No kids? Here’s how to handle estate planning

The makeup of the Canadian family is changing and Christine Van Cauwenberghe, head of financial planning at IG Wealth Management, sees it first-hand. A small but growing number of the people coming through her door don’t have kids or obvious heirs to the wealth they’ve amassed throughout their lives.

“There are more and more families who don’t fall into the traditional family composition that we have seen in the past,” she said. “In some cases, people either have lost contact with their family members or you know, more people are just simply choosing not to have children.”

Almost a third of Canadian adults don’t intend to have kids, and birth rates have been falling for years, with a 5 per cent decline from 2021 to 2022, according to Statistics Canada.

Yet the intestacy system in Canada, which rules how assets are distributed in the case of no will, was designed around family. In general, spouses, children, parents, siblings, nieces and nephews are prioritized. If no family can be found, the estate goes to the government.

For those without a clear heir, estate planning often feels like navigating uncharted waters.

As Canada gears up for the largest intergenerational wealth transfer in history – an estimated $1-trillion passed down between now and 2026, according to Chartered Professional Accountants Canada – people without traditional family structures face additional considerations such as who cares for them in old age. But there are also significant opportunities to leave a legacy by supporting charities or close friends. Maximizing those benefits requires tailored financial and legal strategies.

A first step is reflecting on what you have to give and who you want to give it to, said Nicole Ewing, principal, wealth panning office at TD Wealth. Without kids, this might mean distant relatives, friends or charities – some of which come with different tax and gifting strategies.

For those considering charitable giving, Ms. Ewing recommends starting while alive, which can have significant tax advantages. “You should be connecting with that charity during your lifetime – giving a little bit now and seeing whether you’re comfortable and happy with how they are using your funds.”

One tax-effective way to do this is through a donor-advised fund. “It’s essentially set up in a way that it’s a foundation that allows individuals to have their own account where they can direct funds, make donations and receive charitable receipts,” said Ms. Ewing.

For those deciding to leave to charity, it doesn’t just have to be a cash gift – it can be stocks, investment funds or proceeds of a registered savings account.

“From a tax perspective… you might think about naming a charity as the beneficiary on a registered plan, so on your RRSP for example,” said Ms. Ewing. “That would be a tax-efficient way to essentially eliminate the tax that would have otherwise been payable on your registered account.”

If you leave an RRSP to almost anyone except spouses or kids, the account’s full value will be added to your income after death, potentially triggering a huge tax bill.

When you name a charity as the beneficiary, the funds are still included in the final income tax return, said Cassandra Cross, a wealth advisor at Nicola Wealth in Calgary. But the estate receives a tax credit equal to the value of the gift, offsetting taxes.

Charitable gifts can also be made outside a will. Life insurance proceeds can go directly to a charity, or ownership of the policy can be gifted for tax benefits.

However, Ms. Van Cauwenberghe cautions that leaving a gift to an organization that isn’t a registered charity doesn’t wield the same tax perks. “Sometimes that comes as a surprise to people – they leave gifts to organizations that aren’t registered charities, they’re non-profits, so they can’t issue a charitable donation receipt.”

Clearly understanding what you have to give and talking to charities about it beforehand is crucial. Ms. Ewing recalls someone who had a Beanie Baby collection, believing it was worth a fortune.

“There was an idea it had a certain value and it certainly did not maintain that value,” she said. “Reach out in advance to those institutions to see if they want them or what suggestions they might have.”

Finally, outline everything in a will. For those without heirs, choosing a trustworthy executor and someone to hold power of attorney becomes even more important, as they’ll oversee decisions around asset distribution and end-of-life care.

“You’d want to ensure that the executor has the authority to actually give your assets to the people that you want,” said Ms. Ewing. “If you want to make a charitable donation in your will… you have to specify that – include clear language giving your executor the authority to make that gift.”

An executor’s role can be demanding, so it’s essential to pick someone who’s willing – and eligible. U.S. citizenship adds complexity while bankruptcy can disqualify them.

Without a candidate in mind, professional trust companies can take on the responsibility, though their fees are often higher than the standard maximum 5 per cent compensation for individual executors in places like Ontario.

Planning for incapacity is also important. A power of attorney for personal care helps ensure your healthcare wishes are followed, but this role must be assigned to a friend or relative, not a professional entity.

For estranged families, leaving relatives out of a will needs clear stipulation. In provinces such as Ontario and B.C., disinherited spouses and children can challenge an estate, so including a statement explaining the decision can help.

“It can be as simple as acknowledging that you’ve considered the matter and intentionally chosen not to leave someone money,” said Ms. Ewing.