Many families have an unspoken taboo in regards to talking about money. Should you have a conversation with your heirs about your finances and how should you go about it. Vanguard’s Beth Orford, Meredith Antik, and Alisa Shin shared their insights in a recent interview:
Q: Should I discuss my financial intentions with my heirs?
Beth Orford: There’s some very good reasons why you should start this conversation, and one is to help prepare your heirs. Perhaps, you are the only person to make financial decisions in your family, or you are the leader of the management of the family assets. You might want to help build that expertise in the next generation, so that’s a great way to start.
I think, also, building trust and communication is one of the big indicators of successful family wealth transition. When there’s great open communication, then you know what people are willing and able to do, what they want to do, what their wishes are around the wealth. So it’s a good best practice in families. It’s been shown time and time again that open communication works.
But you also have to take the measure of who you’re talking to and whether or not you think they are capable of handling this information. I think some families are very concerned that they don’t want to create a next generation that isn’t motivated to be productive and lead productive lives. So I think you really have to balance who you’re talking to, with what information you’re going to share. And I think, a little information first, see how they do with that, and then build over time is another good practice.
Meredith Antik: And, also, don’t be afraid to get your advisor’s support in how to have these conversations with your family.
Q: There’s probably different degrees of types of conversations you can have. To your point about starting with a little and moving on, you can show some cards, not all potentially, at the outset, and build the conversation over time.
Beth Orford: Yeah, I think that’s right. As we just talked about, the role of a trustee and/ or an executor is a fairly daunting role. For any of you who have settled an estate, you know that it’s time consuming. It takes a lot of expertise or patience, I guess I would
say. So you want to make sure that if you do appoint one of your heirs in either of those roles, that they’re willing to accept that responsibility as well. All good reasons to have the conversation, I think.
Alisa Shin: Long story short, unfortunately, there’s not one recipe, one way, one recipe for every family on how to have these conversations, what to cover in these conversations. You really have to think about your family, ages of your beneficiary. You don’t have to disclose your net worth, you certainly can, and you can certainly do it in stages.
For educational purposes only. We recommend that you consult a tax or financial advisor about your individual situation.
© 2015 The Vanguard Group, Inc. All rights reserved. Used with permission.