The Inheritance Conversation

By Jon Theriault, MBA, CFP®
I’ve had a number of recent discussions with clients regarding how and when to potentially engage in conversations with adult children about their estate plans and intentions regarding inheritance. Just thinking about these conversations often generates stress or uncertainty for them, but I find most parents are genuinely trying to do the right thing and seek the optimal balance between what is best for their children, themselves, and the family overall.

Research suggests that most parents do not look forward to talking to their kids about wealth, money and inheritance, so if this resonates with you, know you’re not alone. But a failure to do so can bring unintended results such as strained family relations, resentment, and even mismanagement of the inheritance once you’re gone. Many parents wait too long or never have a conversation at all, which is unfortunate given wealth can be an impactful blessing for children and future generations if the parents’ values around its purpose and intended use are clearly articulated.

A common concern we observe among wealthy parents is that their children may lose motivation to set their own course, live independently, and strive for higher accomplishments in life if they realize how much they stand to inherit. Parents often choose to delay talking to their kids for this reason, hoping their children will instead make their way in life and provide for their own families without complacency or preoccupation with an inheritance.

Another frequent reservation comes from parents who are sensitive about whether or not their assets in retirement will carry them through the rest of their lifetimes, especially when considering the costs of healthcare and maintaining lifestyle, not to mention the likelihood of living longer. In other words, they fear disappointing their children if the inheritance they once communicated is no longer there at the end of their lives. Although we can address many of these variables through ongoing financial planning, it still rarely eliminates this concern altogether.

A third concern comes from parents who are overly focused on achieving perfect equality among multiple children to make sure everything is fair. But we remind our clients that equal and fair may not be the same, and that only their best intentions are achievable whereas perfection is not. Perhaps one child lives nearby and would benefit most through inheritance of the home, another may run the family business and benefit through increased or outright ownership, and yet another may take care of you later in life and a disproportionate financial share may be in order. And things change, so the decisions you believe are fair today may not be the same tomorrow.

All things considered, we believe it is important to talk with your adult children about your wealth and inheritance intentions. But if the time is not right, or as you contemplate how to go about doing this, know the most effective way to teach them about money and your values is to consistently model for them. Perhaps you might do this through charitable giving, investing in education or college savings plans, or finding ways to spend and value time together as an extended family.

At a minimum, we suggest writing down the reasons behind your decisions, perhaps even in a personal letter to each child. A well thought out estate plan will assist with the execution of your inheritance decisions, but is unlikely to explain the subjective reasons behind them. Even if the letters are never mailed but rather kept in safe keeping for later, just knowing why you arrived at your decisions can help children and families reconcile and better understand your wishes once you’re no longer alive.

At RS Crum, we appreciate that every client has different financial values and unique family dynamics, so we do not maintain there is one best way to best prepare for and handle the inheritance conversation. We also understand there are situations where the conversation may not be appropriate. But know we help our clients by listening to their goals and concerns, providing thoughtful counsel and alternatives, and even serving as facilitators for such conversations from time to time.