The Great Wealth Transfer—the idea that trillions will move from older generations, like baby boomers, to their children and grandchildren (millennials and Generation Z) in the coming decades—is currently a source of debate.
“It’s going to change the economy whether we like it or not,” explains financial adviser Sofia Cianciulli. “People will have to deal with a sudden lump sum of money and that means planning for a tax-efficient wealth transfer, which will be of major importance to millions of families in the coming years.”
However, surveys have shown there’s a wide disparity between what millennials and Gen Zers expect to inherit from boomers and what might actually be left for them. Inheritance is unlikely to be the financial planning boom that solves housing costs and student debt. And, unfortunately, the topic of inheritance can cause problems far beyond financial planning and tax implications. It’s a subject that can tear families apart when the contents of a will result in severe emotional fallout.
Why Wills Can Be Contentious
Wills are a touchy subject, largely treated as taboo, since they’re inextricably linked with death. Most families discover the contents of a will after the last of the funeral flowers have wilted and are left to deal with the potential fall-out while still processing grief from the loss of a loved one.
Grief psychologist Bêne Otto explains why wills perceived as unjust are so painful. “When someone has died, that opportunity [for discussion] is no longer there,” she says. “There’s a lot of room for assumption, a lot of room for being wrong.”
Cianciulli agrees. “I’ve heard many times [that those inheriting believe] ‘my father/mother didn’t love me because they didn’t leave me anything, or they didn’t think about me….’ As humans, we seek that explanation,” she says.
The simplest way to mitigate potential feelings of betrayal or abandonment is by opening a conversation with your loved ones about your intentions while drafting your last will and testament.
“From a loved one’s perspective, it gives them an opportunity to share with their people what their wishes are, what their thoughts are and their intentions behind it… It could be something that brings peace of mind and reduces anxiety,” Otto explains.
The Importance Of Open Dialogue
Cianciulli thinks there is a benefit for the beneficiary, too. For instance, a child might hear her parents are trying to leave too much behind for her at the expense of being able to truly enjoy their lives. The child can then correct her parents’ notions about inheritance, stressing that she would rather her parents enjoy the money themselves.
Otto sees inheritance discussions and last wishes as opportunities for connection, so that there’s one less thing for loved ones to have to handle in the aftermath of losing someone who mattered deeply to them.
“I can’t stress enough how empowering it can be to have a document where your loved one has explicitly stated what their wishes are because of the helplessness that can arise when someone dies,” Otto says.
She also understands that, for many families, the prospect of having these open and frank conversations feels impossible, and Otto recognizes that each family has their own dynamic. So, for those who aren’t as open to discussions about topics like inheritance, she says leaving letters or some type of explanation might be helpful. “It doesn’t have to be a long and in-depth thing. It could be a simple statement [like]…. ‘I’m giving you this and this is my intention behind it and this is what I hope it will do for you.’”
Tips For Discussing Wills
From a strictly financial perspective, Cianciulli recommends that wills include “any life insurance, any debts, any assets, distributions—where are these assets going, to whom, and in what percentage?”
She advises using caution when it comes to distribution percentages. “It can break families when assets are not distributed equally. If they’re not distributed equally, I guess that’s really the time [when] you want to have that conversation—while you’re alive.”
These ruptured family dynamics can lead to litigation regarding the estate, in which some assets end up going to lawyer fees, no matter the outcome of the contested will. She also warns against potential surprises left in wills, where families find out hidden secrets from their loved one’s lives and have no recourse to gain further clarification since their family member has passed on.
Otto suggests looking at your assets and deciding what you want your loved ones to have and why that’s important to you. She also advises creating a folder containing all relevant documents, passwords and any information only you would know, like your feelings about organ donation and life support. Your loved ones should know how to access this folder.
Family Feedback Can Help Final Decisions
Otto also proposes discussing the rough draft of your will and treating it as just that: a discussion, where you consider taking suggestions on board. Maybe there’ll be things you haven’t thought about, she says. “You don’t have to necessarily be swayed. You can still make your own decisions and have your own autonomy. But, perhaps, take the feedback of your loved ones on board [and] reflect on it.”
She notes that it’s often easier for you to make decisions around bigger assets, like properties and investments, but receiving input on smaller things, like clothes and jewelry, can be helpful. “[Ask your loved ones] ‘Is there something that reminds you particularly of me? What would help you feel connected to me?’ [And then ask yourself,] ‘Can I take this into account?’”
Conversations around the contents of your will and your intentions behind each choice can help you connect with your loved ones, gain perspective and put things in place that will make a devastating time somewhat easier for the people you care about.
Photo by PeopleImages.com – Yuri A/Shutterstock
