Clients need to talk more to their heirs about their estates: study

At least one adviser has clients create a letter, document, or video that explains to kids why their parents divided assets the way they did

Mar 15, 2017 @ 1:31 pm

By Bloomberg

Most parents want to leave an inheritance to their childen, but few are taking the time to discuss their plans with their kids or even asking their children what their expectations are.

Amerprise Financial found that that 83% of those it surveyed plan to leave money to loved ones. But just 21% of those who plan to bequeath money to their children tell them how much money they'll get.

When kids find out the size of their inheritance after a loved one passes away, it's often less than expected. It can add an unwanted feeling — disappointment — into an already-volatile emotional stew.

More than half in the Ameriprise survey expect to get an inheritance of more than $100,000. Among those who had already received an inheritance, about the same percentage (52%) got less than $100,000.

Half of the boomers surveyed plan to leave at least $500,000 to their kids. Forty-seven percent of Gen Xers and 33% of millennials wanted to leave that much as well. While the survey found that the majority of those who had already inherited got less than $100,000, perhaps the portfolios of those benefactors hadn't lived through an eight-year bull market.

Family conflicts often arise when money mixes with grief. Almost a quarter of those surveyed expect family members will have disagreements after they learn the terms of the will. That proved true for 25% of those in the survey who were left money.

For parents, sometimes the issue is whether to leave amounts to children that are fair, or that are equal. That can become an issue if one child is wildly successful, while another struggles financially.

There's no way to eliminate these conflicts, but you can minimize them, said Eric Reich, a certified financial planner with Reich Asset Management in Marmora, N.J. His clients create what's called an "ethical will," which is a letter, document, or video that explains to kids why their parents divided assets the way they did.

Addressing potential conflicts while everyone is still alive is an even better strategy. Mr. Reich asks parents to get feedback from their children on what each one really wants from the estate. Usually "it's not money, but items of sentimental and/or intrinsic value," he said. "Most often the things that a particular child values most, the parents had no idea they even wanted to inherit."

Jewelry usually causes the most problems, Mr. Reich said, especially pieces that have been passed down generations. And siblings can hold grudges for a long time. "I've actually seen two very close siblings who have not spoken for the past 15 years over a piece of furniture, an antique breakfront cabinet valued at $10,000 in an estate valued at $3 million," he said.

It may be less anxiety-inducing if parents give children an estimation of what they hope to leave them. "I recommend parents give children some frame of reference," said Marcy Keckler, vice president for financial advice strategy at Ameriprise. By setting proper expectations, the inheritance will be "less of a source of tension later," she said.

Beloved animals may also receive money if an owner dies. Some 5 percent of the people surveyed said they wanted to leave money behind for care of a pet.

Whatever the intent, few will match what is perhaps the largest inheritance left to a pet ever: $12 million, from New York hotel heiress Leona Helmsley to her maltese, Trouble. 1 She left her two grandsons out of the will.

Ameriprise conducted its survey online in late November and early December, 2016 among 2,700 adults between the ages of 25-70 with at least $25,000 in investible assets.

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