Parents and Inheritance

My Comments: For many years, the financial industry has been telling those of us who work with clients that as the baby boomers age, trillions of dollars are going to flow to the next generation. The objective has been for us to help those people make good decisions. Or at least that’s what they would have you believe.

I suspect it has always been true that those at the end of their lives view those who will take over as suspect when it comes to exercising good judgement. As a financial planner for the past 40 years, I’ve spent a lot of time thinking about this.

By Ian Prior, U.S. Trust

With an unprecedented transfer of wealth under way, many parents fret that the younger generation may not be ready for it. Here’s a look at how both generations might alleviate concerns and best prepare for the responsibility that comes along with wealth.

Memo to all high-net-worth parents: Millennials, the generation born between 1980 and 2000 and saddled — perhaps unfairly — with a reputation for staring at smartphones and returning to the nest in their 20s, stand to inherit $30 trillion during the next few decades.1 Understandably, many parents — maybe you included — are concerned that the next generation lacks the maturity or the financial know-how needed to handle any inheritance.

While that may be the case, do not despair. “There are practical steps you can take to remedy the situation,” says Craig W. Bethel, a wealth strategies advisor at U.S. Trust. “And, ultimately, your children may surprise you with a willingness to learn or they may show you that they possess a stronger financial acumen than you might have realized.”


Starting the conversation

As it happens, “a shift to more openness may already be under way,” says Bethel. “A rise in affluence-related news stories — contrasting economic conditions, wealth and social responsibility — may have prompted children to ask questions about family assets.” And millennials have a reputation for wanting answers.

If you haven’t had “the talk” about wealth, consider this: With Internet access, a teenager can uncover many facets of your financial information with just a few clicks — mortgages, home sales and corporate financial reports may all be publicly available. “Better to raise the topic and position it in a manner that is consistent with your family’s values than to have them use their imagination to fill in the blanks,” says Paul D. Stavig, a wealth strategies advisor at U.S. Trust. “A general, age-appropriate discussion about wealth grounded in your family’s values is a good start.”

“If you are willing to discuss your wealth, as well as provide financial education, it is never too early to start,” says Chris Heilmann, chief fiduciary executive at U.S. Trust. He would keep the following touch points in mind:
• Family values. ”It’s never too early to share your values concerning wealth with your children,” Heilmann says. “Younger children might be encouraged to help select canned goods to donate to a food drive, while older children might be engaged in co-creating a values statement that encapsulates the purpose and meaning of wealth in your family. Defining values is key to any conversation about money.”
• Age. “Engage in age-appropriate talks,” Heilmann says. “That might mean credit cards and savings with a teen and the family business with a young adult.”
• Trusts. “If your children are trust beneficiaries, educate them about the purpose and goals of the trust,” he says. “That should help them have appropriate expectations and, for older children, assist them in making long-term financial plans.”

Asking for help

“Some families choose to supplement their children’s financial skill set by having professionals work with the family to provide education, insight and share examples,” says Jody L. Weber, senior vice president, Client Segment Marketing at U.S. Trust. Look for a financial education program that offers education on a broad range of topics — from credit reports to trusts, Weber says. “Educational sessions should be age appropriate and come in a variety of formats: online, one-on-one, group presentations or retreats. For millennials, they should be social media friendly.”


Like it or not, “We’re all shaped by the economic, social and political climate we’re raised in, so we inevitably share some traits or views with others in our generation,” says Paul D. Stavig, a wealth strategies advisor at U.S. Trust. “Your generation” — labeled “millennials” by a couple of baby boomers — “has its own characteristics and influences.” Take a look at the list on the next page and see how it aligns with your own experience.
Inheritance 101

Here are a few key things to know when it comes to millennials and inheritance:
• “Many millennials aren’t waiting for an inheritance,” Stavig says. “They are making their mark now as entrepreneurs and job creators.”
• An inheritance can come in many forms, including cash, securities (stocks and bonds), real estate and family business interests.
• Assets may be held in trusts, which are arrangements wherein a third party (the “trustee”) holds and manages assets on behalf of a beneficiary or beneficiaries.
• A trust invariably comes with certain rules or guidelines, established by the creator of the trust, that define things such as the amount and frequency of distributions, as well as under what circumstances they might be made.
• Payments may be in a lump sum or staggered. Beneficiaries may receive funds on a regular basis (e.g., monthly or annually) or upon attaining a specified age. It’s important to understand the terms of the trust and the distribution patterns it provides, as this may impact the kind of lifestyle you’ll be able to maintain as you get older, as well as help you better plan for both yourself and your family for the future. In some circumstances a trust may include provisions that, in addition to periodic income distributions, allow for principal distributions based on prescribed standards in the discretion of the trustee(s).

Parents have concerns

Your parents may or may not have discussed inheritance with you. Either way, “It’s not uncommon for parents to be concerned that their children are inadequately prepared to handle significant wealth and the challenges wealth — through an inheritance or otherwise — can bring,” says Jody L. Weber, senior vice president, Client Segment Marketing at U.S. Trust. “There are a number of ways your parents may address these challenges with you.”

They may:
• Discuss family wealth in the context of family values. This may involve showing you a family mission statement that focuses on your family’s philanthropic goals.
• Provide a financial management overview. Rather than get into specifics about your family’s wealth, they may provide insights on topics that help you become better managers of your own finances.
• Introduce you to their advisors who have in-depth knowledge of financial topics and who may offer educational programs to help you build your own financial acumen.

Listen when they talk

Many parents avoid having “the talk” because they were raised to not discuss money and wealth. “If your parents talk to you about financial issues, listen to them and ask plenty of questions. As in so many of life’s more challenging situations, communication is a key element,” says Craig W. Bethel, a wealth strategies advisor at U.S. Trust. “And, while sometimes wealth is a difficult and uncomfortable topic of conversation, you and your parents will be all the better for having had it.”

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