The Inheritance Talk: Tips for Those on Both Sides of the Table

Let’s face it: no one actually looks forward to a discussion that touches on the passing of a loved one. Maybe that’s why so many families tend to avoid the topics of inheritance and estate planning. For various reasons, meaningful discussions of inheritance and estate planning strategies are too often put off “until a better time,” which may not come during the life of the grantors. In fact, a recent survey commissioned by Wells Fargo Wealth and Investment Management found that more than a third of persons with significant wealth they planned to pass on to their children said their children had little or no knowledge of their inheritance plans.

There can be many reasons for this. Sometimes, parents may think that by purposefully keeping from their children knowledge of what they stand to receive at the parents’ passing, they are ensuring that the children will be more diligent and determined in building their own careers. Many older persons, especially those with significant wealth to bequeath, may be reluctant to inform their children of the full extent of their inheritance for fear that the younger generation will then become “entitled.” On the other side, children often may not want to appear greedy or to create conflict within the family. They also may not want to appear unprepared for the responsibilities of managing a significant financial legacy.

But there are ways for both sides to move past these communication obstacles. And moving past them is important; when heirs are ignorant of their parents’ wishes concerning end-of-life and inheritance matters, they are actually more prone to experience conflict, as individuals attempt to act according to what they believe their parents wanted—in the absence of actually knowing what their parents wanted. Transparency and good communication from both sides are essential for the smooth transition of the estate.

Start the Conversation with Values

One of the best places to start conversations like these is by focusing on the family’s values. In fact, many persons with significant wealth view values as a legacy that is equal to, if not more important than the financial bequest. When parents and children are clear on the values that are guiding decisions about the estate, common ground is easier to find, and motivations are easier to clarify. After all, when people understand that they are seeking the same goal, they are more likely to feel empowered and also to seek the empowerment of others. This, by the way, can become a cornerstone of building an enduring family financial legacy: the time spent instilling consistent values in each generation can be considered as an investment in the long-term viability of the family enterprise.

Encourage Familiarity with the Documents and the Team

This might be considered “Estate Planning 101”: the will—or, in some cases, the trust documents—govern how the assets will be distributed. Parents should discuss the estate planning documents with their children; in fact, since their financial advisor may not be licensed to practice law or advise on legal matters, they should perhaps call on the services of a legal advisor to “moderate” the discussion. If they do not have a legal advisor, they may wish to ask their financial advisor for a referral to a qualified attorney; they may even want to include other financial and tax experts in the discussion. Such conversations can offer a natural way to introduce the children to the parents’ financial and legal “team,” which can greatly facilitate future planning and strategy. In fact, the children may want to call upon the financial or legal experts to further their own knowledge and preparedness. The discussion should include the outlines of any healthcare directives, powers of attorney, or other estate planning instruments that could be needed in the event of the parents’ passing. If there are potential issues of separate property that need to be clarified, this is the time for those conversations, as well. The most important outcome, however, is that both the grantors and the beneficiaries should be familiar with the broad outlines of the will or trust. Having this knowledge in common will make everything much easier.

At The Planning Center, communication is perhaps our most important asset. By facilitating clear communication with our clients concerning their priorities, we are then in a better position to help them communicate with other important parties. If you have questions or concerns about inheritance matters related either to making or receiving a bequest, we are eager to help you get the conversation started. To learn more, visit our website and read our article, “When Should You Review Your Estate Plan? Six Examples.