The concern is that learning about a big inheritance will take away any ambition or desire to work hard. Children are always more aware than parents give them credit for, so chances are they already know if the family has a comfortable lifestyle or if they are from a wealthy family. However, talking about concrete numbers and an inheritance is different than just having a general sense that the family has money.
Kiplinger‘s recent article, “To Prepare Your Heirs for Future Wealth, Don't Hide the Truth,” says that some parents have lived through many obstacles themselves. Therefore, they may try to find a middle road between keeping their children in the dark and telling them too early and without the proper planning. However, this is missing one critical element, which is the role their children want to play in creating their own futures.
In addition to the finer points of estate planning and tax planning, another crucial part of successfully transferring wealth is honest communication between parents and their children. This can be valuable on many levels, including having heirs see the family vision and bolstering personal relationships between parents and children through trust, honesty and vulnerability.
For example, if the parents had inherited a $25 million estate and their children would be the primary beneficiaries, transparency would be of the utmost importance. That can create some expectations of money to burn for the kids. However, that might not be the case, if the parents worked with an experienced estate planning attorney to lessen estate taxes for a more successful transfer of wealth.
Without having conversations with parents about the family’s wealth and how it will be distributed, the support a child gets now and what she may receive in the future, may be far different than what she originally thought. With this information, the child could make informed decisions about her future education and how she would live.
Most heirs are concerned with planning for their future, which is a reasonable thing. Those who have been taught early that the family is wealthy and that this comes with civic responsibility, will have a better time of it than those who have never been taught about their options. It’s up to the parents to provide the guidance that comes with wealth. Some families teach their children that they are in a position to do good, rather than to grow the family’s wealth. Others want the next generation to become part of family businesses.
Talking honestly and frequently about the inheritance and what the heir wants for their future, will yield the most opportunities for the family to guide heirs.
Reference: Kiplinger (May 22, 2019) “To Prepare Your Heirs for Future Wealth, Don't Hide the Truth”