Picture this: You’re sitting down with your family, sipping hot cocoa by the fireplace, and enjoying some quality time together. It’s a cozy scene, but there’s something you’ve been meaning to discuss – inheritance.
If you feel uneasy chatting with your kids or grandkids about money, trust me, you’re not alone. Many parents find discussing inheritance with their children to be quite a challenge. However, it’s a meaningful conversation to have with your children. It can help prepare them for the future and potentially foster a healthy relationship with money. The conversation could help prevent your family from fracturing after you are gone.
Here’s the thing: Did you know that only about one-third of adults have a prepared will? And get this: around 40% of folks with $1 million or more in investable assets never talk to their children about their estate plans. Can you believe the third generation completely squanders 90% of inherited wealth, and a whopping 70% is gone by the second generation? Yikes! Those numbers are pretty eye-opening. Leaving a legacy and creating generational wealth involves proactive financial planning.
Parents worry that a child who knows they will one day inherit a significant amount of money may not have the same motivation to work hard and succeed on their own accord. Another concern for wealthy parents is that a child with the knowledge that they will inherit millions could feel entitled and better than their peers. Mom and Dad want their children to understand how the world works, how to be responsible with money, and recognize the value of a dollar. Historically, there needs to be more communication between those who have earned the money and the beneficiaries who will inherit it one day.
A communication breakdown may contribute to the squandering of inheritances. There’s a lot of room for misunderstandings and miscommunications concerning inheriting money. That’s why it’s so crucial for parents and children to sit down and talk openly about their expectations. Consider scheduling time with the parent’s wealth advisor to discuss your hopes, expectations, and the importance of wealth management.
Here is a checklist to help prepare you to have conversations about passing down your wealth to your children and building generational wealth.
☐ Ask Questions
Hey, it’s all about open communication here. Parents, it’s time to dig into those children’s plans for the inheritance. Sons and daughters, don’t be shy to ask your parents about their concerns and wishes for managing that money.
- What are some things you hope to achieve in life?
- What are your thoughts about money and planning for the future?
☐ Ensure honest and transparent communication
Transparency is the name of the game. It’s crucial to discuss all those important details, like which accounts and assets are part of the estate plan, the inheritance amount, emergency contacts, and why you set up the estate plan in a specific way. And hey, be authentic and share your true feelings. It’s all about building trust and opening doors for teachable moments.
- What does being responsible with money mean to you?
- How do you think you would handle a sudden windfall?
- Why is the estate plan currently structured the way it is?
- How can you and your family work together during the decision-making process?
☐ Share your values
Let’s get on the same page here. Chat about what inheritance and lifestyle mean to both parents and children. Finding common ground on financial aspirations will make the journey smoother.
- Why is leaving an inheritance vital to you?
- Why is receiving an inheritance important to you?
- Why is wealth important to you?
- What are your concerns, hopes, and dreams?
☐ Recognize where there might be a problem and troubleshoot it now
You have probably seen it before – the spendthrift – a child or grandchild who is a pro at blowing through cash. It’s time to address those concerns and find some sensible strategies.
- Do you have an heir who is not fiscally responsible?
- Are there any issues with substance abuse?
- Are there any children with feelings of entitlement?
- Does anyone have special needs?
- Are there any complicated relationships or marriages?
☐ Schedule a family discussion call
Family time is precious. Please set up a call to bring everyone together to share and introduce them to the wealth advisor who will guide them through the inheritance journey. Let your family know:
- Where are the essential documents located?
- Who should they call if something was to happen to you?
- How will your estate be administered?
- Who’s the executor? Who is trustee?
- What arrangements are already in place?
- What is your aspiration for the family after you are gone?
- Who is your wealth advisor? Tax advisor? Legal advisor?
☐ Schedule time with a wealth advisor
They can guide you in talking to the next generations about their future inheritance, give insights on managing money wisely, and help create a plan that fits your needs.
☐ Create a plan
With a wealth advisor by your side, now is the time to design a strategy for long-term wealth stewardship – aka generational wealth.
Our mission is to identify goals and nurture behaviors so that together, we can confidently discover and pursue dreams. If you’re looking for financial guidance, schedule a call today.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
This information is not intended to be a substitute for individualized legal advice. Please consult your legal advisor regarding your specific situation.
All information is believed to be from reliable sources; however, LPL Financial and Enduring Wealth Advisors® makes no representation as to its completeness or accuracy.
Securities are offered through LPL Financial, Member FINRA/SIPC. Investment advice is offered through Enduring Wealth Advisors, LLC, a registered investment advisor. Enduring Wealth Advisors, LLC and Enduring Wealth Advisors, INC are separate entities from LPL Financial.
This article was prepared by LPL Marketing Solutions.
Edited by Mark R Tracy, MBA, CFP® from Enduring Wealth Advisors® in collaboration with Copy.ai and Grammarly
How to Talk to Your Kids About Their Inheritance – Bloomberg
What To Tell Your Children About Their Inheritance (estateplanning.com)
Tips for estate planning and talking about inheritance | UMN Extension
What to tell your adult kids when planning your estate (cnbc.com)
How To Talk To Your Kids About Your Will | HuffPost Life