Many parents spend a lot of time and money ensuring that their estate will go to their children exactly when and how they want it to; they work with the best advisors to create a plan that will transfer their assets as smoothly as possible to their children and grandchildren when the time comes. Ninety-nine percent of the time these parents have in mind that the inherited estate will be used responsibly to help their children and grandchildren pay for schooling, make it possible for one parent to stay home with young children, be put away for retirement, etc. But according to Pamela Black at financial-planning.com, “while estate planners are 98% effective at preparing these assets to be passed on, that preparation goes to waste in 70% of the cases… [because] no one is preparing the heirs for assets.”
When considering how to pass your estate on to your heirs, it is important to take the time to consider how your heirs are likely to handle the new responsibility. While many parents have numerous discussions with their advisors about how they would like their money to be handled, they neglect to have these important conversations with their children because they assume (often erroneously) that they and their children share the same financial values.
Death and money are two of the most uncomfortable subjects for discussion between parents and children, and many families will simply avoid these conversations. But financial advisors and estate planners have seen too many cases of families and carefully crafted estate plans falling apart in the wake of the death of a parent; we know how important it is to have these difficult discussions.
Do you need to spend more time preparing your children for their eventual inheritance? Pamela Black has included in her article a preliminary “Wealth Transition Checklist” to give you an idea of how well prepared your family is for the transition. Bring your kids in with you to your next appointment and let them share in the process of planning for their future. The more they know the better prepared they will be.