What Is the Best Way to Leave Your Estate to Your Children in Canada?

How Should I Approach Leaving an Inheritance to My Kids?

The best way to leave an inheritance to your children is to start planning early and talk with a professional.

The bare minimum is to create a well-written Will. 

You need to consider your children’s age, family dynamics, and financial situation alongside your overall estate planning goals. Then you can determine whether your situation is complex and would benefit from the use of a formal trust or other estate planning tools.

Written By Tiffany Woodfield, Financial Advisor, TEP®, CRPC®, CIM®

Summary of Key Points

• Everyone needs a Will, but not everyone needs a trust. 
• Start the estate planning process by defining what matters most to you.
• Consider family dynamics and whether conflicts may occur. 
• Trusts are beneficial for blended families and complex or substantial assets.
• Families with businesses often benefit from using a trust in their estate planning. 
• Consider life insurance as it provides immediate tax-free financial support to your beneficiaries. 
• You can leave assets to your children with a Will, Trust, beneficiary designations, joint ownership, and life insurance. 

Table of Contents

1. How I’ve Approached Estate Planning for Our Kids
2. How to Get Started with Estate Planning, Even If You’ve Been Procrastinating
3. What Are the Main Ways to Leave Assets to Your Children?
4. Who Should Consider Using a Trust, Not Just a Will?
5. What Are the Pros and Cons of Leaving Assets Directly to Children?
6. When Should You Get Professional Estate Planning Help?

How I’ve Approached Estate Planning for Our Kids

As parents, my husband and I want our children to reach their full potential, spread their wings, and become independent. 

At the same time, we have a strong desire to protect them. So we have approached our estate planning with both of these values in mind.

When our boys were young, our focus was making sure we had an up-to-date Will and naming guardians who could care for them if something happened to us.

As they have grown into teenagers, we’ve started teaching them about money, investing, and the value of time and hard work.

Because our children are still not at a stage where they could confidently manage a large inheritance on their own, we included a testamentary trust in our Wills. A testamentary trust only comes into existence after death, which means we maintain full control while we’re alive. We can update the terms at any time as our family circumstances, goals, or values change.

The trust also allows us to set rules for how and when our children would receive their inheritance. 

For example, the trustee could use funds for education, healthcare, housing, or other needs while delaying access to larger amounts until they are older and more financially mature. This gives us peace of mind knowing that the money would be used to support our children rather than overwhelm them.

We worked with an estate lawyer to ensure our Wills and trust provisions were properly drafted and legally valid.

Estate planning is not a one-time event, so we review our plan every couple of years to make sure it continues to reflect our wishes and the needs of our family.

This approach gives us confidence that if something happened to both of us, our children would be cared for financially while still having the opportunity to grow, learn, and make their own decisions over time.

How to Get Started with Estate Planning, Even If You’ve Been Procrastinating

The most important thing is to take the time needed to do your estate planning.  

When you have children, life can get busy. And estate planning can be the last thing on your to-do list. I often hear people say that they don’t know where to start, so they don’t start. 

It’s always something to tackle tomorrow. But estate planning isn’t something you can put off indefinitely. 

When getting started with your planning, be honest and think about whether there is the potential for conflict in your family with siblings or a blended family.  

Jot down what is most important to you and then what your fears are around estate planning. Do this, and then meet with an estate lawyer. 

When you know what is most important and your fears, you’re better positioned to protect your estate and the people you love.

While it is important to list your assets and beneficiaries, the most important and overlooked step is to first know what is most important and what worries you.

This will set you up for success whether you just need a simple will or a more complex trust. Without knowing what matters, your plan won’t help you achieve your goals. 

In brief, these are the key steps to take when planning how to leave your estate to your children: 

1. Assess if there is the potential for family conflict after you die. 
2. Write down what’s most important to you.
3. Write down your fears around estate planning. 
4. List your assets and beneficiaries.
5. Meet with an estate lawyer and your financial advisor.  
6. Create an estate plan that includes a well-written Will and is based on what matters most to you. 

What Are the Main Ways to Leave Assets to Your Children?

Although there is no single “best” way to leave assets to your children. It is important to understand the most common ways parents pass wealth to the next generation.

Wills

A Will is often considered the foundation of most estate plans.

It is a legal document that details who receives your assets, appoints guardians for minor children, and names an executor to carry out your wishes. Assets that pass through your Will generally become part of your estate and may be subject to probate fees.

Trusts

A trust is a legal arrangement that allows one individual to manage money or assets for another individual.

A trust can provide greater control over how and when your children receive their inheritance. For example, you may want funds used for education and have larger amounts delayed until your children reach a certain age.

Trusts can be especially useful when children are minors or when you want to protect assets from misuse.

Beneficiary Designations

Certain assets, such as RRSPs, RRIFs, TFSAs, and life insurance policies, allow you to name a beneficiary.

If structured properly, these assets can pass directly to the named beneficiary and usually bypass the estate, making the transfer simpler and often faster.

Joint Ownership

Joint ownership is when an asset is owned jointly with a right of survivorship.

As a result, when one owner dies, the asset may pass directly to the surviving owner without going through the estate. 

Life Insurance

Life insurance can be a good way to leave a tax-free lump sum to your children or other beneficiaries.

The proceeds are usually paid directly to the named beneficiaries, providing immediate tax-free financial support and often bypassing the estate.

Who Should Consider Using a Trust, Not Just a Will?

For many families, a Will is enough to pass assets to the next generation. 

However, there are situations where a trust can provide greater flexibility, control, and protection. Trusts are often worth considering if you have a blended family, assets or beneficiaries in multiple countries, a business, or significant wealth to pass on.

Business Owners with Complex Estates

When you own a business, it can be difficult to divide assets equally among family members. A trust can help create a clear plan for managing business interests and distributing wealth in a fair and tax-efficient way.

Families with Significant Assets

When you have a larger estate, you often can benefit from additional planning and oversight. A trust offers more control, strategies and solutions to manage how assets are distributed.

Blended Families

When you are in a blended family, there is generally more complexity and risk of conflict on how to distribute your estate. Using a trust can help balance the needs of a surviving spouse while still protecting an inheritance for children from a previous relationship. This can reduce the risk of unintended outcomes and help ensure your wishes are carried out exactly as you want them to be. 

Families Concerned About Asset Protection

A trust can help protect an inheritance from risks such as creditors, lawsuits, or poor financial decisions. It can also provide guidance on how funds should be used and when beneficiaries can access them.

Parents with Minor Children

Children under the age of majority generally cannot directly inherit significant assets. A trust allows you to appoint someone to manage the money on their behalf and set rules for how and when they receive their inheritance.

What Are the Pros and Cons of Leaving Assets Directly to Children?

Pros of Direct Inheritance

• Simple and easy to set up.
• Children receive assets quickly.
• Lower cost than using a trust.
• Easy to update your Will if your wishes change.
• Children have full control over their inheritance.

Cons of Direct Inheritance

• Children may not be ready to manage the money.
• You lose control over how the assets are used.
• Assets may be exposed to creditors or lawsuits.
• Inherited assets may be at risk during a divorce or separation.
• May miss out on planning opportunities available through a trust.
• Provides little protection for beneficiaries who are vulnerable or financially inexperienced.

When Should You Get Professional Estate Planning Help?

Professional estate planning help becomes increasingly important as your life and finances become more complex.

A lawyer can help prepare legal documents such as Wills, Powers of Attorney, and Representation Agreements. An accountant can provide guidance on tax implications, while a financial advisor can help coordinate your overall estate strategy and ensure your assets align with your goals. 

You should consider seeking a professional with experience in dealing with situations such as yours.  For example, get specialized advice if you own a business, have a blended family, expect an inheritance, or have assets in more than one jurisdiction. 

Remember: Even if your situation appears straightforward today, professional guidance can help identify issues before they become costly problems later. 

Estate planning is not a one-time event. Life changes because people get married, get divorced, or have children or grandchildren.  People move, sell a business, retire, or receive an inheritance, which are all good reasons to review your plan.

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