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New Demands for the Evolving Family

With so many kinds of families today, the type of planning advisors provide has had to evolve. Fortunately, rules and laws have also changed to help support all Canadians.

 

Date: October 6, 2017

Looking back on it now, the 1960s were a fairly uneventful decade for family dynamics. Most Canadian households looked like the old TV family the Cleavers – a mom, a dad and two smiling kids – but plenty has changed since then.

Over the past 50 years, the Canadian family has evolved dramatically. We now see more same-sex couples, single parents and blended families, while offspring are living with their parents far longer than they used to.

We have much more diversity in our culture, and all of these domestic shifts have impacted how families spend and save for the future, says Carol Bezaire, Vice-President of Tax, Estate and Strategic Philanthropy at Mackenzie Investments.

At the same time, tax and estate planning have become increasingly complicated, with more people changing career paths and working for themselves. As well, fewer people now have workplace pensions to support them in retirement.

A firm like Mackenzie has had to adapt to these changes – and, indeed, it’s spent the past half-decade delivering new solutions to the morphing Canadian family. Here are just some of the changes that families and financial planning have experienced over the years.

More children living with disabilities

Advances in medicine and changes in social attitudes mean more families are caring for children with mental and physical disabilities, and parents want to provide for them for the long term, says Bezaire. That’s why, in 2008, the Canadian government created the registered disability savings plan (RDSP), which allows these families to grow money tax-free.

Mackenzie is the only independent investment management firm that offers a suite of RDSPs, and it’s made a point of helping families register correctly to take advantage of government grants. “It’s a real passion for me,” Bezaire says. “I have a nephew who has a disability, and when we came out with the RDSP, I called my sister right away and told her, ‘You’ve got to get one of these.’”

Business-owning dynamics

Family members are also going into business with one another far more often than before. That’s created a type of family dynamic that wasn’t there years ago, especially when it comes to passing down a company to the next generation.

In the past, when a parent wanted to transfer a business to a child, “You shook hands and away you went,” says Bezaire. Now all siblings feel they have a right to equal treatment, while divorces could mean an ex-spouse holds shares in a company that they could then pass down to stepchildren. “It can get very complicated,” she says.

Financial rules around passing down a firm have evolved too – there are now lifetime capital gains exemptions of $850,000 per person on a business, for instance – making it that much more important to have an advisor help with a family business transition.

Changing retirement

Retirement has also changed significantly over the past 50 years. These days, many people work beyond the typical retirement age of 65, and with dual-income families now the norm, couples could retire at completely different times. People are also living to more advanced ages, which means their savings must last longer than it did years ago.

Fortunately, these days there are more ways to save. Many people still use Registered Retirement Savings Plans, but the advent of the Tax-Free Savings Account has offered another way to grow your savings tax-free.

At the same time, saving itself has become more complicated, says Bezaire. There are more vehicles to buy and new tax rules to consider, and the more money people make, the more they are at risk of losing income-tested government benefits such as old age security or the Guaranteed Income Supplement.

More charitable giving

As well, many Canadian families have been able to build up significant wealth over the past several decades. In smaller families, many older boomers are more prepared to give back through their estates and not just pass on wealth to the next generation.

Fortunately, Canadian laws support charitable giving more than ever. The rise of donor-advised funds in the past 10 years offers something of a mini-foundation for those who want to give more or give to many different organizations. “Ignore writing tiny cheques anymore,” says Bezaire.

While the Canadian family has changed, the advice for everyone remains the same: Plan ahead to make sure the money is where it needs to be. No one, regardless of their family situation, wants to pay more in taxes than they need to.

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