Discussing Family Legacy Plans? 5 Tips to Navigate ‘the Talk’
A successful plan to pass wealth on to future generations takes effective communication delivered with a dose of sensitivity.
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.
Sign up for Kiplinger’s Free E-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.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
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.
-
Visa Is the Worst Dow Stock Wednesday. Here's Why
Visa stock is down sharply Wednesday after the credit card company came up short of revenue expectations for its fiscal Q3.
By Joey Solitro Published
-
Another Analyst Moves to the Sidelines on Tesla Stock After Earnings
Tesla stock is spiraling Wednesday after the EV maker's big earnings miss and Wall Street has been quick to weigh in. Here's what you need to know.
By Joey Solitro Published
-
Confused by Annuities? Making Sense of the Different Types
Many investors aren't sure if annuities are a good option for meeting financial goals. Let's look at the different categories, along with their pros and cons.
By Kris Maksimovich, AIF®, CRPC®, CPFA®, CRC® Published
-
Talkin' 'Bout My Generational Wealth: Baby Boomers
With retirement, each generation has different priorities and challenges. For Baby Boomers, it's a matter of ready or not, here it comes.
By Alvina Lo Published
-
How to Avoid a Big Hassle if Your Financed Car Gets Wrecked
How an insurance check is made out for repairs can cause a world of problems if the lienholder is left out.
By H. Dennis Beaver, Esq. Published
-
Estate Planning Strategies to Consider as Election Nears
Are big changes in tax laws coming soon? Not likely, but you might want to take advantage of higher estate and gift tax exemptions well before the end of 2025.
By David Handler, J.D. Published
-
How to Get Your Money's Worth From Your Financial Adviser
A good financial adviser will focus on how your financial planning and investment strategy align with your lifestyle and aspirations.
By Pam Krueger Published
-
Think of Prenups and Postnups as Financial Planning Tools
These contracts provide a clear framework for asset management and protection and are especially useful if you get married later in life.
By Andrew Hatherley, CDFA®, CRPC® Published
-
Congratulations on Your Raise: Three Things to Do With It
We're not saying you shouldn't spend it on a new car, but there are some considerations to guard against lifestyle creep and to help ensure a comfy retirement.
By Andrew Rosen, CFP®, CEP Published
-
Check Off These Four Financial Tasks to Finish 2024 Strong
The new year is a popular time to set financial goals, but now is the ideal time to check how you're doing. Four tweaks could make a big difference.
By Daniel Razvi, Esquire Published