Originally published: Mar. 10, 2023 (distributed by Andrews McMeel Syndication)
When it comes to estates and inheritances, it helps to have a plan -- one that ensures that your assets transfer as you intend. Should you involve your children in any way?
Most affluent and near-affluent investors (67%) recently surveyed by Cerulli Associates do share information with their children. (Twenty-six percent say they have provided enough information for the heirs to be considered "very well informed" of their plans. Another 41% considered their heirs to be "somewhat informed.")
Meanwhile, when inheritors were asked when they had first learned about their own inheritances, 54% said it was when the "inheritance bequestor(s) passed away."
Which is better? Communicating about plans or not? Does age matter? Does wealth matter?
Consider a couple in their 40s, and compare them to a couple in their 80s. Does age make a difference? Do assets make a difference?
According to Cerulli's study, the 40-year-olds are likely to be in their "wealth accumulation" phase of their lives and "not yet thinking about what comes after." They are more likely to wait to communicate information until they reach a "specific level of wealth than those who are older."
Those over 60 say they will share information about inheritances when they reach a specific age (or die).
Some feel that sharing information helps avoid conflicts. "Unless these conversations are ongoing or well-documented, retention rates of nuanced details of complex subjects discussed only once are quite low. Thoroughly sharing this information and supporting rationale with intended recipients and other stakeholders may create discomfort in the short term but is an important step in minimizing costly and divisive legal battles in the future," said Cerulli research director Scott Smith.
Based on my decadeslong experience serving as investment counsel to high-net-worth families, I say that it's not so simple. If you do decide to share, should you open up your financial situation? Once you do that, there is no going back, and for that reason, think hard before taking that step.
Family dynamics and family values both enter into the picture.
Those who are charitably inclined would share their desire to leave a legacy and go further, to involve their children in setting up and funding a family foundation while they are very much alive.
Someone else might think differently. The elderly widow (or widower) who provides a 60-year-old adult child financial support during challenging times (divorce, loss of jobs, health issues, etc.) may need to consider the legacies of the other children. Would this widow want to share finances or involve the children in legacy discussions? Should she? That's not so clear.
Should there be a discussion with children who are appointed executors in the will? Again, family dynamics enter into the picture. I do have a point of view, however, when it comes to passing along "knowledge."
Neither dealing with a legacy or serving as an executor is something a child, no matter the age, learns on his or her own. Death forces learning. Isn't it better to help with the learning process if the children are open to it? That does NOT mean that dollars and cents have to come into the discussion.
Let me share a rather surprising finding of a 2022 study of 20- to 39-year-olds who expected to inherit more than $1 million. According to a Wells Fargo Wealth and Investment Management survey (tinyurl.com/2mhk75ts), 72% said that talking with family about an inheritance would help them plan better for the future; 54% said they wished there was more transparency in their family about money; and 81% said family meetings would be valuable.
For families of great wealth, there is an additional issue: the question of future generations.
"If the current generation is able to transfer its knowledge as well as its wealth effectively, it could increase the likelihood that future generations will be better prepared to preserve wealth, drive economic growth and give back to their communities," according to RBC Wealth Management's Wealth Transfer Report (tinyurl.com/mpyvc8j3).
No matter your age or financial circumstances, if you are planning your estate, where does this discussion leave you? Probably with questions. Ask them by writing to firstname.lastname@example.org.
To read Julie Jason's books, go to: https://juliejason.com/author/julies-books.