The following column from Jennifer Pagliara, CapWealth Senior Advisor, appeared in The Tennessean on Sept. 29, 2017.
There are an endless number of reasons that people don’t like to talk about money. When you live in the South, it can be especially taboo. Navigating discussions about family wealth with children and young family members can be tricky, but nevertheless, it’s important to make the effort, especially for the young adults in the family.
At this point, millennials stand to inherit $30 trillion dollars in assets from their foregoing generations. That will be the largest wealth transfer of any generation. However, some may be shocked at what they actually receive. According to a new Natixis U.S. Investor Survey, nearly 70 percent of young people expect to get an inheritance, while only 40 percent of parents plan to leave anything for their children.
While you might be cringing at the thought of bringing up this topic with your parents, it’s important that you have an open dialogue with them to understand their wishes and how that might possibly impact you. This could honestly save both you and your parents a lot of frustration, uncertainty and wasted time.
There are likely several reasons why your parents have not previously discussed their wishes with you. First of all, many people don’t want to confront the fact that they will die someday. Also, parents sometimes don’t want children to be aware of what they could inherit because it could hinder their motivation in life and in their careers. And finally, it can just be flat out uncomfortable.
Here are some tips on how to tactfully approach the subject with your parents:
Don’t go into the conversation with any expectations. You might be surprised by what your family has planned. There is a real possibility that your parents plan to spend their life savings during retirement and not leave you (or your siblings) anything.
Acknowledge that this might be an uncomfortable conversation but one you feel is important to have. A good segue into this discussion is to ask if they have a strategy in place to carry out their wishes after they pass away.
Take exact numbers off the table. Encourage the idea that it’s not about the amount they are leaving you; but rather, you want to understand how their wishes could impact your own planning.
Ask for their advice. Explain that you are beginning to take a more active role in planning for your own retirement and want to know if they have a will, power of attorney, insurance policies or any other estate planning documents in place. Ask for their suggestions on what you should be doing at your age.
Start small. If you are dreading a formal sit down, then simply start the conversation naturally when you feel the timing is right. However, if you have siblings, you might want to ask in advance if they would like to be included in the discussion so it can be at a time when they are around.
Don’t think of this as a one-and-done conversation. Financial situations can change as life change happens and as time goes on. Keep an open dialogue to ensure everyone maintains an understanding of what’s to come.
The most important thing to remember is that your inheritance is a contingent asset, meaning you have no control over whether or not you will receive the amount your parents intend to pass down to you. If you plan for your financial future as if you won’t receive it, you are only going to be better off if something does come your way.