Money is an incredibly sensitive topic. For most people, their “success” or “failure” in life is gauged by how much they make. Now many people, myself included, feel that there’s more to success than just money, however, we can’t escape the fact that many others don’t feel the same.
Money, in a family dynamic, can cause more strife than any other single topic. As I’ve said many times, money does not cause family dysfunction, it merely amplifies any underlying dysfunction that was always lurking below the surface. Add to this the fact that, in the next 20 years, we’re going to experience the largest transfer of wealth ever and the implications are huge.
The easiest way to avoid future conflicts over money is to do proper planning before it ever becomes an issue. When starting the estate planning process, it’s important that all interested parties be aware of what’s going on so that there are no nasty surprises when the transfer of assets actually happens. By doing proper planning ahead of time any issues can be addressed and hopefully, minimized with much less pain. I can’t tell you the number of times I’ve heard potential heirs complain that their parent/grandparents are frittering away “their inheritance.”
If you are a business owner with family members involved, if you’ve accumulated enough wealth to have a family charitable foundation, or if you simply want to give it all away when you die, it’s critically important that you let your heirs know what you intend to do with your estate when you pass away. There’s nothing worse than having a child that thinks they’re going to inherit a fortune, only to find out that you intend to give it all away to your favorite charities. Many baby boomers are counting on their inheritance to finance their own retirement so imagine their surprise and anger when they find out their own retirement plans have been derailed. At a minimum, not involving your heirs in this discussion could lead to incredible animosity, years of therapy and, most likely, legal wrangling in an attempt to undo your wishes. That’s why, long before it becomes an issue, you need to ask yourself the following questions:
- While I’m alive and in my twilight years, who’s responsibility is it to take care of me when I can no longer take care of myself?
- When I do die, what do I want done with my estate?
- Are my children capable of carrying on the visions and goals of my business?
- Will my heirs use the money in our charitable foundation the way I intended, or will they change its mission to something completely different?
- If you plan to give it to your children or grandchildren, and they inherit a large sum of money, will they be able to handle it responsibly or will they “blow it” on, as the saying goes, wine women and song?
One of the trends we’re seeing is inheritance based on reaching certain personal milestones. For example, instead of giving your beneficiary a lump sum inheritance when they turn 21, the trust will dictate that a certain amount will be distributed upon reaching certain milestones i.e. graduation from college, marriage, starting a new business, etc.
The wealth transfer process, by its nature involves many parties including family, charities, attorneys, accountants, wealth managers and a host of others. By having open, honest discussions with your family and advisors regarding the transfer of your own wealth, you can have your estate go where you want it and in the amounts you want and, hopefully, all those involved will be on board so that the process is as painless as possible.