“The Talk” – Part I: Talking to Your Kids About Wealth Transfer

Posted on Thu, Jun 29, 2017 ©2021 Drucker & Scaccetti

By: Rachel Kieser, CPA, MT and Jane Scaccetti, CPA, MT

 

When you hear “The Talk,” you may not think the talk is about money.  However, many parents in high-net worth families find it difficult to discuss their wealth with their children -  particularly the amount of their wealth, their responsibilities for this wealth, and how it will be distributed once they pass on.  And they certainly don’t know the best age to reveal the “number” to their children, or if they should even tell them the value of their wealth at all. 

 

Over the years, we have worked with children- the Next Gen- who have been well prepared, unprepared, and shocked (and that can go both ways). Some seek counsel and others think they can do it on their own. Many change advisors because they have not built the trust within a firm or with the Next Gen of the professionals involved. This blog can’t deal with all the questions around timing and content. But we can recommend tips to consider and talk over now with your trusted advisor with the goal of creating a succession plan for the Next Gen.

 

  1. Discuss the Origins of your Wealth – Are you in a family of multi-generational wealth? Or did you grow your wealth in a family business or through investment?  If your children understand the origins of their family’s wealth, they may be more inclined to be good stewards of this wealth.  Don’t underestimate the power of your family’s story.

 

  1. Tell Them Who You Trust and Where to Find your Estate and Other Important Documents – You likely keep your wills and other estate documents in a safe or file at home or at work. If you have named an adult child as your executor, it would be best for them to have a copy of these documents, or at least inform them where they are kept.  But most important is for them to meet and know the trusted advisors who can help them when you no longer can. Yes, they should also have a listing of your assets and liabilities at some point, and how to gain access to your accounts online. But access to those you have trusted is a crucial. When you pass, your children are likely handling their own grief and adding burdens such as accounting, tax and legal issues is unfair. Explain to them now the value you found in your team of advisors.

 

  1. Talk About Special Bequests & Uneven Transfers – You may want to leave a special piece of jewelry to one daughter rather than another, or you leave a higher percentage of assets to one child who may not have the same income potential as their siblings. Typically, the comparison is the social worker vs the doctor both who are valuable members of our community but have very different income potential. Unequal bequests could cause unintended tension between your children.  We recommend you discuss this decision with them while you are still living. Even a note with your estate documents is better than no explanation at all. 

 

  1. Discuss Business Succession Planning – If you started a family business or took one over from a prior generation, you are responsible for the legacy to the next generation.  One child may be involved in operating the business, while others are not.  How do you then transfer ownership of the business?  Do you leave a share for the children not involved?  Or do you provide additional compensation to the one running the show?  These are all important questions and providing your successors with your reasoning will help them understand your plan, and execute wisely.

 

Most estate planners and parents spend too much time on document drafting and too little time on preparing the Next Gen to be good stewards of your hard-earned money. While we are not claiming to have majored in psychology, communication now could help mitigate stress and animosity among your heirs when you are no longer here.

 

Remember: estate planning is more than preparing documents.

Topics: Trusts, Wealth Transfer, estate planning, beneficiaries, Succession Planning, conversation

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