Talking to Heirs About Their Inheritance

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Do your heirs know how much they stand to inherit from you?  Have you ever received an unexpected inheritance?  Many clients debate how they should notify their heirs of the amount and extent of the expected inheritance.  On April 22, 2013, the Wall Street Journal published an aptly-titled article “The Inheritance Conversation. Ugh.”  Many fear the inheritance topic and avoid the subject just as they avoid adequate estate planning.  However, there are practical steps you can take to assure that your heirs are prepared for the receipt of assets and property.

Most recognize the importance of preparing and disclosing information about inheritance to their heirs, yet few take the time properly prepare their heirs.  Children should not receive much financial information until they reach their 20s.  While certain teenagers may be precocious and able to comprehend the value of a dollar, clients must be cautious to avoid undermining their work ethic. Simply telling children how much they stand to inherit can weaken the determination of even the most capable individuals.

Importantly, children of wealthy parents will not learn financial management by osmosis.  Parents must take an active role in educating and informing their children about financial planning and management.  Several advisors recommend a mentorship whereby the heirs are given an opportunity to manage a smaller portion of the assets.  As the heirs gain in knowledge and ability the children or others can be given more knowledge of the family’s wealth.

One crucial element is requiring heirs to secure and maintain jobs.  With their earnings, the heirs can be instructed on the importance of saving and sharing their assets. Most successful wealth transfers occur where children have learned the value of work and wages earned.

I continually remind clients that their best laid plans can be undone by unexpected health concerns or other financial catastrophes (see the most recent recession).  For those who have a revocable living trust, I urge them to remind their children that the children’s shares are not fixed and can be altered.  No one should expect or rely upon a set amount of money or assets passing to them.

Simply start with a basic conversation with family members and other heirs.  Avoiding this topic can cause confusion, mistrust and leave heirs unprepared to manage the family’s wealth.  For those who need assistance in this process, our office is experienced in wealth transfer planning.

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