Don’t put off having an inheritance conversation.
Everyone is familiar with Benjamin Franklin’s famous quote that “in this world, nothing can be said to be certain, except death and taxes.” Yet despite talking excessively about the latter, very few of us ever seem comfortable when it comes to discussing the former. Parents are reluctant to broach the subject because it forces them to contemplate their own mortality. Adult children avoid the topic so as not to appear greedy or insensitive.
In fact, a recent study found that more than two-thirds (67%) of wealthy parents are apprehensive about sharing inheritance details with their adult children.1 As a result, we have a generation of soon-to-be inheritors who not only are unaware but also woefully unprepared to manage the financial complexities of wealth.
Silence isn’t golden
Inheritance conversations afford your children greater insight and transparency into their financial future information that could have a significant impact on their own wealth plans. For instance, assurance of a sizable inheritance could allow a working child to take a few years off from their retirement savings and redirect those assets towards paying off high interest student loan debt. Or, it could allow a couple who are overly conservative with their retirement savings to comfortably take on more risk, knowing they have a significant buffer.
For the sake of family unity and harmony, a discussion about inheritance also affords you an oppor- tunity to explain the reasons and rationales behind any particular trust structures (such as the inclusion of spendthrift provisions to protect trust assets from a child’s creditors) you may have established or important considerations you may have factored into your estate plan. Perhaps you own a family business where one or two family members are active in the business and natural successors. An inheritance conversation allows you to explain your wishes and the steps you are taking to help equalize inheritances for the other heirs through other assets or life insurance policies.
Perhaps most importantly, however, talking with your heirs about their inheritance presents a unique opportunity to share your financial values, beliefs, and accumulated knowledge with the next gener- ation. It’s a chance for you to go well beyond the basics of who gets what, to discuss the social and philanthropic issues you all care about and to encourage your children to be empathetic, generous, and active members of their communities.
How to get started
Start thinking about some of the common questions most parents grapple with surrounding inher- itance such as how much financial information you’re willing to share, what you can do to try and ensure your heirs make good use of the money you leave them, and what financial values and wisdom you most want to share.
If you’re married, make certain that you and your spouse are on the same page about the information you want to share. Be prepared to discuss any financial misunderstandings or family conflicts that may need to be addressed. Writing down a handful of key points you want to communicate will help to keep the discussion focused.
Strive to keep the conversation casual rather than making it a somber, formal occasion like the reading of a will. Set a tone that conveys your desire to consider everyone’s thoughts and feelings. Take time to honestly share the financial insights and wisdom you’ve accumulated over the years both from the mistakes you’ve made as well as the successes you’ve had. And, try to share the one or two most important financial lessons you wish you had known when you were younger.
No two families are alike. Each has its own inherent strengths, challenges, personalities, and family dynamics. You may have deep concerns about the financial well-being and ability to handle wealth for some of your heirs, while having supreme confidence in the sound fiscal responsibility of others. Whatever your situation, we can help not only in addressing any unique wealth transfer considerations, but also in preparing you to address this issue with your beneficiaries and even participating as a facilitator of your family meeting.