THURSDAY, OCTOBER 2, 2025 | THE GLOBE AND MAIL G B7 GLOBE INVESTOR REPORT ON BUSINESS | A couple of weeks ago I shared some details of the last will and testament of Mr. Richard Clarke – my wife’s great-great-grandfather. Wills looked quite a bit different in 1903 when his was drafted. There was one other provision in his will which does have some relevance today. It provided that “the four chickens that are owed to me by my son William I hereby forgive and are bequeathed to him.” Okay, I’ll admit that most par- ents today aren’t lending the kids four chickens – or any manner of fowl or livestock. But parents to- day are, more than ever, helping the kids financially by lending – or giving – funds to help with the down payment on a home, to start a business, or simply to help make ends meet in a world that has become unaffordable for many. The question: What happens to these amounts when a parent passes away? And what if differ- ent children have received differ- ent amounts over time? Your will should deal with these amounts in one way or another. Today, let’s talk about how to deal with this issue by asking four questions.

1. HAVE YOU ADVANCED FUNDS TO YOUR CHILDREN? If you’ve already advanced funds to one or more of your kids, was your intention to make these loans, or gifts? There’s a differ- ence – and it matters. In some cases, parents have lent funds to help with the down payment on a home and have taken back a mortgage on the property. This can protect the property in the event the child is married and lat- er gets divorced (you could demand payment on the mort- gage in that case). In other cases, the amount is a gift and won’t have to be repaid. Loans you’ve made are an asset (a receivable) that forms part of your estate – but gifted amounts are not. Is it clear to your children whether funds they’ve received are a loan or gift?
2. HAVE YOU DOCUMENTED ANY ADVANCES? Documenting advances to kids is important – especially if you plan to equalize inheritances for your children so that each ultimately receives the same amount. When you’re gone, your executor will need to know how much was ad- vanced to each beneficiary. How should you document advances? As a minimum, you should main- tain a spreadsheet with that in- formation, and make sure your executor knows where to find it. Even better, provide an e-mail to your lawyer, accountant, or exec- utor with details of each advance (and copy the child receiving the funds on that e-mail). If the amount is a loan, the best docu- mentation is a promissory note signed by you and the recipient of the funds. A separate promissory note for each loan amount makes sense.
3. IS YOUR PLAN TO FORGIVE ANY LOANS MADE? Whether you plan to forgive any loans after you’re gone, or not, there should be language in your will to address your intentions. If you want to forgive any loans, your will should state that you’ve lent funds to a child, or children, and that you forgive all amounts owing at your date of death, and that your executor should cancel any promissory note and deliver a copy of this to the respective children. And if your intention is to not forgive loans, your will can say that loans should be collected upon your death (you should in- clude the details of any loan, like the amount and whether it’s se- cured or not). If you have a spouse, you should also mention whether the intention is to for- give or collect the loan upon your death, or your spouse’s.
4. IS YOUR PLAN TO EQUALIZE INHERITANCES AMONG BENEFICIARIES? Finally, if the advances you make are considered gifts, or forgiven loans, is it your intention to treat all beneficiaries equally when your estate is distributed? If so, your will should include a “hotch- pot” provision. In this case, your executor will add the value of all these gifts and forgiven loans to the total value of the estate. This total will be divided equally be- tween your beneficiaries, then the funds advanced previously will be deducted from each heir’s share (see the accompanying ta- ble). The result? Children who re- ceived more during your lifetime will receive less after your death, and everyone will ultimately re- ceive an equal share. Be clear about gifts and loans in your will Avoid family conflict by addressing issues like children receiving different amounts of money over time TIM CESTNICK OPINION FCPA, FCA, CPA(IL), CFP, TEP, is an author, and co-founder and CEO of Our Family Office Inc. Equalizing an estate Value of estate assets A $100,000 Add: Gifts and forgiven loans made previously Child 1 $50,000 Child 2 $25,000 Child 3 $75,000 Total estate to be divided B $250,000 $83,333 $83,333 $83,333 Less: Less amounts already advanced ($150,000) ($50,000) ($25,000) ($75,000) Amounts to be Distributed C $100,000 $33,333 $58,333 $8,333 TOTAL CHILD 1 CHILD 2 CHILD 3 Note: Any loans not forgiven at the time of death will be included in the value of estate assets owned on death (Line A). THE GLOBE AND MAIL, SOURCE: OUR FAMILY OFFICE INC. M ary started her tax-free savings account when they first came out in 2009 and made the maximum contribution allowed each year, for a total of $102,000 to date. Now, her TFSA is worth nearly $300,000. That’s a pretty good sum for a farm girl who didn’t get much of an education and is now a cente- narian. Moreover, she put hardly any effort into building the TFSA – spending little more than an average of an hour or two each year. Mary married in her twenties and took up residence with her husband in a small town in Southern Ontario. When her chil- dren were old enough to free up some time for her, she began working at the jewellery store in town. She managed to save a lot of her income, depositing it in a bank savings account. Jumping forward several dec- ades when she was a lively octo- genarian, Mary got her TFSA go- ing with a visit to the bank. The financial adviser wanted to fun- nel the annual contributions into some “aggressive” funds but with the encouragement of her daughter and son-in-law, she opt- ed instead for some index funds that had much lower annual ex- penses: the RBC Canadian Index Fund and RBC U.S. Index Fund. This TFSA felt like a good solu- tion for her. She was comfortable with the people she knew at the bank and liked keeping things simple and easy. The automatic reinvestment of dividends was a particularly appealing feature of the funds since it would enhance the an- nual compounding of returns without any effort on her part. In short, Mary didn’t have much to do overall. The index funds in her TFSA can be run on autopi- lot, yet were still low-cost, tax- free and lower-risk (because of a diversified portfolio). The TFSA contributions came out of her savings account at the bank. After her husband passed away about 15 years ago, there were extra expenses to meet but they were covered by withdraw- als from her savings account. She never withdrew any money from her TFSA and was content to let it compound without interruption. SOME OF MARY’S WINNERS The RBC Canadian Index Fund tracks the S&P/TSX Capped Composite Total Return Index and has a management expense ratio of 0.66 per cent. Since 2009, the dividend has more than dou- bled, to $1 per unit in 2024. The closing unit price on Oct. 1 was $57.07. The top 10 companies in the fund are: Royal Bank of Canada (RY-T), Shopify Inc. (SHOP-T), Toronto-Dominion Bank (TD-T), Enbridge Inc. (ENB-T) Brookfield Corp. (BN-T), Bank of Montreal (BMO-T), Bank of Nova Scotia (BNS-T), Canadian Imperial Bank of Commerce (CM-T), Agni- co Eagle Mines Ltd. (AEM-T) and Canadian Pacific Kansas City Ltd. (CP-T). The RBC U.S. Index Fund tracks the S&P 500 Total Return Index and has a management ex- pense ratio of 0.66 per cent. The total distributions per unit were only $0.23 in 2024 but the capital gains have been strong. The clos- ing unit price on Oct. 1 was $57.58. The top 10 companies in the fund are: Nvidia Corp. (NVDA- Q), Microsoft Corp. (MSFT-Q), Apple Inc. (AAPL-Q), Amazon- .com Inc. (AMZN-Q), Meta Plat- forms Inc. (META-Q), Broadcom Ltd. (AVGO-Q), Alphabet Inc. Class A Shares (GOOGL-Q), Al- phabet Inc. Class C Shares (GOOG-Q), Tesla Inc. (TSLA-Q) and Berkshire Hathaway Inc. (BRK-B-N). MARY’S RECENT INVESTMENT MOVES Unfortunately, Mary’s health slipped over the summer this year, although in recent weeks she has been on the mend, back to her old self. But this raises the question: What happens to TFSAs when the holder is no longer with us? What Mary has done is name her daughters as the beneficiar- ies. The good news is that the TFSA assets will bypass Mary’s es- tate and go directly to her bene- ficiaries, so probate fees can be avoided. However, TFSA rules re- quire that beneficiaries receive the TFSA funds as a one-time dis- tribution, which becomes taxa- ble to the beneficiaries if they don’t have sufficient contribu- tion room in their TFSAs. The other option is to name a successor-holder, which main- tains the TFSA’s tax-sheltered status in the hands of the succes- sor-holder. But only a spouse or common-law partner qualify for this designation. Mary’s TFSA didn’t grow to more than a million dollars like some of the other folks profiled in the TFSA Trouncer series. But most of them spent a lot of time and effort getting to these lofty levels, whereas Mary greatly minimized the demands on her time and energy, yet still received a good return at a much lower risk level thanks to diversifica- tion. Centenarian reaps a good return on her TFSA with hardly any effort LARRY MacDONALD TFSA TROUNCERS Regular contributor to the Globe and Mail and author of The Shopify Story ARTUR DEBAT/GETTY IMAGES When we pass on, our children will each inherit a tidy sum, but they have little interest in investing. What instruments should I suggest to them for long-term growth, in- come and security? W e asked Jennifer Wat- son, CFP, CIM and ma- naging partner of Wat- son Investments, to answer this one. This question is more on point than you may know. Canada’s great wealth transfer is already under way, with more than a tril- lion dollars being passed down, according to CPA Canada. And, according to a 2024 report by Manulife Private Wealth, more than a third of older Canadians are worried about it. For many heirs, Ms. Watson said, an inheritance may be the largest sum they will ever man- age, and it often arrives inter- twined with grief. The best path forward for investment success for your children, she added, should include these considera- tions: Investment education. “Even if your children show little inter- est now, encourage some expo- sure before they inherit.” Ms. Watson suggested that giving them a modest amount to invest with an adviser can build famil- iarity and confidence without high stakes. Connect heirs with a trusted team. For heirs who are not in- clined to self-manage, profes- sional advisers are essential. “Even confident investors may struggle when emotions around inheritance run high. Introduce your children early to the team you value, ideally one that pro- vides both planning and invest- ment management and that is not near retirement themselves, so continuity is assured.” Plan before acting. Encourage heirs to first outline what the in- heritance is for: retirement, se- curity, philanthropy or lifestyle. Until the plan is in place, funds can rest in a high-interest sav- ings account for flexibility. “And avoid locking into illiquid prod- ucts prematurely, such as GICs,” Ms. Watson advised. “The plan will also clarify which tax-efficient vehicles, RRSPs, TFSAs and non-registered accounts make sense. Some may choose to earmark a portion of the inheritance for their chil- dren. For minors, perhaps invest- ing in RESPs or trusts, and for adult children, perhaps direct cash gifts.” This planning can start even before the funds are received, she noted. Thoughtful investing. Once goals are defined, diversified portfolios are typically the foun- dation. For long-term needs, greater equity exposure, general- ly through low-cost ETFs, mutual funds and certain alternative in- vestments, may be appropriate. For shorter-term needs, fixed in- come generally provides stabili- ty. Ms. Watson also advised that you encourage your heirs to re- view inherited holdings objec- tively. “It is common to keep in- vestments out of loyalty, but the best adviser will help balance re- spect for sentiment with what is financially prudent.” Protect the inheritance. Re- mind your children that inher- itances are generally considered personal property in Canada. However, Ms. Watson added, if commingled with matrimonial assets, that protection may be lost. Seeking legal advice before combining funds ensures clarity and safeguards. Above all, normalize an inter- est in investing as much as pos- sible while you still can. “By combining early education, a trusted advisory team, careful planning, disciplined diversifica- tion and matrimonial consider- ations, you equip your heirs not just with financial security but also with the confidence and tools to steward their inher- itance wisely.” ‘How do I encourage my heirs to take more interest in investing after I’m gone?’ VIVIAN VASSOS