Passing wealth through generations can be fraught with complexity. Money is often an emotionally charged topic, and an older generation’s plans and intent for transferring wealth can trigger an array of reactions from younger family members.
Recent projections show that by 2045, $72.6 trillion will be passed on to heirs, and another $11.9 trillion will be donated to charities. The sheer magnitude of this generational wealth transfer amplifies the need for families to develop, and talk through, detailed legacy plans.
I often work with clients to coordinate a comprehensive multi-generational meeting where family members can come together in a safe, neutral space for the older generation to communicate their financial and non-financial plans to younger generations. For families – regardless of wealth level – looking to utilize a similar concept, below are five tips to make this meeting successful.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Preparation is key
For older generations interested in bringing their family together to discuss legacy plans and the future passing of wealth, the preparation before the meeting is paramount. Not only should the legacy plan be mapped out well in advance, but thoughtful consideration should go into the actual meeting. Who from the family should attend? Where will multiple generations meet? Is travel involved? Is it best to conduct the meeting around the holidays when families will be near one another?
Prepare for – and even practice – specific conversations that are critical to have, and determine the level of detail to share with family members. Doing this legwork upfront allows the older generation to be in the driver’s seat during the meeting.
Plan to have an objective third party present
Ideally this will be a trusted financial adviser, an attorney or an estate planner. A third-party, objective partner will be able to guide a productive conversation, helping the older generation to articulate their plan and prepare younger generations for their future roles and responsibilities to ensure everyone is on the same page.
Anticipate problematic conversations
Ahead of the family meeting, visualize how certain family members may react to decisions. For example, if a sibling is likely to become upset over an unequal inheritance, anticipate and prepare for how the conversation should be navigated. Share specific insight into why that decision was made. Flagging sensitive conversations in advance, and preparing a response with your trusted adviser, can help determine the best strategy for the family discussion to come.
Understand the meeting doesn’t have to disclose dollars
While the older generation may feel tempted to outwardly define exactly how much money will be passed to heirs and charities, it can be more beneficial to keep the conversation high-level, so families don’t get caught up in discussions around who gets what.
Talk about goals rather than dollars, and most importantly, know that an inheritance can be equal, but not equalized. Meaning, perhaps one sibling (who is single) receives an outright inheritance while another sibling (married with children) has a trust set up where they can withdraw funds to support, for example, their children’s future college needs. The ongoing trust can continue the generational legacy planning should this child have descendants.
Walk away from the meeting defining clear roles and responsibilities
The overarching goal of the meeting is for the older generation to lay out their financial and non-financial wishes and have family members clearly understand future roles and responsibilities. The older generation should consider younger family members’ interests, time commitments and other factors as they coordinate who is most appropriate to tackle different roles within the legacy planning process.
For example, is one adult child more equipped to serve as a trustee, managing their parents’ legacy plan and executing their future wishes? Will another adult child be better equipped to handle non-financial matters, such as vetting future living arrangements and taking this older generation to doctor appointments? This emotional support is an important role to define but can often go overlooked.
While this initial multi-generational meeting is foundational to the wealth transfer process, it is a conversation that likely will not start and end with one session. Older generations should continuously mentor younger generations to educate, inform and align them on future family values and goals. That said, the overall legacy plan is something that should be reviewed annually or when larger life events trigger the need to reassess the plan.
-
New RMD Rules: Can You Pass This Retirement Distributions Tax Quiz?Quiz Take our RMD quiz to test your retirement tax knowledge. Learn about RMD rules, IRS deadlines, and tax penalties that could shrink your savings.
-
I'm 61 and need $50,000 for home repairs. Should I borrow given today's rates or take a withdrawal from my $950,000 401(k)?We asked financial experts for advice.
-
Headed for the Retirement Red Zone? This Eight-Step Game Plan Helps to Avoid FumblesThese strategies help safeguard your nest egg and ensure long-term financial success during the five years before retirement and the five years after.
-
I'm a Financial Planner: This Is How You Can Get Started With RMDsThe IRS will come knocking for its share of your tax-deferred retirement savings when you hit 73, but planning ahead for RMDs will ensure you're ready.
-
How Will You Replace Your Paycheck in Retirement? A Financial Adviser's Tips on Income PlanningBills don't stop once you retire — and you can't expect your Social Security checks to cover them all. Don't risk running out of money. Instead, make a plan.
-
From Pets to Paintings: The Little Things That Can Cause Big Estate TroubleSentimental items might have little monetary value, but their disposition can cause hurt feelings. Talking about who wants what and labeling items can help.
-
The Clock Is Ticking: Take Advantage of These Retirement Tax Benefits While They LastRecent tax changes, including an extra $6,000 deduction for those 65 and older, present a golden opportunity for retirees to reduce their tax bills.
-
I'm a Financial Adviser: This Is Why Unmarried Same-Sex Couples Need an Estate PlanWhen illness or death occurs within an unmarried same-sex partnership, family members can step in and push the surviving partner out. An estate plan is vital.
-
A Financial Planner's Guide to a Stress-Free Adventure AbroadStart by looking at flight/accommodation costs, have a flexible schedule, seek out credit card rewards, prep for health issues and plan to cook your own food.
-
I'm a Financial Planner: This Is How Smart Women Can Plan for Financial Freedom Despite Life's CurveballsProactive planning and professional guidance can help to build your confidence and give you clarity when you're navigating major life transitions.
