When we pass on, our children will each inherit a tidy sum, but they have little interest in investing. What instruments should I suggest to them for long-term growth, income and security?
We asked Jennifer Watson, CFP, CIM and managing partner of Watson Investments, to answer this one.
This question is more on point than you may know. Canada’s great wealth transfer is already under way, with more than a trillion dollars being passed down, according to CPA Canada. And, according to a 2024 report by Manulife Private Wealth, more than a third of older Canadians are worried about it.
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For many heirs, Ms. Watson said, an inheritance may be the largest sum they will ever manage, and it often arrives intertwined with grief. The best path forward for investment success for your children, she added, should include these considerations:
Investment education. “Even if your children show little interest now, encourage some exposure before they inherit.” Ms. Watson suggested that giving them a modest amount to invest with an adviser can build familiarity and confidence without high stakes.
Connect heirs with a trusted team. For heirs who are not inclined to self-manage, professional advisers are essential. “Even confident investors may struggle when emotions around inheritance run high. Introduce your children early to the team you value, ideally one that provides both planning and investment management and that is not near retirement themselves, so continuity is assured.”
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Plan before acting. Encourage heirs to first outline what the inheritance is for: retirement, security, philanthropy or lifestyle. Until the plan is in place, funds can rest in a high-interest savings account for flexibility. “And avoid locking into illiquid products prematurely, such as GICs,” Ms. Watson advised.
“The plan will also clarify which tax-efficient vehicles, RRSPs, TFSAs and non-registered accounts make sense. Some may choose to earmark a portion of the inheritance for their children. For minors, perhaps investing in RESPs or trusts, and for adult children, perhaps direct cash gifts.” This planning can start even before the funds are received, she noted.
Thoughtful investing. Once goals are defined, diversified portfolios are typically the foundation. For long-term needs, greater equity exposure, generally through low-cost ETFs, mutual funds and certain alternative investments, may be appropriate. For shorter-term needs, fixed income generally provides stability.
Ms. Watson also advised that you encourage your heirs to review inherited holdings objectively. “It is common to keep investments out of loyalty, but the best adviser will help balance respect for sentiment with what is financially prudent.”
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Protect the inheritance. Remind your children that inheritances are generally considered personal property in Canada. However, Ms. Watson added, if commingled with matrimonial assets, that protection may be lost. Seeking legal advice before combining funds ensures clarity and safeguards.
Above all, normalize an interest in investing as much as possible while you still can. “By combining early education, a trusted advisory team, careful planning, disciplined diversification and matrimonial considerations, you equip your heirs not just with financial security but also with the confidence and tools to steward their inheritance wisely.”
Do you want advice on a financial planning or retirement issue that’s affecting you? Send us an e-mail.