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.
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.
Julie Virta, CFP®, CFA, CTFA is a senior financial adviser with Vanguard Personal Advisor Services. She specializes in creating customized investment and financial planning solutions for her clients and is particularly well-versed on comprehensive wealth management and legacy planning for multi-generational families. A Boston College graduate, Virta has over 25 years of industry experience and is a member of the CFA Society of Philadelphia and Boston College Alumni Association.
Holiday Shopping? Here’s Why Some Stores May Let You Keep Your Returns
With the holiday shopping season in full swing, you're likely to find more stores shunning returns in favor of a 'keep-it' policy, study finds.
By Jamie Feldman Published
Stock Market Today: Stocks Swing Higher After Powell Speech
Fed Chair Powell poured cold water on potential rate cuts, but stocks jumped anyway.
By Karee Venema Published
Year-End Tax Planning for a Financially Healthier Retirement
Getting your tax ducks in a row for the end of the year can decrease your tax liability and make the most of your income, now and in retirement.
By Ryan Marston, Investment Adviser Representative Published
Where to Start Financially After a Life-Changing Diagnosis
Dealing with an illness, yours or your child’s or that of another loved one, is hard enough without adding financial duress. Here are some considerations and suggestions for covering expenses.
By Stephen B. Dunbar III, JD, CLU Published
Six Ways to Prepare for Widowhood and Protect the Surviving Spouse
No one wants to have to plan for losing their spouse, but having plans in place and knowing what to do when the time comes can alleviate at least some of the stress.
By Tyler Hill, Investment Adviser Representative Published
Creating a Blended Family? Three Key Steps to Consider
Blended families can make your finances and estate extra complicated, but you can head off some of those issues with careful planning.
By Adam Frank Published
Do You Need Disability Insurance?
If you work for a living, the answer is yes, so don’t overlook protecting your biggest asset. Open enrollment season is the perfect time to assess your options.
By Frank J. Legan Published
Retirement Planning in a Time of Inflation and High Interest Rates
Today’s challenges make retirement planning even more complicated than usual, but it’s not all doom and gloom.
By Ken Moraif, MBA, CFP®, CRPC® Published
Not Confident About Retirement Despite Financial Success?
You’re not alone. Uncertainty related to interest rates, government debt, long-term care and market volatility is making everyone uneasy. What can you do about it?
By Barry H. Spencer, Registered Investment Adviser Published
Risk vs Reward: Understanding This Intricate Investing Dance
The stock market can be unpredictable and complex, so having a good grasp on how to mitigate risk is essential.
By Kerim Derhalli Published