Helping Beneficiaries Succeed—and Promoting Family Harmony

Helping Beneficiaries Succeed—and Promoting Family Harmony

by A. Scott White, CFP®, ChFC®, CLU®
President, Scott White Advisors

Over the next 30 years, Americans will transfer trillions in wealth from one generation to the next.
According to the Federal Reserve, the median inheritance in 2019 was $92,700 for someone whose
parents had a college degree and $76,200 for those with parents without a college degree.1 Beneficiaries can use inherited funds to increase their retirement savings, cover college expenses,
build real estate holdings, and more.

But without careful planning, almost 70% of heirs’ money, assets and family harmony disappear after an estate transaction.2

When you create or revise your estate plan, a key goal may be to prepare your accounts and property to ultimately pass smoothly and safely to your beneficiaries. Together with your financial advisor and estate planning attorney, you may develop wills, trusts, powers of attorney and other documents to ensure that what you own ends up in the right hands, at the right time, so that your loved ones can flourish as they carry on your legacy. But creating the documents is only the beginning. An often-overlooked aspect of estate planning is preparing beneficiaries to succeed when they receive money and property.

It’s important to make sure your beneficiaries are adequately prepared to suddenly receive large amounts of property or money.
According to a UBS report, families are happier and more satisfied when parents include their heirs in inheritance planning.3 Open communication with your beneficiaries can generate discussion about values, charitable giving and stewardship. Much of the preparation of beneficiaries comes down to careful communication with your loved ones. This can feel like an even greater challenge than preparing your money and property for your beneficiaries. But putting effort into this communication can help to ensure your beneficiaries will thrive with the resources you provide them.

Perhaps the wealth of your estate is made up of a portfolio of stocks, bonds, cash, and investment accounts. Do your beneficiaries understand the basics of investing with these types of accounts? Do they understand the tax implications? Are your beneficiaries
used to taking advice from financial advisors, attorneys, and tax professionals?

The most crucial conversations, although they may be about money, are really about values. Sometimes clients ask me if it’s better to make one-of-a-kind gifts to children and grandchildren, or if they should leave equal shares to each person. I encourage them to think about which method will generate more goodwill among the heirs. In my experience, most fights among beneficiaries occur over tangible personal property, not money.

In the case of a family business, it’s important to decide who will run the business if you are incapacitated or suddenly pass away. The television series Succession focuses on which child will become chief executive of the family conglomerate after the founder dies—and it illustrates how poor communication can pit heirs against each other. Be sure to tell your beneficiaries that depending on the complexity of the estate, it may take significant time for the estate to settle. I have seen heirs develop conflicts with each other while waiting to receive an inheritance.

It’s easy to postpone conversations about death and inheritance, but you can give your beneficiaries more than assets in the years to come: you can give them goodwill in their relationships with one another.