Having “The Talk” with your Heirs
Posted on April 11, 2018
Are your children grown? Do they have children or even grandchildren of their own? No matter how much knowledge and experience they have accumulated, inheriting your wealth may be a dramatically different and complex responsibility for them.
How do you plan to pass on your assets? Consider these options –
• How can an Irrevocable Trust protect your heirs and the hopes you have for their future wealth?
• How can elections at death create significant tax differences that impact the ultimate payout?
• How can the design of a trust protect the assets to be inherited when one parent remarries?
• Upon the death of both parents, is it best to create separate trusts for the Next Generation (with multiple heirs) or keep it in one account to benefit all?
These questions and more are ones that families wrestle with every day. The path to the answers all start with one important conversation.
Have the “Inheritance Conversation” sooner rather than later
Each generation has a way of discussing estate planning and money management with the next one – or alternatively, keeping that information closer to the vest. Only you know your family members and the dynamics between them. Whether or not you disclose the amount of your estate, having a conversation to set expectations in advance generally assures a smoother transition of family assets and provides heirs the opportunity to ask questions directly, gaining clarification about expectations, as well as seeking guidance about how to manage such an inheritance. Understanding your thoughts about the wealth you’ve accumulated, and how your plans will benefit them and perhaps their community, will be a source of wisdom and insight they will appreciate.
What steps can be taken to assist the Next Generation?
Introduce your heirs to your trusted advisors, so they have an understanding of what they do for you and become familiar with the same fiduciary care and guidance that you have experienced over the years, leading to a less stressful transition of wealth in the future. In addition, help safeguard wealth for the heirs by establishing a Corporate Trustee or Corporate Co-Trustee of the estate. The Corporate Trustee role provides a level of confidence and ongoing advice to heirs to uphold the wishes of the parent generation and manage all fiduciary and tax requirements related to the trust. It also provides a level of protection to assure that the funds are properly managed, and ultimately cultivated and used as they were intended. Corporate Trustees provide a failsafe for the benefit of the heirs — otherwise, depending upon each family’s situation, the inheritance can be quickly depleted through tax mistakes, legal battles and lack of financial discipline. Similarly, a Corporate Co-Trustee forms a working partnership with a family member and/or additional trusted advisor to guide and advise, as well as serve as an intermediary to beneficiaries.
It is important to have custom-designed family trust and investment management for you and the generations to follow, taking into account significant life changes, individual circumstances and special needs, business succession, management of special assets, and strategic philanthropy. In addition, ongoing family education and governance helps prepare and inform your children for the responsibilities that come with inherited wealth.
We highly recommend a family meeting. It is a comfortable, effective forum to introduce your estate plan and the vision that brought you to this point. It is also an opportunity to introduce your children and possibly grandchildren into the process of preparing for inherited wealth that could substantially change their lives. Contact the The Trust Company office in your area to discuss how we can assist you in starting the conversation.