Financially Assisting Family Members During This Time

Many people are financially assisting family members who have been negatively impacted by the COVID-19 pandemic. These three tips will assist you in ensuring that you are in control of the long-term consequences of your generosity:

Financially assisting elderly parents or adult children – Be sure to inform yourself as to whether you may have a legal obligation to continue this assistance under the law of your province, including after your death should your parent(s) or adult child survive you. If so, have you provided for this in your Will.
Helping out the kids and/or grandkids - Do you intend this assistance to be a gift or a loan? If it is a loan, do you intend for it to be forgiven at the time of your death? Whether a gift or a loan that is to be forgiven, should this support be taken into account when equalizing your estate with other beneficiaries after your death?

If a loan, ensure that you document it as such and indicate who the borrower is. Is his/her spouse or partner a borrower as well?
If a gift, ensure that you document it as such and indicate to whom it is a gift. Is it a gift to his/her spouse or partner as well?
If the gift or the outstanding amount of the loan is to be taken into account at the time of your death, consider updating your Will to include an equalization mechanism to rebalance the equal shares with the other beneficiaries. This can be done by a codicil.

3. Have these times shown some beneficiaries to be more financially vulnerable than you thought? If so, then creditorproofing their inheritance through a testamentary trust in you Will may make more sense than an outright gift.

Assisting family members during your lifetime is an important part of any estate planning conversation. More information on beginning this conversation is available through your BMO financial professional.

Thank you to Diane Mehagan at BMO Nesbitt Burns for providing this article.