Despite the uncertainty of 2020 surrounding the coronavirus’s impact, including the severe economic toll it has taken on millions of households, we are part of the wealthiest group of humans ever to walk the planet.
Economic studies show that 85% of the Earth’s population lived in dire poverty just 200 years ago, while that percentage was closer to 10% in 2015. In the U.S., the Great Depression taught harsh lessons about scrimping and saving for the future.
Many baby boomers heard those stories firsthand, and now, whether their estates are small or large, they struggle with communicating their estate plans to their children. While each person is different, here are three questions to ask yourself.
How much will my kids inherit?
This is perhaps the easiest of the three. You can figure out a ballpark estimate of the estate’s value by:
- Marking your current net worth
- How much more you plan to earn in the future
- How much you intend to spend
- How much you want to go to charity
- The taxes, if any, your estate and beneficiaries will owe
- Figuring out how much each child will receive
How will the inheritance likely affect them?
There are three typical outcomes here:
- It will make their lives better
- It could make their lives worse
- It won’t have much of an impact
For some children, receiving an inheritance of $100,000 can be life-changing. For others from wealthy families, it may not make much of a difference. However, it can be more complicated for children who suffer from substance abuse, gambling addictions or those who can’t manage money.
How should I communicate with them?
Your response to the first two questions may largely dictate how you choose to inform your kids about their inheritance. In most cases, transparency is the best policy, and your goal should be to help them be successful beneficiaries. Those in that category typically share these traits:
- They demonstrate responsible financial skills
- They do not feel entitled
- The inheritance they will receive doesn’t come as a surprise
Working through these questions can help make the process smoother through what will be a difficult time for your family. While you focus on communicating your hopes and legacy to your kids, an experienced estate planning attorney will focus on helping you distribute as much of your wealth as possible and in the most efficient manner.
