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.
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.
- 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.
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.
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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.
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