The Burden of Inheritance
Many people mistakenly believe that inheriting a large estate is some wondrous thing akin to winning the lottery. All of sudden, you are presented with access to vast sums of money, large pieces of property, etc. Such assets can completely change your standard of living. Nevertheless, there are numerous “burdens” associated with inheritance.
One of the biggest burdens is the emotional trauma associated with inheritance. We must not forget that someone died in order for an estate to be distributed. Along with the emotional toll of inheritance is the large amount of time and work that must go into properly distributing a large estate. If you are selected as the trustee or executor of a sizable estate, you are likely going to feel overwhelmed at some point during the process. Why? Because you are tasked with itemizing all of the assets listed in the estate, properly distributing those assets, making sure debts are paid, managing the expectations of other loved ones (who may have been passed over as the chosen trustee or executor), etc.
Sadly, in many cases, emotions run hot and family disputes arise over how funds are allocated, who receives family heirlooms, etc. To make matters even more challenging, statistics point to a high probability that much of the money inherited by the beneficiaries will be squandered in a short time.
Numerous studies have shown that when wealth transfers from one generation to the next, the odds of failure of maintaining that wealth, and the probability that family relationships will fracture, are incredibly high, according to an article written by Ryan Ponsford.
How to Avoid a Disastrous Wealth Transfer
One of the key strategies for avoiding a disastrous wealth transfer is proper preparation of your heirs. Ask yourself these important questions
- Have you sat down and talked with your future heirs about the important decisions they will confront when you pass away?
- Have your heirs ever met with, or even know, your financial advisor and/or estate planning attorney?
- Do your heirs actually communicate with one another or is the relationship already frayed?
- Have you told your heirs who will be in charge of distributing the estate?
These are extremely important questions that you must have answers to. At InSight Law, we advocate for a collaborative estate plan. This means not only assisting you with putting your plan together, but proactively reaching out to future beneficiaries to ensure they are kept in the loop so there is no “surprise” moment when the day arrives that your estate must be organized and distributed. This is something we like to call “Wealth Reception” planning. Proper wealth reception planning helps ensure a smooth transition for your loved ones in the event of a disability or death. Additionally, it includes educating your beneficiaries and helpers to promote smart choices on how an inheritance gets managed.
For more information about estate planning and reducing the risk of family squabbles, check out this blog.