If you’re like most people with enough assets to provide a healthy inheritance to your children and other loved ones, you hope it will give them financial security and more opportunities. You don’t want it to cause them anxiety and guilt.
Nonetheless, increasingly, people are receiving inheritances beyond what they’d imagined. That’s due in part to the “Great Wealth Transfer.” It’s been estimated at $84 trillion that Baby Boomers and the generation before them are leaving over the next twenty years or so.
Many of these beneficiaries are suffering what’s known as “inheritor’s guilt.” A person doesn’t have to inherit a fortune to suffer this. It’s more common when beneficiaries are unprepared for how much money their parents or older loved ones accumulated. Many Boomers were raised by parents who grew up during the Great Depression and were forever changed by that. They taught their children never to take money for granted and to value saving over spending.
If you’re in that Boomer generation, you may have been surprised at how much your own parents had when they passed away based on their frugal lifestyle — and felt that inheritor’s guilt that your parents didn’t spend more on themselves.
Don’t pass down your own inheritor’s guilt
One of the best ways to prevent this – especially if you think your estate plan will surprise your children — is to discuss it with them. That doesn’t mean sharing precise dollar amounts, which will likely change, but giving them some idea of what to expect.
You can also minimize this guilt by letting them know how you envision it being used. That doesn’t mean necessarily putting conditions on their inheritance, but letting them know you hope it will help them start their own business or non-profit, give their children the best education they can have or just have a solid nest egg so they can retire early if they no longer find their work fulfilling.
If there are things they wish they could do now (like pay off student loan debt or buy a home), you can gift some of it to them, just being careful not to trigger gift taxes. This can also help you minimize or eliminate estate taxes. If you’re concerned about how one or more of your heirs will spend the money, there are trust structures that will protect it – and them.
A good first step is getting sound estate planning guidance. This can help you better fulfill your goals.