New York Estate Planning & Elder Law Blog
Recent studies have shown that talking about inheritance is still a taboo subject for many families, and the avoidance of the subject could lead to many issues down the road. An estimated $40 trillion of wealth will be passed down to heirs as the Baby Boomer generation passes away. According to a survey of thousands of clients done by financial managing giant UBS, over forty-six percent of people who plan on passing down their estate through inheritance have not discussed inheritance plans with their children and other family members.
Reasons for Avoiding the Talk
The reasons why people had not discussed these plans varied. Thirty-two percent of survey takers said that they hadn’t discussed it because they did not want their children counting on the inheritance. Over a quarter, twenty-seven percent, said that they did not want their children thinking that they were entitled to wealth, and around thirty-one percent of people simply did not see the inheritance talk as a pressing issue.
However, despite the fact that families had not had the talk about inheritance seventy-five percent of people said that it is highly important for their children to use the inheritance wisely and not squander it. In addition, a solid two-thirds of responders stated that they did not want any bad feelings among the heirs about who got what or how much.
The Problem with The Taboo
This is where the conundrum lies: benefactors want fights avoided and prudent financial decisions to be made but keep their children in the dark about what to expect from the inheritance. Wealth experts agree that it is a big mistake to not have a discussion about inheritance with your family. The secrecy can backfire and heirs can be overwhelmed by sudden wealth. When inheritance is treated as a taboo subject, heirs can be surprised and disappointed about what they receive. When there is no explanation for differences in amount or in what people receive the heirs are left to only speculate about the reasons why. This leads to family fights and other issues that arise only after the testator is dead. It is also unsurprising that these types of tensions are higher still in blended families where there is a second or subsequent marriage and stepchildren.
The numbers do not lie, either. Of the heirs who know the details of their parents’ estate plans beforehand – which include seeing the will, knowing how much money there is as well as how it will be divided, and where the assets are – a majority of eighty-nine percent of heirs said that they were satisfied with the distribution plan. Compare this to the heirs who did not know the details beforehand and only sixty-five percent responded that they were happy with the distributions. On top of that, twenty-seven percent of heirs who were in the dark about their inheritances stated that they would fight family members about the distribution of wealth, as opposed to a mere twelve percent of heirs who know what to expect from their parents.
Research has shown both quantitatively and qualitatively that the outcome of inheritance is better for the testator and the heirs when the plans are discussed ahead of time. By making inheritance less of a taboo subject there is a better understand of what is to come, what is expected, and less issues will arise as a result.