Californians may be interested by a recent New York Times piece on the predicament of parents and children who have experienced the turmoil of inheriting a large sum of money. While this certainly seems like a very fortunate problem to have, some heirs have claimed that the lack of communication regarding a potential inheritance has left them ill-equipped to handle the responsibility and burdensome expectations that may accompany that money, with the consequences being irresponsible financial management and family discord. Proper estate planning may be the answer, but there is no one-size-fits-all answer when it comes to familial communication.
A recent study estimates that roughly 30 to 40 trillion dollars will be passed on to children over the next 30 to 40 years, so with such a tremendous amount of money at stake it seems strange that this issue is not often discussed between parents and their heirs. However, it can be an extremely uncomfortable subject, and some may consider it vulgar or rude to discuss.
Some parents worry that telling their children about a vast inheritance may sap them of any motivation to create their own wealth. But from an heir’s perspective, some who have been in this situation say they wish they had had greater knowledge of the situation and that it would have helped as they tried to adjust to life with their new-found assets.
Besides tax considerations, which are often foremost in estate planning, people should consider what they want to accomplish with their money. If this involves passing it down to future generations, parents have the responsibility of waiting until the right time to discuss the issue of inheritance with their heirs. Of course recognizing the right time isn’t always easy, but it can be beneficial to figure it out for all parties involved.
Source: The New York Times “What to tell the children about their inheritance and when,” Paul Sullivan, July 20, 2012.