If you’re preparing to put your estate plan in place, you understandably feel good if you can leave your loved ones significant assets. However, if the inheritances will be far greater than they’re likely expecting, there are good reasons for preparing them – both emotionally and more practically – even though the gesture is undeniably generous.
By discussing the inheritance, at least in general terms, you can alleviate the all-too-common problem of “inheritor’s guilt.” A person doesn’t have to inherit millions of dollars to feel this guilt. Any amount that’s significantly more than they expected based on their perception of your financial standing can cause it – particularly if they never saw you spend lavishly on yourself.
Inheritor’s guilt can also occur if a relationship has been strained over the years or maybe there’s been little or no contact at all. That often happens with parents and adult children and between siblings. An inheritance can compound the guilt they feel for not patching things up while they could.
Helping your loved ones feel “heirworthy”
Some people who don’t feel “heirworthy” spend or give away their inheritance as quickly as possible so it’s not a continued source of guilt – sometimes even on things that are harmful to them. Others become paralyzed with fear because they don’t know what to do with the inheritance, so they stick it in an account that barely earns any interest.
In addition to giving your loved ones some idea of what you plan to leave them, you can help them by letting them know how you’d like to see them spend it. This could include buying a home, starting a business or putting it away for their children’s education. If they’re not used to handling considerable or complex assets, it can be helpful to refer them to your own financial, tax and other advisors for guidance when the time comes.
If you’re concerned that one of your loved ones won’t be prepared to handle their inheritance – particularly if you passed away sooner than you expect – you can put it in a conditional trust managed by a responsible family member or other person. This can prevent them from accessing it directly but still makes it available based on your directions to the trustee.
By having sound professional estate planning guidance as you develop your will, trusts and other documents, you can determine how best to leave your assets to your loved ones and help them be better prepared to handle them responsibly.