Performance figures for each account are calculated using time weighted rate of returns on a daily basis. The Composite returns are calculated based on the asset-weighted monthly composite constituents based on beginning of month asset mix and include the reinvestment of all earnings as of the payment date. Composite returns are as follows:

How to Turn Inheritance into a Lasting Legacy


By Kira Vermond

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Ask Peter Andreana, a certified financial planner and partner with Continuum II Inc. in Burlington, Ont., what his definition of the word “legacy” is and he’s likely to whip out a piece of paper and draw a triangle.

The bottom third represents a person’s financial foundation, what’s needed to pay for food, shelter and taxes. The second tier signifies lifestyle, what makes life worth living. Think trips to Disney World with the kids or booking a tee time at Pine Valley in New Jersey. Retirement savings could fall into this category, too.

But what of the amount remaining, after projecting what the person will need to live on comfortably until they’re 90 or even 100?

“That’s legacy,” says Mr. Andreana. “That’s the part you’re going to leave behind.”

Yet legacy isn’t just about the money, he explains. It’s about using those funds in order to leave the world a better place than how you found it. Some people decide to donate money to charities or their old alma mater. Others create foundations that dole out cash for causes. Still others want to focus on their family and bequeath a sizable estate.

Not everyone is interested in creating a legacy, admits Mr. Andreana, who says he’s had conversations with some clients who plan to go to their grave clutching their last remaining dollars.

“There really are those people who want to leave absolutely nothing. They say, ‘I got nothing and I want to leave my kids with nothing.’ It really comes down to who you are as a person and what you want to build.”

Whatever form legacies take, however, they don’t happen by accident. They’re planned in advance. With foresight and preparation, they’re much more likely to last, he says.

Although it’s obviously important to choose a legacy that means something to you, either emotionally or spiritually, it’s equally important to remember the family left behind. Do they have the time and ability to carry out your requests? Will the legacy become a burden?

It’s a problematic scenario that Francois Sicart, founder and chairman of Tocqueville Asset Management in New York, has seen play out over real estate. Rich European families hold on to history-heavy castles and ancient estates out of a feeling of obligation to ancestors long dead. Meanwhile, in North America, the wealthy think they’re doing their kids and grandkids a favour by passing down their 63,000-square-foot mansions.

One of his current European clients, a young man and sole heir, is trying to figure out what to do with a restored castle his father left him. Mr. Sicart says he has been hesitating to sell it because he’s worried how his mother will react. After all, the restoration had been her husband’s beloved baby.

“I spoke to his mother just recently and she said, ‘I hate this place!’” Mr. Sicart says now. “In matters of inheritance, taxes and estates, families don’t speak. Or if they speak, they don’t communicate.”

He recommends that people who want to leave a legacy not include real estate in the equation unless an heir is honestly interested in taking on the job of upkeep and management. Instead, sell or give the properties to charity and use the money to start some kind of program or foundation that can bring a family together to plan how and where to donate invested earnings.

Mr. Andreana agrees that a lasting legacy is about communication within a family. Someone who has spent 40 years building wealth has also had a chance to grow financial knowledge and make small mistakes along the way. Teaching those lessons and fostering some financial literacy can go a long way toward making good decisions about the funds down the road.

“It’s not just about leaving six million dollars,” he says. “It’s about teaching your core values around money to the next generation and the generation behind them. Then the kids and the grandkids can say, ‘This is what our family is about.’”

John Nicola, CEO and chairman of Nicola Wealth Management in Vancouver, puts it another way.

“If someone received a $5-million inheritance out of the blue, there’s no difference between that and winning a lottery. We all know the history of what people winning the lottery is in terms of how long that money lasts,” he says.

That’s precisely why Mr. Nicola says he is a big believer in legal trusts. Not just for his clients, but as a way to plan his own legacy as well.

The estate he and his wife are leaving behind is separated into four segments. One quarter of the money will be added to his charitable foundation, which is already being managed by his three sons and their spouses. The remaining quarters will go into trusts for each family and are intended to last for a minimum of 10 years. His sons can draw income from their trust, but may only draw from principal for special needs such as health and education.

By writing down exactly how the money is to be used for 10 years, not only is he controlling the funds, he’s hoping his children will learn proper money management.

“With a trust, it’s impossible to just go out, be stupid with your money and make bad investments,” he says.

For his part, Mr. Andreana is a believer in building a foundation or fund in order to teach financial lessons, give back to the community and even create more communication within a family. He’s on the board of directors at the Burlington Community Foundation, which helps donors create funds to support local causes.

Put simply, if a million dollar donation within a legacy fund creates 5 per cent worth of income each year, those thousands of dollars can be earmarked for different causes. He says families often get together each year to decide where the money should go. In one case, they might decide that because the person who created the legacy loved music, they’ll donate the money to an organization that buys guitars for disadvantaged students. The next year it could go to music camp. Because the principal isn’t touched, the legacy continues year after year.

“No question about it, the legacy brings families closer together. They can all work towards these goals and be really fulfilled,” he says. “And you can make it last indefinitely.”