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How Should You Talk to Your Kids About Their Inheritance?

Talk About Inheritance

One of the trickiest and most sensitive financial areas that parents must navigate is talking to children about their inheritance. This conversation is fraught with potential danger.

For example, wealthy parents sometimes fear that telling their kids what kind of inheritance they’re going to receive will take away their motivation to go to college, work hard and build their own careers. Other parents are concerned that revealing inheritance amounts will lead to squabbling and disagreements among their children about who is getting what.

As a result, many parents simply choose not to have the conversation at all. But ignoring the topic could be even worse because this can result in misunderstandings not only between you and your kids, but also between siblings. That’s why it’s usually a good idea to be open and honest with children about what (if anything) they can expect to inherit after you die.

Preparing for the Talk

If you have been putting off having a conversation with your adult children about their inheritance, resolve now to talk with them about it sooner rather than later. Here are a few guidelines to help you prepare for this conversation:

  • Plan the right time and place. Given the sensitivity and emotions that will likely be involved in this conversation, you should carefully plan when and where it would be best to have it. For example, you might plan it during a holiday family get-together, or you could ask your kids to plan a special trip to your home for an important family meeting. You also need to decide whether to have the conversation with each of your kids individually or with all of them together. This will depend on your family dynamics, the personalities and relationships between your children and the logistics of getting everyone together in one place at the same time.
  • Talk about more than just the money. The main thing your kids will probably want to know is who’s getting what. But use the opportunity presented by this conversation to also talk to them about your values and how you expect them to carry on your financial legacy after you’re gone. This is especially important if you are wealthy and will be passing on a large estate to your children.
  • Explain your own financial needs and priorities. Children sometimes have unrealistic expectations about their inheritance — especially if their parents are wealthy. For example, if parents live an affluent lifestyle, kids may think there is going to be a “pot of gold” waiting for them after their parents die. So it’s important to let your kids know that having enough money to live your desired lifestyle and not running out of money before you die is your main priority. Also let them know if you have any charitable intentions and how charitable gifts will affect the amount of money that they will inherit.
  • Ask your kids for their input. When it comes to non-financial assets, it might be helpful to ask your children what they do or don’t want from your estate. For example, some of your kids may not want certain possessions like automobiles, boats, RVs or collectibles while others might find these possessions very desirable.
  • Weigh fairness vs. equality. Some parents want to split their inheritance equally among their children, while others believe that fairness necessitates an unequal split. For example, one child might be facing unique financial challenges such as a disability that require that he or she receive more money than the others. Or parents may want to reward one child who has taken on the burden of elder care for them. It’s up to you to decide whether to divide your inheritance equally among your kids or unequally due to factors like these. Either way, you should be prepared to explain your reasoning to your children to help avoid misunderstandings and hurt feelings.

Don’t Put It Off

No one knows what the future holds, so it’s smart not to delay having an inheritance conversation with your children for too long. While it may seem awkward at first, both you and your children will likely benefit from the conversation in the long run.

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