TALKING TO YOUR CHILDREN ABOUT INHERITANCE – Checklist

Generational wealth involves proactive financial planning, especially when parents or grandparents pass on their wealth to loved ones after they die. Entrusting family members with receiving an inheritance is more than just getting a hold of assets or a check in the mail. It is about understanding how to steward the hard-earned wealth that you and your spouse spent your lives building.

You are not alone if you are uncomfortable discussing your finances with your children or grandchildren. For many parents, talking to their children about their future inheritance is a challenging topic to explore. Did you know that only about one-third of adults have a prepared will, and about 40% with investable assets of $1 million or more never discuss their estate plans with their children? This communication breakdown is correlated to the fact that 90% of the time, inherited wealth is entirely squandered by the third generation, and 70% of the time, it is gone by the second generation. These troubling statistics lead financial professionals to believe that talking to children about their inheritance may help reverse this downward trend.

However, parents worry that a child who knows they will one day inherit a significant amount of money may not have the same motivation to work hard and succeed in life on their own accord. Another concern for wealthy parents is that a child with the knowledge that they will inherit millions could feel entitled and better than their peers. Mom and Dad want their children to understand how the world works, how to be responsible with money, recognize the value of a dollar, and that it doesn’t come easily. Historically there needs to be more communication between those who have earned the money and the beneficiaries who will inherit it one day. We have discovered that it isn’t by accident either. Parents don’t want to discuss estate planning and inheritance with their children.

This communication breakdown may be part of the problem with why inheritances are blown so quickly. Even though it is a sensitive topic, parents and children should consider scheduling an appointment with the parent’s financial professional to discuss the children’s future inheritance, the hopes and expectations of all involved, and the importance of wealth management. We are providing you with a checklist to help you get a head start on your goals for passing down your wealth to your children.

☐  Ask Questions – Parents may be interested in the child’s plans for the inheritance, and the child might want to know if the parent has any concerns or wishes regarding its management.

☐  Ensure honest and transparent communication – Being open and honest can help to mitigate obstacles that could appear down the road. There should be transparency when discussing:

• Which accounts and assets comprise the estate plan, and how to access them?
• The amount of the inheritance.
• Who are the emergency contacts, and how to reach them?
• Why is the estate plan currently structured the way it is?
• What responsibilities will be required for a smooth transition?
• Both parties express true feelings about the situation, including worries, which builds trust and can open doors for teachable moments that will inevitably arise.

☐  Share your values – What do inheritance and lifestyle mean to you? Finding areas where both parents and children have shared values will make it easier to work with one another in pursuit of the same financial aspirations.

☐  Work together during decision-making – Sometimes, difficulties with decision-making after receiving an inheritance are due to previous decisions made by earlier generations.

☐  Recognize where there might be a problem and troubleshoot it now, for example, a spendthrift child or grandchild – There are incidents where the parents or grandparents might feel that a beneficiary is not fiscally responsible based on how they currently live their lives, overspending on material things, maxing out credit cards, battling substance abuse issues, a lack of gratitude and feelings of entitlement for money they didn’t earn. These are all worst-case scenarios that are real-life problems for some families. A question that might arise is, how do you deal with it?

☐ Schedule a family discussion call – Schedule a family discussion call to introduce the financial professional to the family members who are set to receive an inheritance.

☐  Schedule an appointment with a financial professional – A financial professional can not only provide guidance on how to talk with children and grandchildren about the inheritance they will receive one day and how to manage the money, but they may also be able to help you create a strategy for a discussion with individuals that may require some more help in learning and embracing a financial management mindset.

☐  Create a plan – With the help of a financial professional, parents and children can begin designing a strategy for long-term wealth stewardship.

It cannot be overstated how critical preparation is when it comes to the pursuit of any long-term goal or strategy. Begin this new journey by scheduling a meeting with your financial professional for you, your spouse, and the loved ones whom will one day receive an inheritance.

If you would like to set up a call, please don’t hesitate to reach out to us using the contact information provided below. Please also have the following information ready:

• Dates and times everyone is available
• Everyone’s email addresses and contact information so that I may introduce myself.

Don’t hesitate to contact me if you have any questions. Thank you for your continued business, and we look forward to building our relationship with you!

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This information is not intended to be a substitute for individualized legal advice. Please consult your legal advisor regarding your specific situation.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by LPL Marketing Solutions.

LPL Tracking #1-05377431

Sources:

How to Talk to Your Kids About Their Inheritance – Bloomberg

What To Tell Your Children About Their Inheritance (estateplanning.com)

Tips for estate planning and talking about inheritance | UMN Extension

What to tell your adult kids when planning your estate (cnbc.com)

How To Talk To Your Kids About Your Will | HuffPost Life

Keri Pugh

Keri Pugh is a Wealth Advisor with Fusion Financial Group, an independent financial planning firm and fiduciary based in Denver, CO. Keri has over 20 years of experience in the industry, as both a financial advisor and Principal. She obtained a bachelor’s degree in Finance from the University of Northern Colorado and is an alumna with national sorority Delta Zeta. Keri holds a variety professional licenses, carries the esteemed mark of Certified Financial Planner (CFP®), meeting rigorous education and experience requirements in key areas of financial planning, as well as the designation of Accredited Investment Fiduciary (AIF®), a symbol of her dedication to upholding the fiduciary standard for clients. As a wife and mother to two young children, Keri is particularly drawn to working with thriving families and women. This is not only reflected within her practice but also in her regular sponsorship of the local PTA and volunteer work with the elementary school. Outside of the office, Keri enjoys traveling, skiing, and the Colorado great outdoors with her family. She often lines up movie marathons for the family and, in line with many clients, is a beginner golfer and a wine enthusiast. To learn more about Keri, connect with her on LinkedIn.