Best Practices For A Successful Transition Between Generations

Passing on wealth is not just about getting financial assets to the next generation. It’s also about passing on what you think is important and avoiding damage to your heir's relationships with each other. Unfortunately, research shows that for many families the process goes awry. Here are some steps you can take to try to avoid common and costly mistakes, while increasing the likelihood that your estate transfers successfully and lasts through another generation.

Avoid This Unfortunate Inheritance Situation

It’s not an uncommon scenario: The parents pass away and leave the family home to the children, Joe, Bill and Marie. Joe wants to keep the house and live in it to preserve the homestead for generations. Bill is fine with that as long as Joe can buy out Bill’s share. Marie insists they sell the home because the market is hot and there’s a good profit to be made. Then the fighting begins. Certainly no family likes to think that the parents’ legacy will turn into a tussle over assets. Yet it happens all too often.

Understand Why Most Transfers Fail

While wealth transfers fail for many reasons, the top explanation is simple: lack of communication. For example, most parents are uncomfortable discussing money with their children. Perhaps we fear such talks will reveal children’s greed or that by talking about inheritance the kids will be less motivated to strive in life. Maybe parents believe such a discussion would be all about trusts, tax strategies and insurance policies. While your financial advisor might use those tools to achieve your wealth transfer goals, the real purpose of talking with your heirs ahead of time is to express the impact you hope the assets will have on your family and community — both now and after you’re gone. This is especially important in the event of passing along a family business. Pointed communication of what you would like to accomplish and pass along can help legacies endure for generations.

Plan To Avoid Mistakes

Before you talk with family members about your legacy, it’s critical to fully consider all of your potential beneficiaries. Map out and identify all of your immediate and extended family members so that you will have a clear picture of whom you and your financial advisor may want to plan for. Perhaps you have a child who requires custodial care when you’re gone. Or you may have elderly parents whom you hope to support financially if you predecease them. Before you talk with your heirs, take time to document specific details — including names, addresses and contact numbers — and then use the map as the basis for a planning conversation with your attorney, tax professional and financial advisor.

Share Your Values

Sometimes, legacies involve arrangements outside the family boundaries. Maybe you’d like to leave a portion of your stock holdings to a favorite charity. Or perhaps you’ve decided the summer home should be bequeathed to a nonprofit organization for housing or educational facilities. Let your children know the reasons behind the division of your estate so they won’t feel confused or resentful when your legacy transfers to others. The why of your estate is as important as the what if you hope to minimize conflict when you’re gone.

Engage Your Financial Advisor

These conversations should happen well before your heirs inherit your estate. For example, if one child is your executor, invite that child to your strategy session with your financial advisor to begin discussing financial matters and wishes openly. If another child is just starting out on a career, arrange a meeting with your financial advisor to explore saving strategies for long-term goals.

Legacy Financial Planning Fee

Our team can provide support with hosting family meetings to facilitate these important conversations. To support your loved one's continued financial goals, our team at Covenant Wealth Strategies offers a discounted, non-recurring Legacy Financial Planning Fee for family members of existing clients because we believe multi-generational planning is so important. 

The ultimate goal is to create a legacy plan that aligns with your family's values, nurtures open communication, and ensures a secure and harmonious financial future for generations to come. Contact Us to learn more.

Content in this material is for general information only and not intended to provide specific legal advice or recommendations for any individual.