If you’re like many people, you want the assets you’re able to leave your loved ones to be a source of security for them – to provide them with a financial cushion they wouldn’t have had otherwise. You may hope they use their inheritance to help fulfill their dreams – whether it’s buying their first home, starting a business or sending their kids to the best colleges.
You certainly don’t want your children’s inheritance to be a source of guilt. However, “inheritor’s guilt” is a real thing. A great deal of money has been passed down from the Greatest Generation to the Baby Boomer generation, who are in turn are passing it on to their children and grandchildren. The Great Wealth Transfer, as it’s known, is estimated to total some $84 trillion.
While your estate may be a tiny fraction of that, if it’s more money than your loved ones are expecting or have ever personally dealt with, it can be overwhelming. Guilt can come along with that if they feel like they watched their parents or other older loved ones live a frugal lifestyle focused on careful saving and spending of their hard-earned money without splurging a little, even in retirement.
What can you do to minimize inheritor’s guilt and the potentially poor decisions that can come from it?
Avoid surprises
If you think your children or other loved ones will be surprised by the amount of their inheritance, talk to them about it while you can. You don’t need to give them a precise dollar amount, but provide a rough estimate. Give them a chance to discuss it with you. Let them know you aren’t sacrificing your happiness just to leave them a lot of money. Discuss how you hope they’ll use it for themselves, their families and causes they believe in, without putting conditions on the inheritance. (If you need to do that to protect them, a conditional trust is typically a good tool to use.)
Provide them with resources
You probably can’t remove all their guilt, and you don’t want that guilt to lead to poor decision-making around the money or make them afraid to touch it. If you have trusted financial, tax, real estate, legal and other advisors, arrange to have those advisors available to help your loved ones handle their inheritance responsibly.
It’s a lot to consider. Thankfully, seeking experienced estate planning guidance yourself can help you prepare your family for their inheritances.