Family Legacy Wealth Plan: 3 Must-Have Conversations With Adult Children
A family legacy wealth plan requires care and forethought. One common error for those going through the process is failing to prepare adult children for the role they will play.
A thorough estate plan will see that your assets are distributed according to your wishes. Yet, many parents don’t account for the issues their children will encounter when they receive their share of the estate.
Passing on the assets you’ve built over a lifetime may be easier than preparing your children to properly manage their own inheritance.
A Vital Component to Family Legacy Wealth Planning
As important as it is to communicate with the beneficiaries of your estate plan, there is another important piece of the puzzle. Your spouse or significant other must be on board with the plan.
Having a unified vision can be a particular challenge when dealing with blended families or where there are family disputes.
Modern families come in all shapes and sizes. Some couples are on their first marriage. Others have been through multiple marriages. Others are simply cohabitating or in a committed long-term relationship.
Understanding your family’s feelings and attitudes is a big part of building a family legacy wealth plan. Does your partner share your goals and preferences when it comes to your plan? Does your partner share your vision when it comes to the strategies in the plan? Will there be a dispute between you and your partner about whether to divide assets equally versus fairly?
If there are disagreements, it’s important to work them out in advance with the help of an experienced estate planning lawyer. Getting everyone on the same page can save enormous difficulty in the future.
Necessary Discussions to Have With Your Adult Children
It’s natural to focus on your role as the giver when it comes to family legacy wealth planning. There is another side of the exchange, however. The person receiving assets needs a plan as well, to protect the family legacy.
The best way to ensure that both sides of this planning process work together is to communicate clearly, and with purpose, with your beneficiaries. The point of the conversations is to clarify what your plan is and to answer any questions your beneficiaries might have while you’re still around to do so. That way, your loved ones will have the guidance they need to follow the plan in the way you want them to.
Open communication about important assets such as the family home or vacation property, and vital issues like your end-of-life care and what you want your heirs to do after you’ve passed, can make a huge difference during a difficult time. Without it, family members may get mad at each other for decisions that you made.
In many cases, these discussions can reveal new information you may want to account for in your plan. The treatment of the family home or vacation properties is a key example. You may not realize the level of attachment your children have to these properties. A plan to sell them off and divide the proceeds might not be the best path. Balancing the wants and needs of your family members in a way that everyone considers fair might be tricky, but it’s far easier if you’ve had open communication in advance.
It may be possible for one child to contribute financially to keep an asset intact while still providing an equal division. The details need to be worked out, including the financial transactions necessary and the timeline to be followed. Planning ahead can prevent disputes and allow for the smallest amount of tax liability.
Using the example of a family vacation property, one estate planning tool would be the use of a Qualified Personal Residence Trust (QPRT). This is one way to pass it to the next generation in a tax-friendly manner.
Telling your children what’s going to happen is different from discussing your plans and the reasons behind them. If your beneficiaries don’t understand why you’re making the choices you’re making, they’re more likely to disagree and cause strife. Lay out your reasoning now, while you still have the chance.
It’s possible–maybe even likely–that your adult children will not have a full understanding of all the elements of your portfolio. Business and financial holdings cover a wide range of items, including:
- Life insurance policies
- Real property
- Ongoing business income
- Corporate or executive benefits
- Private holdings
- Stock options and RSUs
- Retirement plans
More complicated portfolios increase the need for in-depth discussions with your children. This will allow your children to avoid mistakes that can lead to asset loss and unnecessary tax liability. It can also help them manage the assets in the most productive manner.
For most people, a lifetime’s worth of wealth represents more than accounts and entries on a ledger. Your legacy is a product of your work and values. Passing these values on requires an open dialogue with your children.
If you freely communicate your intentions and beliefs, you’ll be able to leave a legacy that means more to your loved ones than just an influx of resources. You should take the time to make sure your children understand the following:
- What did you learn in your career that you want them to understand?
- What lessons have you learned while accumulating your wealth?
- What mistakes would you have them avoid?
- What do you want your wealth to accomplish in the world?
- How would you like to see them use the assets you pass on?
- What have you valued most in the life you’ve shared with your children?
What Comes Next?
A family legacy wealth plan is not meant to be a burden for your children. When you’re done, the plan should be comprehensive and clearly understood by all. The idea is to pass along your assets in a way that serves the needs of the people you love.
Clear communication leaves more room for your children to benefit from what you’ve built, rather than seeing it lost to family fights, taxes, fees, creditors and others.
We Can Help You Create a Legacy Wealth Plan
Experienced counsel is a key component in successful estate planning. At the Law Office of Janet L. Brewer, you’ll work with a lawyer who understands the importance of careful planning.
The right attorney can guide you through the complexity of the process and ensure that your goals are expressed in an efficient and effective manner. Call our Los Altos offices at 650-325-8276 to get started on your plan today.
