Why are most of the talks we need to have in life so difficult? I remember one study where Baby Boomers said they’d rather talk to their kids about sex than their parents about not driving. I wonder where discussions about money, or more specifically, inheritances, would rank? At the rate they’re avoided, I’m guessing pretty high.
Parents often drag their feet to have this conversation, asking what’s the rush? Adult children don’t like the subject either and fear if they bring it up it will look like their only interest is in how well off they’ll be.
But these assumptions are wrong. Having a conversation about financial planning is actually responsible, regardless of which role you’re playing. Because in its absence, misunderstandings and hurt feelings are often the result and can fracture a family.
In a survey by UBS Investor Watch, the consensus was the earlier the better when it came to talking about an inheritance. But they also found that even though wealthier benefactors are more likely to have created a plan for their wealth transfer, they’re no more likely to have discussed the topic with their heirs.
What stops the conversation from happening? Heirs indicated it’s because their family doesn’t talk openly about finances. While the parents reasoned that it wasn’t a pressing issue or that they didn’t want their kids to count on an inheritance or feel entitled. Yet they also made it clear that they wanted the transfer of assets to go smoothly without any hard feelings.
The bad news is that you can’t have it both ways. Even if the conversation is distressing, the survey found less dissent when the inheritance process was talked about. For those who didn’t know any details ahead of time, they were more than twice as likely to have disagreements about the distribution.
It gets worse when there’s complications. For unresolved issues, don’t leave it for your children to untangle. The likelihood of dispute rockets from 11% to 82% if it doesn’t get settled before a parent’s passing. For those in blended families, conflict can be much more likely so it’s even more important to talk beforehand.
Finding a way to talk with each other in a less emotionally charged situation can help. If the inheritance conversation occurs in the larger context of a discussion about financial planning, some of the tension is relieved.
As parents, it’s our responsibility to share our wishes with our heirs, including whether we have a will, power of attorney or health directives in place. We also need to list what accounts we have, insurance policies and passwords. If you’re not ready to share all the details that’s fine but you’re not off the hook. You still need to let them know it’s been taken care of, where the information will be when it’s needed and discuss the distribution of your personal property.
To open the lines of communication, here are some suggestions to help both sides navigate this sensitive subject.
Define your goals and objectives ahead of time.
Whether your personal items have a high cash or sentimental value, deciding where they go is usually the most difficult. Since there are rarely enough identical diamond engagement rings to go around, discuss how you’d like to come to a fair distribution. Where possible, ask for their input.
Even if ultimately some aren’t happy, it’s important they know this is how it’s going to be. Don’t pass down unresolved issues for them to figure out.
These conversations tend to happen over a course of time and there will be bumps in the road. If one approach doesn’t work, try another. Don’t expect to settle everything in one setting.
Make sure everyone is present for the conversation, even if it means some are joining online or by telephone.
It’s usually best if parents initiate the discussion, but if they don’t, children can start things off by asking if they have an estate plan. Make it clear that you’re not asking for how much money they have but that you just want to make sure you understand what they want.
Another way to begin the conversation is to bring up a book or article you’ve read or share that you’re doing your own estate planning (because of course you are, right)? Let them know of the stories you’ve heard when things aren’t discussed beforehand and that you don’t want that to happen to your own kids.
Be honest that it’s a tough conversation for both sides to have.
Most parents want to help their children. It’s OK to ask if they’d talk to you about this so you won’t have to worry. For parents, this is a gift you can give to your kids.
Shift the focus off of death and instead concentrate on the positives of taking care of this, which will ease everyone’s piece of mind.
Over time, more Baby Boomers are passing on a portion of their wealth while still living, referred to as “giving while living,” according to the UBS survey. More than one generation is also often considered, with half of the grandparents saying it was highly important that their assets also support their grandchildren.
Without criticizing, 72% said they plan on dealing with their children’s inheritance differently than their parents did with them, stressing they’ll be more open and proactive in discussing their plans. Although the survey did find that less than half of millennials said they’ve actually had the discussion with their parents.
But no matter the level of a person’s wealth, most likely there will still need to be a distribution of assets. When no one knows the intentions, it just becomes that much harder. If you’re the parent, you don’t want this for your children. And if you’re an adult child who’s had that experience, make a promise today not to pass down the same to your heirs.
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