Give The Gift of Clarity To Your Family

By: Lauren K. Drury, Esq.
Vice President and Chief Fiduciary Officer
Washington Trust Wealth Management

Too often, when a loved one passes, their family is left confused about the terms surrounding their inheritance. Common thoughts and phrases are:

• Mom would have never wanted this, she trusted me to handle my own money!
• I was supposed to get the art – my sister doesn’t even like it!
• Didn’t Dad trust me? Why am I not in charge?

Being open and honest with your family ahead of time about your estate plan – and your values and expectations around it – can help avoid confusion, conflict, and legal challenges after your death. Thoughtful and strategic planning with an experienced wealth advisor will allow you to clearly articulate your values, goals, and expectations, minimize confusion and hurt feelings, and avoid unnecessary family conflict.

But how do we talk to our children about money they will inherit? After facilitating countless of these conversations, we can make the following recommendations.

Your Values, Goals, and Expectations

As you’re preparing for the conversation with your children about money – whether through gifts while you’re living or as a part of your legacy after you’re gone – you need to be able to articulate your values, goals, and the rationale for the stipulations in your estate plan. These conversations are all about managing expectations and helping your kids to understand your value system around wealth and how it affects your decisions – even if they don’t align with their own values.

Ideally, conversations about money should start when your kids are young so that they understand your values and your expectations around items such as budgets, philanthropy, and what you consider to be the foundation of a successful life. High net worth individuals may worry about how their children or grandchildren will be affected by a large inheritance, fearing it could erode their work ethic and lead to a sense of entitlement.

When you are designing your estate plan, your legal and wealth advisors will have asked you a lot of questions to determine how your legacy will be carried out. These same questions will help you outline a conversation with your family around wealth and legacy, such as:

• What in life is most important to you? Once you have passed, how would you expect your family to honor your legacy?
• Do you expect your monetary legacy to transcend generations, or is it meant to foster only the next generation or two?
• Is philanthropy important to you? Is it important that your heirs continue to be charitable?
• How do you define success? How do your children define success? Is your estate plan tailored to address both definitions – and why or why not?
• How would your heirs handle an outright inheritance? What would be their first steps – Investments? Purchases? Debt payments? And do you agree with their vision for inheritance?
• Do they have an interest in the family business? Will they keep family property or sell it?
• Do they have drug, alcohol, or gambling problems that could lead to the money being used to cause further harm?
• Who will have power of attorney? Who will be the executor? Will you have a corporate trustee?
• How will your family handle conflict – do they have a preferred method that’s worked in the past?

Explaining Your Estate Plan in Light Of Your Values

Once you have discussed your feelings about questions such as these, your family will have a better context of why you have made certain decisions in your estate plan, such as:

• Incorporating a personal value statement or side-letter as part of your estate plan, to help guide your executor(s) and trustee(s) distribute tangible assets appropriately, and to help guide them in making financial decisions in your stead.
  
• Creating incentives in your trust, which encourage a beneficiary for achieving specific goals to help encourage a strong work ethic and wise money management. For example, you may have chosen to say a child will only receive their inheritance after they complete a certain level of education, are gainfully employed, or engaged in some other metric of success that you value.
  
• Handing down the inheritance in installments or at the discretion of a trustee rather than in one lump sum, in the event your goal is asset preservation or generations, or to foster good decision making. Why a Corporate Trustee May Be Right for You (or “How to Save Thanksgiving Dinner”)

Remember that it is your estate to do with what you wish. But communicating your wishes is critically important to avoid confusion and chaos for those you leave behind. (Six Common Pitfalls to Avoid in Estate Planning)

Five Tips To Start The Conversation

If it’s a conversation you’ve been saving for later, “later” is now. Setting clear expectations is an important part of managing your estate before you die, and it can avoid unwanted surprises, hurt feelings, and family drama after you’re gone.

While there is no single right time or right way to talk about your estate, these five tips may make the conversation easier and more productive for all of you.

1. Start with a story. You could say, “I’ve heard stories of a parent’s passing that has left the kids at each other's throats over the estate. I don't want you to end up like that, so let's talk about how things will work." This sets the tone that you are looking out for them and want to avoid conflict when you are no longer there to help.
2. Have a specific plan. Enter the conversation with specific goals. A bulleted list of talking points and key issues will help, especially if the conversation gets sidetracked or emotional. At minimum, it should include the location of your important financial documents, what they can expect in the will, and their roles in managing the estate, including your choice of executor.
3. Use your judgment. A face-to-face conversation is generally preferred, either with the entire family or one-on-one. But you know your children and your family dynamic. Your children may be more receptive to a series of small conversations or may benefit from covering everything at once. You may have more harmony speaking to your children separately or together in a group. They may be more comfortable with a framework of your estate without actual numbers or may prefer to read a full copy of the will.
4. Explain your reasoning. Be prepared. Your kids may be disappointed or upset by your choices if you're giving them news they don't expect or agree with, such as placing conditions on the inheritance, leaving assets to charity, or dividing assets unevenly among heirs. As difficult as that conversation may be, it is far better for them to hear it from you rather than after your death, when you are no longer there to explain your decisions.
5. Encourage dialogue. Let your children know that although you have put great thought into making these decisions about your estate, you are interested in their input. Ask them, “What do you think?” And since some of the most emotional and potentially contentious conversations happen around “who gets what” - from Mom’s diamond engagement ring to Grandma’s dishes to Dad’s car - give each child a chance to talk about their favorite items and come to an agreement about how everything will be divided up.

Having the Conversation

Your wealth advisors at Washington Trust Wealth Management can walk you through the process as you prepare to communicate your wishes to your family, and we can facilitate those family meetings as well, whether a one-on-one conversation or a full family summit.

We can help discuss your estate plan with your family, and introduce trusted advisors – such as trust officers, investment professionals, attorneys, CPAs – who help steward the family legacy, including corporate trustees and executors. We can discuss location of important documents, disposition of personal property and collectibles, how to minimize taxes and fees, how to protect business interests, and any other topics important to you to help create understanding and respect around the family legacy plan.

Most important, we will help you communicate your hopes, dreams, and values around your family legacy, focusing not on what your heirs “get from wealth,” but rather what they can “accomplish with wealth.”