COVER

RICH INHERITANCE

THE URGE TO SPEND IS POWERFUL

ANN WALMSLEY November 5 1990
COVER

RICH INHERITANCE

THE URGE TO SPEND IS POWERFUL

ANN WALMSLEY November 5 1990

RICH INHERITANCE

COVER

THE URGE TO SPEND IS POWERFUL

Over the next two decades, Canada ’s baby boom generation will inherit about $1 trillion from the frugal, savings-conscious generation that preceded it. Suddenly, hundreds of thousands of middle-aged Canadians will have the opportunity to buy things that have always been far beyond their reach. But the experience of some recent inheritors suggests that, after an initial spending spree, a generation with a reputation for unbridled shopping and indebtedness may handle its inherited wealth fairly conservatively. Three cases:

William Larose, helped by his fiancée, Katie Arthur—and his sister, Helen—nursed his mother for nine months through agonizing emphysema before her death at the age of 68 in 1984. He says that he was astonished to learn then that he was suddenly well-off. Larose, now 35, and his sister, now 31, inherited more than $2 million each from their mother’s savings and the sale of her mechanical contracting business in Hamilton. “My mother was not very open with us about her money, so this was totally unexpected,” said Larose. “My economic situation changed overnight.”

Although many people would gladly be in Larose’s financial position, he said that inheriting a lot of money is fraught with problems. “It is a Catch-22 situation,” he said. “On the one hand, it has allowed my wife to stay home [with their two-year-old son, William], allowed me to go to law school and enabled us to live fairly well. But at the same time, it plagues you—the problems of managing the money day in, day out. There are so many choices.”

Disputes: Larose’s problems were complicated by the fact that a trust company official hired to administer the funds made several errors in dealing with a tax return. Six years after his mother’s death, he is still involved in legal proceedings against the trust company. Handling the disputes took so much time that Larose switched from the full-time to the parttime program at Queen’s University law school in Kingston, Ont., where he now expects to graduate next spring. “People coming into inheritances should be careful when delegating others to handle their money,” advised Larose. “It has not been fun.”

Still, Larose says that he has enjoyed the transition from student life in a run-down fraternity house to his comfortable lifestyle now. He did what many distraught young inheritors do first with newfound wealth—splurge. Said Larose: “I bought a Porsche, a Robert Bateman original, a stereo and a watch—mostly

male toys.” He also travelled to Kenya and sailed on an Argentine supply ship to Antarctica.

After his initial spree, Larose says that he has returned to a more frugal lifestyle. He and his family live in a rented house in Kingston and their expenses are covered by interest and dividends from investments in stocks and bonds. “Those boosts at the beginning helped me survive the emotional loss,” said Larose. “But it is not the kind of advantage I want to display.

And it has never been my idea to slough off.”

A committed environmentalist and Greenpeace worker, Larose says that a law degree will not only help him manage his money, but equip him with the legal tools to fight for his personal causes—a purer environment, aboriginal

rights and the rights of children. Unlike many of his fellow students, he does not hope to article with a large Bay Street firm. “The point is that my career is no longer a dollar-and-cents issue,” said Larose. “I simply want a power base from which to do meaningful work.” Although Larose has resolved the issue that often bedevils inheritors—what to do when you do not have to do anything—his plans for his money are still slowly evolving. He is now looking for a country house north of Toronto. After that, Larose’s only firm plan is to finance his son’s education and then travel with him when he is older. “My friends all talk about retiring at age 55, buying 5 a sailboat and moving to I Victoria,” says Larose. ® “Not me. I doubt whether í I will ever retire. My I mother never did.”

He was just 30 when his mother died at age 64 of liver cancer in 1985, but David Black says that he was managing well at the time without any inheritance. He had built his Halifax accounting business from a one-man operation in a cramped office in 1979 to a firm with three staff members by 1985. He and his wife, Leslie, owned a small, although heavily mortgaged house, a new and heavily financed Honda Accord and, together with two friends, a mortgaged rental property. Still, because of the high cost of carrying his debts, Black had not achieved the material wealth that his parents had accumulated when they were his age and raising him and his brother and sister in a stately 15-room Victorian house in Halifax.

The proceeds of his mother’s estate changed all that. After selling the family home for more than $300,000 and cashing their mother’s stocks and bonds, the children each ended up with roughly $170,000—the price of a threebedroom house in a nice Halifax neighborhood. Recalled Black: “It was obvious to all of us what to do with the money—sink it into real estate.”

Adamant: For Black, the decision was related to his self-esteem as an independent entrepreneur. “I was adamant that the money should not become a slush fund for the business,” he said. “There is a certain joy in knowing that I started the business with nothing. I want to say at the end of the day that I did it all myself.” At the same time, Black said that he wanted to invest the money quickly because he was uneasy with the temptation presented by an excess of readily available cash. “You grow up thinking that when you are 55 or 60, you will have a buming-of-the-mortgage ceremony,” said Black. “To suddenly be given some money without obligation can be bad for you. It screws you up a bit at the outset.”

Within a few months, Black used the money to buy a $155,000, three-bedroom bungalow on the outskirts of the city and pay off his car loan. He kept his old house as an investment property. Said Black:

“Once we had done that, plus little renovations such as painting the new house, it was gone.”

Now, Black’s conservative approach to investing may leave him a lot more reliant again on his income from his accounting business. He and his wife have separated and, under provincial family law, inheritances invested in the matrimonial home are generally split equally in a marriage breakup. “All of a sudden I am back closer to where I started,” said Black. “But I would do it all over again. You do not plan your life to get divorced.”

The view from Vancouver fashion designer Catherine Regehr’s recently acquired mountain property in northern British Columbia is breathtaking. From the five acres of wilderness overlooking Atlin Lake near the border of the Yukon Territory, where she grew up, she can see 50 miles in every direction. “There are lynx, eagles, moose, warm springs with watercress growing, and the best cross-country skiing in the world,” says Regehr, 35. “I love it there.” She adds that being able to buy the lake

property is possibly the most important benefit to flow from an unexpected inheritance that she received from Yukon artist Lilias Farley, a close friend who died at age 82 in 1989. She plans to build a log cabin on the site to serve as an art studio and retirement home. Farley, who had no immediate family, bequeathed her en-

tire estate to Regehr, who is unmarried. It included cash, an African-art collection, paintings by the Group of Seven and pieces of her own painting and sculpture. The elderly painter had also hidden away valuable South African gold Krugerrands, which fell out of a stocking drawer as Regehr carried out the task of organizing Farley’s belongings.

Because she is one of five siblings, Regehr said that she will not receive a large inheritance from her own parents, who live in Vancouver.

But she was not in great need financially. Last year, sales of her successful evening-wear line doubled as such department store chains as Nordstrom’s in the United States bought from her collection, which includes antelope-skin sarongs and other exotic designs.

Regehr said that she had no idea that her friendship with Farley, her high-school art teacher in Whitehorse and a well-known artist, would lead to such a generous gift. Indeed, she said that Farley never appeared to be well-off, and Regehr contributed to Farley’s share of a 1986 trip they took to Mexico. “She lived modestly in an apartment,” said Regehr. “I did not know until after she died that she had socked away so much over the years.” Bought: At first, Regehr indulged herself a little. “I bought some beautiful Persian carpets and art, and took a trip to Barcelona,” she said. “The hedonist era I grew up in says that you need to have a little fun with your money.” But for the most part Regehr followed a conservative path. She renovated the main floor of her Victorian house in Vancouver’s Kitsilano area, bought a new gas furnace and paid off a large portion of her mortgage. “I held on to the gold Krugerrands as a long-term investment, switched the Canada Savings Bonds to T-bills to maintain a cushion for my business, and I will convert her few stocks into T-bills too,” said Regehr. “I would not touch the stock market with a 10-foot pole.” She has also donated two Group of Seven paintings and one Farley piece to the Vancouver Art Gallery. “Ethically, it is really important to me to eventually donate all of Lilias’s work,” said Regehr. “She has made a phenomenal difference in my life. I want to do something for her.” As for the Atlin Lake property, “that land is almost like a retirement savings plan,” said Regehr. “And I think our generation is likely to spend our inheritances that way, as we look to the family, the environment and ways of securing a less harried lifestyle away from the city.”

ANN WALMSLEY