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Will Power: The Inheritance Problem

Vicki O'Brien

| July 1, 2008

Image by: Kelly Sutherland

When the executor read out the terms of their father’s will, Julia and her two siblings just stared at each other in stunned silence. “We were completely shocked,” recalls the Vancouver marketing specialist.

“My dad had done his best to control us while he was alive – now he was doing it from the grave.” What they expected to be a simple three-way division of their dad’s considerable estate turned out to be a complex set of instructions, sending his adult children cap in hand to his executor any time they needed a little extra cash to cover unusual expenses such as new vehicles, home renovations or weddings. The executor was empowered to veto any request their father might have deemed frivolous or unreasonable.

“In retrospect, what happened wasn’t all that surprising given the way my dad behaved while he was alive,” says Julia. “Even later in life, when he was in an expensive care home getting lots of attention, he expected the three of us to be at his beck and call 24 hours a day. He constantly changed his will, threatening to cut us out every time he disapproved of something we said or did. He never really approved of our choice of spouses and did everything to ensure that none of them would get his money.” Fifteen years later, Julia and her siblings must still seek permission to access family cash and provide receipts for every penny they spend.

Posthumous finance tips

As the original executor has since retired, they now deal with someone in the firm who never met their father. Fortunately, says Julia, under the terms of the will, when she or her siblings die, their children will inherit the remaining share of his estate – no strings attached. “It wasn’t as if we ever spent a lot of money on ourselves,” she adds. “We would have used it to make life better for our children. Hopefully one day, at least, their families will be able to benefit.” Much is written about the business of making money but relatively little about the way we pass it on to our heirs – either when we’re still alive or when we finally shrug off this mortal coil. But clearly it’s a pressing societal issue: more than a million Canadian households, according to Statistics Canada, now have a net worth of at least $1 million. On top of that, there are the super-rich. Forbes magazine counted 25 Canadian billionaires in its 2008 survey, about two per cent of the world total, with a combined wealth of US$88.4 billion.

In line with their penchant for tweaking all sorts of social norms, wealthy boomers are shifting away from traditional estate planning – dividing their cash and assets between the next generation – toward the newer concept of legacy planning: figuring out how they want to be remembered and how they want to contribute to their families, communities and the rest of the world. A 2005 survey by global insurance giant Allianz found that boomers and their parents actually felt that the non-financial things an individual leaves behind – values, morality, faith – are 10 times more important to them than who gets the stuff or the money.

However, while exceptionally wealthy Canadians (those with upwards of $10 million) are increasingly leaving the bulk of their estates to charitable causes, our need to leave a monetary legacy for the kids remains pretty strong. Economists have identified four basic motives for this. First, there’s the altruistic: the sheer pleasure of knowing our children will benefit. There’s the egotistic, when the bequest has more to do with our own selfish desire for immortality than to help our children. There’s also the strategic, when we use the promise of inheritance as a carrot to extract filial obedience, such as joining the family business, getting a degree, choosing a “suitable” mate or maybe even visiting us in our old age. Lastly, there’s the accidental motive: we may not intend to leave anything when we die, but we wind up saving more than we can spend, so our heirs luck out.

In most affluent households, the subject of who gets the family money – how much and for what reason – is still taboo; it’s rarely discussed around the dinner table, especially with the children present. Planning for our final exit still makes us feel uncomfortable. Indeed, TD Waterhouse reports that 49 per cent of Canadians don’t even have a will. But smart parents begin preparing children to handle their legacy from an early age. David Bentall says that, growing up in a relatively modest home on Vancouver’s west side, he had no idea he was part of the third generation of Vancouver’s premier real estate and commercial-construction dynasty. His father, the legendary Clark Bentall, firmly believed that everything had to be earned and frequently reminded his four children to “work first, play later.”

They were all taught the value of money and, despite the family wealth, were never showered with gifts. Bentall remembers two exceptions: when he was in high school, his father bought him a car and gave him a White Spot credit card, for unlimited use by himself and his friends. “In retrospect he knew I was involved with a church youth group and wanted to make it easier for me to get there,” says Bentall. “Plus he probably thought I wouldn’t get into trouble if I spent all my time at White Spot. Of course, he was right.” Bentall says he never viewed his father’s expectations as a burden or responsibility. He spent 20 years in the family business before selling his shares in Dominion Construction to his sisters in 1998, going on to found his own firm, Next Step Advisors. Today he specializes in succession consulting and executive and life coaching.

Bentall says he and his wife Alison initially disagreed on how to handle the subject of money with their children. He believed money must be earned; she favoured an allowance. “I changed my mind after reading the book Raising Money-Smart Kids, which stressed the importance of teaching children that money is a scarce resource. Bill Cosby also tells this great story about the time one of his children asked him to buy something. When Cosby said no, his son asked: ‘But why can’t I have it? We’re rich.’ Cosby replied: ‘Son, your mom and I are rich – you are not.’ I think that’s a very nice distinction.”

In his west side Vancouver counselling practice, therapist Stephen Madigan sees a lot of unhappy adult children of wealthy B.C. families. He says arbitrary decisions in the wake of a parent’s death, made without any discussion, or downright punitive final wishes – such as the estate plan made by Julia’s father – can unleash a toxic tsunami on surviving children, often pitting them against each other for life.