A lot of parents don’t talk to their children about their assets,
and it’s understandable. In the United States, it’s usually
not polite to talk about a person’s wealth, and that belief extends
to families as well.
But, if you don’t talk to your children about their future inheritance,
they may have a difficult time managing the funds wisely, even if they
receive a small inheritance.
According to Wealth Counsel, this is an important issue because the children
of Baby Boomers stand to inherit an estimated $30 trillion in the next
30 or 40 years. Aside from manners, why are parents so hesitant to disclose
their wealth to adult children?
Some parents are afraid that if their children find out that they stand
to inherit millions, they’ll become less driven and self-sufficient.
For some parents, it’s a fear that their children will sit on a
beach somewhere like Mexico waiting for their parents to die, while others
are afraid that their children won’t go to college or won’t
make their own way because of a promise of a large inheritance.
Then some parents don’t know if they’ll one day be put in a
nursing home, or if they’ll need round-the-clock care, both of which
drain an estate. Medical expenses can be unpredictable as well, so some
parents don’t want to give their children false hope of an inheritance.
Reasons to Discuss Children’s Inheritance
Should you talk to your children about their future inheritance? Is there
any benefit to discussing it with them? Most experts agree that it is
wise to discuss it with children, at least in generalities.
If your children are in the dark about their inheritance and they receive
a substantial amount, they may be unprepared to handle that much money.
If they all of a sudden receive a windfall, they may not spend the money wisely.
Many children will blow the money, or they’ll all of a sudden become
lazy, only for the money to run out within a few years, leaving them back
where they started before the inheritance. Even those who inherit a modest
amount can waste the money on a fancy new sports car instead of investing
it wisely.
Ask an estate planning attorney and they’ll tell you that it’s
wise to talk to your children about money and good spending habits.
If you’re not comfortable discussing details, you can speak in generalities,
such as, “When you receive your inheritance, it would be wise of
you to pay off all of your debt and invest the rest in stocks or a new
business.”
Instead of talking to them about buying thousands of dollars’ worth
designer clothing, you can talk to them about buying a house with cash,
or using the money to accomplish a goal, such as paying for a child’s
college education.
Teaching Good Values by Example
One of the best ways to teach your children about money is to be a good
role model yourself. Let your children see you using your wealth for the
greater good. Whether you donate to charities or invest your money, if
your children see you being smart with your money, they’ll be inclined
to make better financial choices when they inherit your hard-earned assets.
If you would like to discuss this issue in further detail, we encourage
you to contact a local estate planning attorney.