One of the satisfying parts of developing an estate plan is detailing how much money and other assets you’ll be able to leave to loved ones. You’ve worked hard your whole life, but you’ve also had some good fortune. You want to pass that down.
If your children are responsible adults, you don’t worry about your inheritance being wasted or misspent. What many people don’t consider, however, is that their children may experience “inheritor’s guilt.”
Beneficiaries often feel some guilt and even a burden when they inherit money from their parents or other older relatives. That can be especially true if they watched them scrimp and save over the years – eschewing trips abroad, a second home and other luxuries – only to find that they had plenty of money to enjoy these things.
Why it’s important to talk to your heirs about their inheritance
As you’re developing your estate plan, you can help prevent your kids from having this guilt. Let them know that you’ve lived the way you’ve chosen to and didn’t spend money on luxuries because you weren’t interested in them. You didn’t join friends on Caribbean cruises because you get seasick – not to leave more money when you pass away.
It’s fine to describe your wishes and expectations – verbally and in writing – for how you’d like some of the money to be spent. For example, you may feel strongly that none of your grandchildren should have to worry about college debt. However, it’s important to give your family permission to use some of it to splurge on themselves a bit.
It’s typically also a good idea to give them some idea of the amount they can expect. If someone’s expecting around $100,000 and they get $1 million, it can be a shock to the system. If it’s going to be more money than they’ve ever seen, make sure they have some financial guidance.
If you’re concerned about an inheritance being wasted or used for self-harm (for example, if someone has an addiction), you can place it in a trust with some conditions. Regardless of which estate planning tools you use, having a plan in place can give you a framework for talking to your heirs before it’s too late.