Estate lawyers are bracing for a wave of litigation as Canadians prepare to transfer close to a trillion dollars of net worth through inheritance — with wealth disparity between generations, challenges flowing from health conditions, and rapidly rising medical costs combining to create the perfect storm, Barrie personal injury lawyer Steve Rastin says.
As Rastin, managing partner at Rastin Trial Lawyers, says, the richest cohort in Canadian history — the post-war cohort — is preparing to transfer assets to its children and grandchildren in the next decade via what the CIBC believes will be the “largest inter-generational wealth transfer in Canadian history.”
“Fuelled by a robust investment economy, a booming housing market and the inherently conservative habits of the post-war/depression cohort, banks have estimated that there are currently over two and a half million Canadians aged over 75 years old with a total net worth of at least $900 billion. This accumulation of wealth has risen by more than 30 per cent since 2005,” says Rastin.
One significant factor contributing to the swift growth of accumulated wealth is the rapidly rising real estate market, he explains, particularly in cities like Toronto where some families find themselves worth more than $1 million from their house alone.
“The generation that is positioned to benefit most from the change is the baby boomers, aged between 50 and 75 years. Unlike their parents’ generation, which is generally considered to be a group of conservative savers, the baby boomers have, on average, adopted more aggressive spending patterns,” says Rastin.
However, he explains, this disparity between asset levels can contribute to increased family discord over wealth redistribution. Another factor that is indirectly driving disputes, he adds, is the rapid escalation of the cost of caring for aging parents.
“It is unfortunate, but not surprising, that some members of a cohort burdened by debt would be alarmed by the prospect of their parents’ estate being fully depleted by massive medical care and rehabilitation costs,” writes Rastin.
“Further, an aging population is resulting in a marked increase in cognitive challenges such as dementia and other mental health problems that increase the likelihood of one or more family members challenging the validity of a will or a power of attorney. Even worse, a surprisingly high number of older Canadians do not appear to have taken basic, common sense steps to safeguard their estate wishes by executing wills and powers of attorney,” he adds.
Rastin cites one recent poll that says nearly one-third of baby boomers report they did not have a legal will. Of those that did, 44 per cent had not updated the document in more than five years.
“While other areas of legal practice are facing risks of contraction and cost pressure, wills and estates lawyers can already see that we are headed to a period of increased tension and increased litigation as Canadian society enters two decades of the largest inter-generational transfer of wealth in our history,” says Rastin.