Estate planning often seems to get the lowest priority when people make retirement plans — if it makes the priority list at all. Even some of the most loving and proactive parents avoid working out strategies for the smooth transfer of wealth to their family members.
It makes sense. No one likes to think about their own death, and the decisions that must be made can seem daunting. Unfortunately, for those who delay, there may be ramifications — at least for their loved ones.
Procrastination almost always has consequences. If you put off doing your laundry, you’ll run out of clothes to wear. If you put off going to the gas station, your car won’t run. Those are your problems, for you to handle. If you delay deciding who gets what when you die, it’s your heirs — not you — who will be left to deal with the paperwork and the issues that are bound to crop up.
It isn’t a pleasant task at any time, but especially not when people are in mourning.
When I give workshops, I usually ask how many participants have been involved in settling an estate. Typically, about half raise their hands. Then I ask how many enjoyed the experience. Every hand goes down.
Instead of a peaceful transition — what most people surely hope for — all too often the process creates discord among family and friends. And the financial consequences can be challenging.
After speaking with thousands of high net worth families and business owners over a number of years, The Williams Group family wealth consultancy found that 70% of wealthy families lost their wealth by the second generation (opens in new tab) and 90% had lost it by the third generation.
Which explains why nearly every country and culture has some version of the rather cynical saying, “Shirtsleeves to shirtsleeves in three generations.”
What goes wrong? Using its data, The Williams Group 1 found three main causes of wealth-transfer failure:
- Trust and communication breakdown within the family — 60%
- Inadequately prepared heirs — 25%
- All other causes (tax, legal, etc.) — 15%
These figures show that estate planning tools and the advisers who use them usually aren’t the problem. It’s more about what’s happening within the family — the connections and conversations they have.
So, how can families fix these problems? Start by focusing on three areas:
1. Work on relationships and reconciliation.
Make relationships with your adult children a priority. Don’t skip over Generation 2 (your kids) to Generation 3 (your grandkids). If you aren’t getting along, work on it. Set an example and take the lead in healing any fractures to your family bonds. This will make communication much easier for everyone and help avoid hard feelings now and when you’re gone.
2. Capture your story.
Be intentional about the values you hold dear and share how those values trace back to your history. Many young people today think they can get everything they need to know from Google, not from Grandpa and Grandma. With that in mind, it’s no wonder so many want to spend all their time at the golf course or on a cruise. Retirees have a vast reservoir of wisdom and know-how. Don’t wait to be invited — pass it on to the ones you love.
3. Share your plan with your heirs.
In movies and novels, there’s always that big moment when the family gathers for the reading of the will. There’s usually a winner and a loser — and a battle. That’s fiction and a recipe for failure. You don’t have to disclose the exact dollars and cents involved in your legacy plan, but you should share the details of who, what and where. Misguided expectations about valued items or inherited funds can lead to bitterness and even lawsuits. Make it a goal to keep that from happening.
Clearly, there’s more to estate planning than signing and filing the proper documents. The good news is, you don’t need to go it alone when you’re putting together the particulars of your plan. A financial adviser who specializes in retirement is in a unique position to help you accomplish your legacy goals within your overall financial plan. He or she can help you coordinate with your attorney or CPA to make sure your wealth transfer goes smoothly. And, because things can get complicated, your loved ones may be included in any conversations you wish.
Just don’t put it off until it’s too late. Your wealth transfer should be a blessing, not a burden.
Kim Franke-Folstad contributed to this article.
1 — Roy Williams and Vic Preisser. Preparing Heirs (San Francisco: Robert Reed Publishers, 2010).
Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and J. Biance Financial are not affiliated companies. Neither the firm nor its representatives may give tax or legal advice. Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Any references to protection benefits or lifetime income generally refer to fixed insurance products, never securities or investment products. Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. 648771
The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.
Justin M. Biance, a Certified Estate Planner and principal at J. Biance Financial (www.jbiance.com (opens in new tab)), is the author of "Designed to Last: Renovate Your Financial House and Retire With Confidence" and “The Great Inheritance: 7 Steps to Leaving Behind More Than Your Money.” He specializes in multigenerational legacy planning and creating tax-efficient strategies for transferring wealth to heirs.
Amazon Prime Video Regains HBO Max
After a brief departure from Amazon Prime Video, HBO Max is back.
By Bob Niedt • Published
You Can Tip Your Amazon Driver Through Alexa. It Won’t Cost You a Dime
Amazon is rolling out a service that will reward its drivers and customers won't pay a dime...
By Bob Niedt • Published
Where Is the Economy Heading? Velocity of Money Provides Clues
Financial adviser looks at the rate at which money is being spent in the economy for an idea of whether we’ll see a recession in 2023.
By T. Eric Reich, CIMA®, CFP®, CLU®, ChFC® • Published
3 Mistakes Business Owners Can't Afford to Make When Planning Their Exit Strategy
Getting an early start on laying the groundwork for your exit is imperative. Empowering others to make decisions and delegating responsibilities also play key roles.
By Christopher C. Giambrone, CFP®, AIF® • Published
7 Financial Planning Steps to Take at the End of the Year
These moves are good to make at any time of the year, but doing them before 2023 arrives can help you enjoy a fresh, confident start to the new year.
By Andrew Rosen, CFP®, CEP • Published
4 Steps to Take if You Lose Your Job Near Retirement
Being let go from a job later in life can lead to financial disaster, but there are some things you can do to help lessen the damage.
By Tony Drake, CFP®, Investment Advisor Representative • Published
Divorcing a Trustee: Do You Need a Prenuptial?
For any corporate trustee you choose, there should be some minimum requirements, and it’s best to check its reputation ahead of time to find out if its trust relationships end amicably.
By Timothy Barrett, Trust Counsel • Published
5 Mistakes Veterans Most Often Make When Filing for Disability Benefits
Our military takes care of us, and when they are injured, sick or unable to work, the VA can help take care of them. For a successful benefits claim, here are some mistakes to avoid.
By Brett Buchanan • Published
Don’t Poke the Bear! How to Respond to Angry Customers
Arguing, doubling down and refusing to negotiate could make matters worse, so it’s best to aim for a win-win solution. And if that doesn’t work…
By H. Dennis Beaver, Esq. • Published
Doing Your Retirement Income Planning in the Right Order Matters
A strong retirement income strategy considers many factors, including the retiree’s unique financial resources and needs. How and when you tackle them is critical.
By Jerry Golden, Investment Adviser Representative • Published