Parents can prepare their children to receive an inheritance.

Humans are not born with wisdom or practical skills.

They must learn these.

Such learning comes through curiosity, self-teaching, classroom instructions, life experiences, and mentorship.

To pass along wisdom and skills to their children, parents are responsible for initiating conversations and lessons.

These are essential steps in preparing children to receive future inheritances.

Coaching your children on financial management and conversing about their inheritance can make your estate planning more successful.

Why Is It Important to Discuss Inheritance Early?

While you may feel more comfortable avoiding the topic of your own mortality with your loved ones, taking such a passive approach often leads to future issues.

If you die before discussing your wishes and reasoning with your family, you can leave them confused and trigger conflict.

As a result, your loved ones could be saddled with financial and relational burdens after your death.

According to a recent Fidelity article titled "Preparing your children for their inheritance," having frank estate planning conversations with your loved ones helps minimize surprises.

As a result, your heirs will be more emotionally and financially prepared to adhere to your wishes and values.

How Can You Start the Conversation?

Broaching any topic of conversation can be awkward and uncomfortable.

The best way to begin is to be clear.

Tell your children your reasons for discussing your estate planning with them and your goals for the conversation.

Underscore your desires for family unity and for everyone to be aligned with your wishes.

You can start simple.

Share how you manage your finances or the key aspects of your estate plan.

As the discussion continues, you can introduce greater detail about how assets will be distributed and the purpose of your decisions.

What Financial Skills Should Your Children Learn?

Your children will not be ready for an inheritance if they have had no financial education.

Without the skills to manage money at a basic level, your children may struggle to manage inherited wealth.

You should start teaching and promoting positive financial habits.

How can you do this?

You can help them open a savings account, set up a budget, and understand the value and dangers of credit.

As your children get older, you can introduce more complex financial topics, such as tactics, investing, and setting up an emergency fund.

Should You Consider Setting Up a Trust?

For parents apprehensive about their children's ability to handle a large inheritance, trusts can be a helpful tool for protecting the inheritance for and from their children.

Trust can be designed to meet your family's unique needs and goals.

For example, a spendthrift trust could shield assets from mismanagement, or a generation-skipping trust could pass assets directly to grandchildren.

In addition to providing greater control over the terms of inheritance, trusts can protect assets from creditors and minimize taxes.

How Can You Ensure a Smooth Transition with the Inheritance?

In times of transition, there are ample opportunities for issues to arise.

To proactively prepare for a smooth transition, you can create a comprehensive estate plan and communicate it clearly to your loved ones.

Your children should know where you store essential documents and how to access them.

They should also be told who to contact when you die or become incapacitated.

If your family values and legacy are important to you, you can create a family mission statement to pass along guiding principles to your children.

Prepare Your Family for the Future

Preparing your children for an inheritance is more than setting up the means for transferring funds.

It involves establishing values and mentoring your children so they are ready to manage their inheritance.

If you want to set your heirs up for success in your estate planning, schedule a consultation with Harvest Law KC.

What are Key Takeaways regarding Preparing Your Heirs for an Inheritance?

Clear communication is key to avoiding surprises and conflicts among loved ones.

Passing along financial management skills and values will help your heirs take on the added responsibility of inherited wealth.

Utilizing trusts allows for greater control over the passing of wealth, but it is still important to discuss your comprehensive estate plans with your heirs to promote understanding.

You can promote a lasting family legacy by sharing your values and the purposes behind your estate plan.

This post is for informational purposes only and does not provide legal advice. You should contact an attorney for advice concerning any particular issue or problem. Nothing herein creates an attorney-client relationship between Harvest Law KC and the reader.

Reference: Fidelity (Jul. 26, 2024) "Preparing your children for their inheritance"