• Jeff Sproul

THE DREADED INHERITANCE TALK


Telling your children how much they are likely to inherit is probably one of the most sensitive issues parents of wealthy families face. For many parents the dreaded conversation with children is often referred to as the talk about the birds and the bees. Well it seems that once you are past that stage the next topic of discomfort is the inheritance conversation.

For many parents there are significant concerns around sharing information about family wealth with their children. Often this revolves around those who feel guilt in having money and don’t want to ruin their children’s work ethic or give them a sense of entitlement. Some would simply prefer to keep the matter private. However, avoiding the issue or waiting too long to have the discussion carries its own negative connotations which can potentially have a much larger impact.

When to have the conversation

There are many factors to consider including family dynamics, values, level of maturity of the children and how much wealth is to be distributed. All of these factors can vary significantly from family to family and there are no set rules that apply to everyone. However,one general rule of thumb is that you should start the conversation process sooner rather than later - it is just a question of how much detail you provide.

Do it gradually

Educating family members with regard to wealth is an ongoing process and will generally lead you into the discussion on inheritance. One great starting point is to create a family mission statement. This will provide the foundation for more detailed conversations to come by clarifying the family’s values regarding money. It is generally more effective to build up to full disclosure rather than drop the “bombshell” too soon or hiding you plans until the time of your death.

Are they ready?

What are your kids prepared to hear – have they been educated about finance? You want to assess where your children stand in terms of their level of financial responsibility, resilience, ability to think in a mature way and adjust to a potential windfall. Generally, you want to start educating your children at an early age about money, savings, bill payments, etc. to start building a foundation to discuss the family wealth. If the use of actual family wealth is a concern,consider the use of scenarios such as what they would do if they won the lottery. Typically by the time they are in their 20’s children are ready for more detailed conversations about inheritance.

Ask them what they want.

Often concerns about a child’s work ethic causes some anxiety for parents. However, discussions of what the child wants to achieve may uncover entrepreneurial aspirations versus wanting to live off the family bank and be ‘fun-employed’. This will give you the direction you require to develop an effective estate plan that is best for everyone. It is also a good idea for parents to emphasize that wealth is subject to change, so heirs should always have a career to fall back on. Make it clear they shouldn’t rely on receiving the family assets.

Are you ready?

Are you prepared to lead this conversation with your children? The reality is that most parents are not, but there is help. Often utilizing a trusted advisor who has experience in facilitating these types of discussions can make the whole experience much more comfortable and effective. This will also help address who should be present at the meeting or more importantly who should not. How to frame the conversation to avoid negative reactions is also something that firms like Northland Wealth have experience in. A little bit of prep work can go a long way to ensure this is a productive exercise.

Just like the birds and bees conversation, the dreaded inheritance talk needs to happen, and after both it is usually said, ‘that was not as bad as I thought it would be’. For more information on how Northland Wealth can help your family be better prepared for the future, please contact our office.


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