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5 Tips to Prepare Your Heirs for a Successful Wealth Transfer

Plan carefully and communicate clearly for a smoother transition of assets

5 Tips to Prepare Your Heirs for a Successful Wealth Transfer

Regardless of how, when, or what amount of money changes hands through inheritance, the wealth transfer process can bring a host of concerns for both parties - benefactors and beneficiaries. Those passing on their wealth and assets may have specific plans on how the inheritance should be managed, while those on the receiving end likely have their own opinions on the subject.

Wealth transfers come with some common pitfalls, many of which stem from communication failures within the family. Whether the issue is a family member with a sense of entitlement or outdated assumptions about roles related to the inheritance, clear communication plays a critical role in removing those barriers to a successful wealth transfer.

A Historic Transfer of Wealth

An unprecedented wealth transfer looms large on the horizon as America’s Baby Boomer generation ages and passes on, leaving an estimated $30 trillion in accumulated wealth to their beneficiaries. Though it will take place over the next few decades, this historic sum of money passing from one generation to the next is still significant enough to attract attention, leading many to refer to the phenomenon as “The Great Wealth Transfer.”

This massive exchange of wealth also means a massive amount of financial planning. Traditionally, the burden of planning for an inheritance falls on the benefactor, but it can be beneficial for heirs to be involved in the process, as well. By ensuring your heirs understand their roles and responsibilities related to their inheritance, you stand the best chance of preserving the wealth you’ve worked so hard to accumulate.

The five tips below offer some suggestions on how to engage all parties in the process to achieve a smooth, successful wealth transfer.  

Tip #1: Organize Your Files

Keeping all of your financial documents well organized and in one location will be a tremendous help to your heirs. Rather than hunting for the disparate pieces of your estate while dealing with all the other practical and emotional difficulties of your passing, they can rest assured that you had everything in order.

These items would include any documents related to account statements, life insurance, business interests, loans, mortgages, real estate ownership, share certificates, revolving accounts, and anything else you deem significant. It would also be wise to keep your most recent legal will, beneficiary designations, and power of attorney in the same location as the financial documents.

Be sure your heirs are aware of where these files are kept and that you have chosen a safe location where documents will not be damaged or lost.

Tip #2: Involve Your Heirs

Bring your heirs into the conversation early as you start your estate and wealth transfer planning. Making assumptions about who will want what from your estate can be a slippery slope, leading to conflicts among beneficiaries after your passing.

If you involve your heirs in the process, you can have conversations about plans for inheritance from both perspectives. You can address how you want your estate to be distributed and managed, and your heirs can share their opinions, as well. This will provide you with added insight and give you the opportunity to be proactive and nimble with your estate planning.

These conversations can serve as important opportunities to share your values with your heirs, too. This can offer them even more guidance should questions arise surrounding your estate. If you are transferring a business or large investment it is particularly important to share your values and your aspirations for what that asset looks like in the future.

SEE ALSO: Why Baby Boomers Are Making History with a Significant Transfer of Wealth - Here’s How to Do it Properly

Tip #3: Practice Transparency

Communication is one of the most critical components of a successful wealth transfer. Heirs cannot be expected to adhere to your plans for your assets if they are not aware of those plans.

Share the details of your finances and estate planning with your beneficiaries. While discussing your finances and your passing can both be difficult topics, having an open and honest conversation will provide peace of mind for you and your heirs. If you provide the necessary details, you can rest assured that your beneficiaries will have the information they need to manage the assets you leave behind.

Tip #4: Create a Plan

Depending on the personality of your heirs and their level of experience handling money, you may need to help them understand how to use their inheritance wisely. Rather than burning through their money quickly on extravagant purchases, which happens all too frequently, they could work toward creating financial security for themselves and their families.

Perhaps this looks like paying off debt and establishing an emergency fund. Maybe they invest in home renovations and improvements they have been putting off, or they put their money aside to save for a college education. You could also advise them on how to make shrewd investments that will result in increased equity.   

In fact, if your beneficiaries are wise with the assets that you leave behind, they can ensure that their inheritance continues to be passed on to the next generation. 

Tip #5: Work with a Professional

The wealth transfer process can be complex and difficult. By working with a professional financial advisor, you can remove some of the unknowns from the equation, making for a smoother process. Your advisor can include the entire family in the process and develop a plan that fits your goals and theirs. With their expertise, they can also offer philanthropic insight, such as how to create a family foundation or charitable giving opportunities that align well with your personal values.

Establish an early relationship between your heirs and your financial professionals, which could include your financial advisor, estate planning attorney, and certified public accountant. This way, all involved parties will be familiar with each other and able to communicate throughout the wealth transfer process.  

SEE ALSO: Four Tips to Help You Talk About Estate Planning with Your Family

Ensuring a Smooth Transfer

As many as 60 percent of wealth transfers fail, but it’s usually not because of poor financial planning. Rather, it is often due to mistrust among family members or errors in communication. Facing potentially contentious topics while you’re still able to do so may have a tremendous impact on how well the transfer goes.

You can preserve your legacy and your wealth for future generations by having open and honest communication with your heirs before it’s time to divide your assets - and by using the legal documents available to commit your wishes to paper. Following the tips above and working with a professional financial team can safeguard your family’s inheritance for your immediate heirs, as well as the generations that follow.

At FC Wealth Solutions we provide comprehensive financial planning services, including estate planning and wealth transfer planning. We strive to help individuals and families find confidence in their financial futures, and we know that successful financial plans are built on transparency, communication, and trust. If you’d like to speak with one of our experienced team members about your wealth transfer needs, please schedule a call with us today.


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