Surprise! You’re in the will.
Even though more than two-thirds of parents and adult children say they’ve had family talks about end-of-life planning decisions, key details are still often left unsaid, according to a new report from Ameriprise Financial.
The financial services firm polled 2,700 Americans, ages 25 to 70 and with at least $25,000 in investable assets, in November and December.
Oddly, families rarely talk numbers. Only 21 percent of parents expecting to leave an inheritance to their children have told them how much they will receive, according to the report.
“That can lead to some unaligned expectations,” said Marcy Keckler, vice president of financial advice strategy at Ameriprise Financial.
Half of the survey respondents who have received an inheritance said they got less than $100,000; only 28 percent expect an inheritance of that size. The majority expected to receive more than $100,000.
Some surprises go the other way. A recent TIAA report found that 20 percent of adults don’t anticipate inheriting anything from their parents, yet only 9 percent of parents said they planned to leave their children nothing.
So why keep mum? Nearly 1 in 5 parents told Ameriprise that estate plans and inheritance aren’t appropriate topics to discuss with their children, and a quarter thinks their estate decisions will lead to tensions or disagreements among family members.
Parents passing on substantial wealth often worry that anticipating that money will lead their kids to make bad financial decisions, said attorney John Scroggin of Roswell, Georgia.
“The reaction is very often, ‘I’ll spoil my kids if I tell them what’s going on here,'” he said.
Experts say there are plenty of good reasons to share specifics with your heirs, however. Doing so gives you a chance to head off family fights on controversial or unexpected plans — such as leaving money to a pet, for example; splitting money unequally among children; or leaving someone out of the will, Keckler said.
“Have individual conversations with people,” she said. “It’s an easy way to set expectations, and explain why you have made particular choices.”
Communicating your intent helps your heirs be better prepared, Scroggin said, especially if your plans include complex tools such as trusts, or you’re assigning them responsibilities such as being a trustee or the estate executor. Advance knowledge enables your kids to adjust their own estate plans accordingly to avoid having a taxable estate, he said.
Details can prevent heirs from having outsized inheritance expectations, but offering an exact number isn’t easy. Everything from a bad day in the market to unexpected health costs can shift the size of your estate, Keckler said.
“Instead of necessarily specifying a dollar amount, it can be helpful to give people an order of magnitude,” she said — for example, that the amount you’re leaving won’t be enough to cover the cost of a grandchild’s education, but it could cover the cost of, or just a down payment on, a new car.
You and your heirs can also think about ways to use that gift wisely, said Jessie Doll, a Fairfax, Virginia-based wealth management advisor with TIAA.
True to parents’ fears, that’s not a given. One-third of inheritors see either a decline or no change in their net worth, according to a 2012 study in the Journal of Family and Economic Issues — indicating they spent, donated or otherwise gave away the money rather than saving it or using it to pay down debt.
“If you’re planning on gifting to your kids, you might get some joy in life by sharing that [that] is your intention,” Doll said.