Why Do Families Fail when Transferring Wealth?

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Over the next 25 years, analysts anticipate $68 trillion to be passed down to younger generations and charities. While the importance of legacy planning is not limited to the forthcoming Great Wealth Transfer, it does spotlight the significant amount of wealth that has been created, primarily by Baby Boomers, and the need to transition these assets thoughtfully.

A legacy plan or estate plan is a vital part of the financial planning process. It will ensure the assets you have spent your entire life accumulating will transfer to the people and organizations you want. The plan will also make sure that family members are prepared to inherit and execute your wishes.

Kiplinger’s recent article entitled “4 Reasons Families Fail When Transferring Wealth” gives us four common errors that can cause individuals and families to veer off track.

Failure to create a plan. It’s hard for people to think about their death. This can make us delay our estate planning. If you die before a comprehensive estate plan is in place, your loved ones can’t carry out your goals and wishes. It would be best if you established a legacy plan as soon as possible. A legacy plan can evolve; a plan should be grounded in what you envision today but with the flexibility to be amended in the future as life changes.

Poor communication and a lack of trust. Failing to communicate a plan early can create issues between generations, especially if it is different than adult children might expect or incorporates other people and organizations that come as a surprise to heirs. Bring adult children into the conversation to establish the communication early on. You can focus on the overall, high-level strategy. the conversation includes reviewing timing, familial values and planning objectives. Open communication can mitigate negative feelings, such as distrust or confusion among family members, and make for a more successful transfer.

Poor preparation. The ability to get individual family members on board with defined roles can be difficult, but it can alleviate many potential headaches and obstacles in the future.

Overlooked essentials. Consider hiring a team of specialists, such as a financial adviser, tax professional, and estate planning attorney, who can work together to ensure the plan will meet its intended objectives.

Whether creating a legacy plan today or as part of the millions of households in the Great Wealth Transfer that will establish plans soon if they haven’t already, preparation and flexibility are essential to wealth transfer success.

Create an accommodative plan early on, have open communication with your family and review philosophies and values to ensure everyone’s on the same page. As a result, your loved ones will have the ability to understand, respect, and meaningfully execute the legacy plan’s objectives.

Reference: Kiplinger (Aug. 29, 2021) “4 Reasons Families Fail When Transferring Wealth”