Guiding your clients in intergenerational wealth transfer

Intergenerational wealth transfer is one of the most critical areas of estate and tax planning. As baby boomers retire and pass on assets, lawyers have a major role in helping families transition their wealth smoothly. 

Lawyers must guide their clients through legal, tax, and practical considerations to reduce disputes, taxes, and complications. In this article, Lexpert will look at the legal strategies and planning tools lawyers should consider when advising clients on intergenerational wealth transfer. 

What’s the problem with intergenerational wealth? 

While passing wealth to future generations can create financial stability, it also raises several concerns: 

• Wealth inequality: Large inheritances can widen the gap between wealthy and less wealthy families, making social and economic mobility harder. 

• Family conflict: Disagreements over distribution or fairness can lead to legal disputes and strained relationships. Worse, it can result in costly litigation. 

• Unprepared beneficiaries: Recipients without financial literacy might mismanage inherited assets, diminishing long-term value. 

These issues often drive demand for skilled estate planning and dispute resolution—areas where the best personal tax planning and estate lawyers in Canada excel. Feel free to browse our list if you want to connect with these experts! 

What’s intergenerational wealth transfer? 

Intergenerational wealth transfer refers to the passing down of assets, property, or financial resources from one generation to the next. This is usually done from parents to children or grandchildren. 

This transfer can happen during a person’s lifetime through: 

• gifts 
• trusts 
• property transfers 

It can also be after death through a will or estate. Assets involved often include: 

• cash 
• real estate 
• investments 
• family businesses 
• other valuable property 

Know more about intergenerational wealth transfer in this video: 

Want to know if there are family law Implications of intergenerational wealth transfers? Check out this article for more. 

How much money can you inherit in Canada without paying taxes? 

In Canada, there is no inheritance tax. Your clients can inherit any amount without paying tax simply for receiving it. When a person passes away, the Canada Revenue Agency (CRA)  treats all their assets as part of their estate and taxes them before anything is given to beneficiaries.  

Your clients’ heirs don’t need to pay tax on their inheritance because the estate has already paid what’s owed. 

Why intergenerational wealth transfer planning matters 

The transfer of wealth between generations can have major tax implications, lead to family conflict, or even result in costly litigation if not handled properly. Your clients might want to: 

• minimize probate fees and taxes 
• provide for spouses, children, or grandchildren 
• transition a business or property smoothly 
• protect vulnerable beneficiaries 

With intergenerational wealth transfer planning, your clients can be confident that these goals will be met through sound legal structures and documentation. 

Business succession as part of intergenerational wealth transfer 

Many clients include the transition of a family business as a major part of their wealth transfer strategy. Legal planning in this area is complex and must address ownership, tax exposure, and long-term sustainability. 

Structuring ownership and control 

Transferring shares of a business or real estate gradually allows the senior generation to retain control while introducing the next generation. This often involves a shareholders’ agreement that defines roles, responsibilities, and rights for each party. 

Using estate freezes 

Lawyers often recommend estate freezes to cap the value of the older generation’s shares. This strategy shifts future growth to the successors while allowing the parent to retain preferred shares with fixed value and voting control. 

Managing operational roles 

Beyond ownership, there must be clarity about who will manage the business. Whether children will be active in operations or remain passive shareholders needs to be discussed early and documented carefully to avoid disputes. 

Managing intergenerational wealth transfer 

Gifts and loans when transferring wealth 

Gifting during a client’s lifetime is a common strategy to reduce the size of their estate and avoid probate. However, large gifts can trigger tax consequences or later disputes. 

Loans to children, especially for home purchases or education, should be documented clearly. A promissory note or loan agreement can avoid future uncertainty or claims of unequal treatment among siblings. 

Where appropriate, lawyers can advise on using prescribed rate loans in family trusts to achieve income splitting. 

Wills and powers of attorney for generational assets 

Estate planning documents remain the foundation of any intergenerational wealth transfer. These must be reviewed regularly and aligned with the client’s overall plan. 

A will should: 

• reflect current family and financial circumstances 
• appoint appropriate executors 
• provide clear instructions on asset distribution 

Powers of attorney (for property and for personal care) are also crucial. They ensure that someone trusted can manage the client’s affairs during incapacity. 

Lawyers should explain the importance of updating these documents after major life events, such as marriage, divorce, or the sale of a business. 

Tax considerations when transferring wealth 

Tax planning is integral to every wealth transfer, and lawyers should be aware of how asset transfers are treated at death and during life. 

Deemed disposition and capital gains 

When someone dies, they are deemed to have disposed of most assets at fair market value. This triggers capital gains tax unless specific exemptions or rollovers apply. The inclusion rate, value growth, and asset type all affect tax payable. 

Probate and estate administration tax 

Assets that pass through a will are subject to probate fees, which can be minimized through tools like joint ownership, trusts, or named beneficiaries on registered accounts. Lawyers should confirm that these align with estate planning to avoid unintended consequences. 

Attribution and income splitting 

Transfers between family members can sometimes result in income attribution, where the original owner remains taxable on income earned. Using prescribed rate loans or trust structures might help clients legitimately split income while remaining compliant. 

Double taxation risks for business owners 

If a corporation’s shares are sold or redeemed without proper planning, clients might face double tax—once on deemed disposition, and again when funds are distributed. This can be avoided with post-mortem pipeline strategies or corporate reorganizations coordinated with tax advisors. 

Digital assets as part of inherited wealth 

Digital assets such as online accounts, cryptocurrency, and intellectual property are increasingly relevant. These must be included in planning and documented carefully. Clients should: 

• inventory digital assets and access credentials 
• update wills and powers of attorney to authorize access 
• consider whether digital assets hold financial or sentimental value 

Failing to plan for digital assets can result in loss of value or difficulty administering the estate. 

Real estate and legacy wealth 

Real property, particularly cottages, family homes, or income-generating buildings, presents both opportunities and challenges during intergenerational transfers: 

Ownership structures and survivorship 

Real estate can be held jointly with right of survivorship to avoid probate. However, this must be considered carefully in light of family dynamics and potential conflicts. Adding a child as joint owner could also result in unintended tax or legal consequences. 

Capital gains and exemptions 

The principal residence exemption can shelter some or all of the capital gain on a home, but it can only apply to one property per family unit. Secondary properties, like cottages or rentals, will be subject to capital gains tax. Lawyers must work with clients to determine which properties qualify and how to plan accordingly. 

Family use agreements and trusts 

For vacation properties shared among multiple children, a usage agreement can clarify how costs and access are managed. Alternatively, a trust might be used to hold the property and provide long-term governance if co-ownership is expected to continue. 

The next generation’s readiness for intergenerational wealth transfer 

Preparing heirs to receive and manage wealth is a huge part of intergenerational wealth transfer. Even when the legal and tax structures are well designed, the transfer can fall short if the next generation is not equipped to handle the responsibility. 

Many younger family members might have limited experience with budgeting, investing, or managing business assets. Without basic financial literacy, inheritances can be mismanaged or lost. Lawyers can guide clients to start early with financial education. This can be through formal programs, mentorship, or involving children in family financial decisions while the client is still alive. 

The role of communication in preparing heirs 

Equally important is communication. Families benefit from open, ongoing conversations about values, expectations, and roles. These discussions don’t need to disclose exact figures but should provide clarity about how decisions are made and what the long-term vision is. 

This is especially useful in cases involving family businesses or shared real estate. When heirs understand the purpose of the plan, they are more likely to preserve and grow the wealth. Lawyers can help by encouraging clients to bring the next generation into meetings or introducing them to the advisory team. 

A well-prepared heir can make the transfer more effective and reduce conflict later on. 

Avoiding conflict during transfer of wealth 

Disputes between heirs can derail even the most carefully drafted plans. Lawyers should anticipate areas of conflict and design solutions to reduce friction. Here are some strategies: 

• using independent executors or trustees 
• explaining plans to family members during the client’s lifetime 
• including dispute resolution mechanisms in shareholder agreements or trusts 
• balancing fairness and equality in blended families 

Some clients might benefit from using a professional corporate trustee to reduce tension between siblings or stepfamilies. 

Using life insurance in family inheritance 

Life insurance provides flexibility and liquidity in estate planning, especially for covering taxes or balancing inheritances. 

Ownership and beneficiary designations 

A life insurance policy might be personally owned or held by a corporation. Personal ownership allows for direct payment to named beneficiaries, often outside the estate and probate. Corporate ownership might offer tax advantages, particularly where the business needs funds to redeem shares or pay taxes. 

Equalizing inheritances 

Life insurance can provide a cash benefit to children who are not involved in the family business or not receiving certain assets. This allows parents to equalize value while keeping business continuity intact. 

Managing proceeds for minors or vulnerable beneficiaries 

If a beneficiary is a minor or has a disability, the insurance proceeds should not be paid directly. Instead, a testamentary trust or insurance trust can be set up to manage funds under specific instructions. 

Legal professionals’ role in managing intergenerational wealth transfer 

Lawyers play a central role in coordinating the moving parts of an intergenerational wealth transfer plan. This includes: 

• identifying goals and family dynamics 
• drafting documents with tax and legal consequences in mind 
• collaborating with accountants, financial planners, and business advisors 
• updating the plan as the client’s life evolves 

Building long-term relationships with clients and their families allows lawyers to guide the wealth transfer across generations. 

Building a legacy through intergenerational wealth transfer 

Helping clients transfer wealth is not only about minimizing tax or avoiding probate. It’s about achieving personal and family goals, preserving relationships, and securing the future. As legal advisors, lawyers are in a unique position to design practical, durable solutions that carry a client’s values and assets into the next generation. 

By using trusts, succession planning, wills, and by coordinating with other professionals, lawyers can help clients protect their legacy and support their families for decades to come. 

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