How Do you Start a Family Conversation About Financial Inheritance?

The thought of discussing inheritances with family members can be emotional and uncomfortable if not approached in the right way.

The late Charles Collier was the former senior philanthropic adviser at Harvard University, where he served for 25 years. He also held positions at Brown, Andover, Dartmouth, and Princeton. He has worked with hundreds of individuals and families to shape their philanthropy, helping them make tax-wise gift decisions and advising them on family relationships surrounding financial wealth.

Charles contributed an excellent chapter to Tom McCullough and Keith Whitaker’s book, Wealth of Wisdom: The Top 50 Questions Wealthy Families Ask, focused on helping families start a conversation about financial inheritance.

To get a better understanding of how to begin this process, he suggests several key questions to help illuminate the important issues:

• What amount of financial inheritance would you like to leave for your children and grandchildren?
• What, if anything, will you tell your children about your estate plan and their inheritance? And, if you do tell them about this, how much detail will you provide and when?
• Will you actively help the next generation learn about finance and investments?
• Should you include sons and daughters-in-law in these conversations?
• What do you think is the purpose of a financial inheritance for your children? For example, is it to be used to provide a safety net, to purchase a vacation home, to fund financial or social entrepreneurial initiatives, to enable a choice of career without regard for the economics of that choice, or for anything your children choose?

Answering these questions before discussing or implementing estate planning strategies can provide a helpful framework upon which to base the next steps.

Because of his belief that the true wealth of families is not really financial, Charles suggests that you start by discussing the principles that will guide your decisions. He recommends a three-part process.

• The first step is a conversation with your spouse (if you have one) to explore all your options and what the inheritance should achieve. What principles guide our decisions regarding our children’s inheritances? What factors might make it difficult to follow our principles?
• Do we treat our children equally or fairly? What are the challenges and solutions for both scenarios?
• At what stage do we tell them about their financial inheritance?
• What would our parents say about the financial inheritance we plan to leave our children?
• What worries us most about our children’s use of their inheritances?
• What are our hopes for the next and then future generations?
• What amount of inheritance would be life-giving to our children?
• Could we give them a say in their financial inheritance?

Once you have established your basic principles together, the second step is the conversations with your beneficiaries. Whether with all beneficiaries at once, or one at a time is a family specific choice. In some instances, only one conversation is needed. Other times, a series of conversations over a number of years is the best approach. There is no one size fits all approach.

When beginning a conversation with beneficiaries, these general questions can be helpful, but the family conversation will be very specific to the family:

• What is the meaning and purpose of a financial inheritance for you?
• How much money do you need to live a worthwhile life?
• What do you think about the purpose of inheritance for your generation?
• Do you want to bring your husband/wife/partner into this conversation?
• What is the best financial decision you have made? The worst?
• Is it important to you to work together with your siblings around inheritances?
• What are the challenges that your parents’ estate presents for you and your family?
• What kind of guidance/consultation would assist you in the management of your parent’s estate?

The third part of the conversation is a reflection on the principles that guided the initial decisions, the general nature of the estate plan and the amounts that your children will receive. Does the plan mirror the same principles set out as the framework for the inheritance at the beginning of the process? Based on the conversations with beneficiaries, should any of their suggestions be integrated?

Charles’ primary message is: "Think carefully about the purpose of the financial inheritance. Engage all your children in conversations about your financial wealth and their inheritances." While this task can seem daunting, it can be an opportunity for the family to come together to connect and educate one another. For further details on this topic, I suggest reading or listening to the podcast Wealth of Wisdom chapter 24 "How Do you Start a Family Conversation About Financial Inheritance?"