be separate and apart from his Canadian tax liabilities arising from deemed dispositions upon death. Would his estate be able to use the U.S. estate tax liability to offset any Canadian tax? Perhaps. But such relief is very limited given the restrictions in the Canada-U.S. taxation treaty.<\/p>\n What does all of this mean? In short, the $1-trillion to $2-trillion wealth transfer is well underway. Developing an effective estate plan requires more than a will<\/a> from 20 years ago, a few beneficiary designations or the advice of a single professional who claims to do estate planning.<\/p>\n It demands a coordinated, multidisciplinary approach \u2014 tax, legal, accounting, investment, insurance, trust and philanthropic expertise \u2014 working in concert. It demands constant vigilance to keep pace with shifting laws, cross-border complexities and changing family realities.<\/p>\n Estate planning is an ongoing act of stewardship. Done poorly, it\u2019s an expensive gift to the government \u2014 to help fund their latest spending spree \u2014 and a recipe for family strife.<\/p>\n Kim Moody<\/a>, FCPA, FCA, TEP, is the founder of Moodys Tax\/Moodys Private Client, a former chair of the Canadian Tax Foundation, former chair of the Society of Estate Practitioners (Canada) and has held many other leadership positions in the Canadian tax community. He can be reached at kgcm@kimgcmoody.com and his LinkedIn profile is https:\/\/www.linkedin.com\/in\/kimgcmoody<\/a>.<\/p>\n _____________________________________________________________<\/p>\n