How To Prepare Your Heirs For A Successful Wealth Transfer

Open Communication Plays A Vital Role In Protecting Your Money

We are about to enter into a period of wealth transfer so massive that it will be the largest wealth transfer in history. For the next 50 years, more than $1 trillion in assets will be transferred each year totaling an expected $59 trillion!

As much as we don’t want to think about our family members and loved ones passing away, it’s important to talk about wealth transfers now.  Of the $59 trillion that will be transferred, $36 trillion is expected to go to heirs.

 But unfortunately, a whopping 70% of wealth transfers are not successful and the main culprit is familial issues.  According to The Williams Group, family dynamics and unresolved issues among family members play a huge role in the failure of wealth transfers.  While the beneficiaries may receive the assets successfully, it’s after the transfer that conflict, strife, and failure have a good chance of setting in. 

In order to increase the chances of a successful wealth transfer, we suggest several ways to open the door to healthy communication and honesty with your heirs:

Tell your heirs about your financial details.  We normally avoid talking about our personal finances even with loved ones, but you need to be sure that your heirs are familiar enough with the details of your estate so they can assume management or oversee the assets once you’re gone. 

Involve your heirs in the estate planning process.  This will help to generate dialog about how your estate will be passed own.

  This is also a good time to work on your family’s mission statement.

If you are passing along a business or large investment, you should talk with your heirs about your values and hopes for these assets.  Clarify now so they aren’t let guessing later.

Organize your financial documents and keep them in one location.  You don’t want your heirs having to scramble to find different parts of your estate.

  Keep all of this information in a safe location, and let your heirs know where it’s located.

Speak to a trusted family advisor.  This can play a vital role in ensuring a successful wealth transfer.  By engaging the entire family, a family advisor can help craft a plan with the long-term goal of helping the next generation thrive.  Many family advisors will conduct speaker series about raising financially responsible children.  They can also provide advice around philanthropy to introduce gift-giving strategies or creating a family foundation.

Help build the relationship between your heirs and your financial team (financial advisor, estate planning attorney and CPA).  By helping forge this relationship early, your heirs will have resources to turn to if the transfer of wealth gets complicated.  It will also help prepare them for their future roles and all that the inheritance brings.

If you are the recipient of an inheritance, it’s critical to use your “newfound” money wisely.  This is not the time to move into a mega mansion, buy a yacht, or go on extravagant shopping sprees.  In fact, your lifestyle really should not change much at all.  The money you do receive can be used wisely in the following ways:

  • Eliminating debt is a great way to use some of your wealth transfer
  • Add to your emergency fund of six month’s expenses
  • Save for higher education
  • Invest in home repairs or equity producing investments
  • Even if an inheritance truly constitutes extra money, still save 80%

Remember, strong family communication is the key to a successful wealth transfer.  If you are interested in more information on this topic, please download our e-book, The Great Wealth Transfer.

Are you looking for some financial planning tools?  Check these out:

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Disclosure:  This information is provided to you as a resource for informational purposes only.  It is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors.

  Past performance is not indicative of future results.  Investing involves risk including the possible loss of principal.  This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. 

Wes Moss is the Chief Investment Strategist at the financial planning firms Capital Investment Advisors and Wela. He is also the host of the Money Matters radio show on WSB Radio. In 2014, Moss was named one of America’s top 1,200 financial advisors by Barron’s Magazine. He is the author of several books including his most recent, You Can Retire Sooner Than You Think  - The 5 Money Secrets of the Happiest Retirees, which has been one of Amazon’s best-selling retirement books in 2014.