As an estate planning attorney, I am frequently asked who should be involved in the estate planning process.
Often, parents are uncomfortable talking about how much wealth and how many assets they have with their children. Parents with a high level of wealth, in particular, fear that if their children know how much they will inherit, they’ll become complacent and unmotivated.
However, I think that both parents and children should be involved in the estate planning process. Involving children now can save a lot of time and heartache after the parents are gone. When you tell their children what they can expect and discuss at least part of the reasoning behind your estate planning decisions, the likelihood of hurt feelings, monetary issues, and even a lawsuit between family members diminishes.
A recent New York Times article demonstrates this perfectly. Inheritors, especially inheritors of large sums of money, “said they were ill equipped to handle the windfall and found that it quickly made them feel separate from their peers.”
Experts expect that a vast amount of wealth will soon be changing hands among several generations. In June, Accenture reported that baby boomers are expected to leave approximately $30 trillion to their children in the upcoming 30-40 years—which is in addition to the $12 trillion that baby boomers are expected to receive from their parents (predicted by MetLife).
Children who have little to no idea how much they stand to inherit will be put in a difficult spot upon their inheritance, especially if they are younger. Unless they have a financial advisor or trusted family member to advise them, how will they know what to do with the money? They may not know what to invest in, how to save it—or worse, they may want to spend it all.
This is why talking to your children about what you expect them to do with their inheritance is so important. You can impart now, while you still can, the values that you have regarding your wealth to your children. In addition, you might consider giving them a smaller amount of money now to see how they handle it and leaving the rest of their inheritance to them later. A trust is also a good instrument that can protect your children’s inheritance.
More often than not, talking with your children about your estate plan and your expectations will leave them better prepared and will lessen family discord.