Worried About Beneficiaries? For 2026: Resolve to Make a Plan

Are your beneficiaries set up for success? As you review your estate plan, perhaps in the spirit of New Year’s resolutions, you may be wondering how to prepare beneficiaries to manage an inheritance responsibly. If you have concerns, here are three strategies that can help protect your legacy while supporting your beneficiaries over the long term:

1. Set up a testamentary trust. A testamentary trust takes effect upon your death and is managed by a trustee, who distributes portions of the inheritance over time according to a schedule you set. You can also include terms to encourage responsible behaviour, for example, tying income to employment (“monthly income will increase if the beneficiary maintains a job for x years”) or delaying payouts until certain milestones are met (“capital won’t be distributed until the beneficiary completes their education”). There are legal limits to these types of restrictions, so it’s important to consult a qualified trust and estate lawyer.

This type of trust can be especially helpful if your heirs are young, financially inexperienced, living with a disability or are otherwise financially vulnerable. It helps support the longevity of wealth and encourages responsible behaviours.

Things to keep in mind: Generally, with some exceptions (such as qualified disability trusts or graduated rate estates), income earned within a trust may be subject to the highest marginal rate. There are also costs for setting up and managing the trust. Trustees have ongoing responsibilities, including bookkeeping and tax returns. Hiring a professional trustee can reduce any potential burden, though this adds additional costs.

2. Direct a portion of the inheritance to a life annuity. A life annuity is an insurance product that is designed to pay a guaranteed income for life for the beneficiary, similar to how a pension plan benefits a retiree. It offers financial stability, giving your beneficiaries a steady monthly income over their lifetime.

Things to keep in mind: Allocating funds to an annuity limits flexibility and the potential for higher investment returns, as the capital is committed to the annuity and payments are fixed. Payments will end when the beneficiary passes away, so there’s nothing left for future heirs. Unlike a testamentary trust, a life annuity doesn’t allow you to influence your beneficiary’s behaviour.

3. Introduce your beneficiary to us, your trusted advisors. We can build a relationship with your beneficiaries, which may be helpful if they need guidance on financial literacy or investing. By getting to know us early, your beneficiaries can better understand your financial values.

We can also provide support for family meetings to discuss your intentions behind your estate plan or guide financial planning, estate distribution and the responsibilities that come with inheritance. Additionally, we can provide support to open investing accounts, including TFSAs, RRSPs or FHSAs, to help them build and manage wealth over time.

Things to keep in mind: While establishing a relationship can be highly beneficial, it doesn’t give the same structured control as a trust or annuity. Success depends on your beneficiary’s willingness to engage and follow the guidance provided.

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These are just a few strategies that can help set up your beneficiaries for long-term success. Each comes with its own set of advantages and drawbacks, so it’s important to determine the best fit for your unique situation. For a deeper discussion, please call.

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