Explore why discussing wealth transfer is complicated and read on for tips to get started.
Why It's Hard
Legacy planning can be a loaded and uncomfortable topic, rife with potential conflict and reminders of mortality. “It is natural to find these conversations difficult,” says Dr. Keith Whitaker, managing director at Wise Counsel Research Associates, a firm specializing in family legacy planning. “Most of us do not have experience thinking about what really matters most to us and what part money should play in our lives.”
Research suggests that we avoid challenging conversations because they heighten cognitive load and make our brains work harder. Northwestern Mutual’s study supports these findings, with 36% of families saying it’s taxing to simply think about wealth transfer.
Heirs Say Talking About
Inheritance Is Tricky
Emotions run high during
these conversations
It's difficult just
thinking about
legacy planning
Our family
doesn't talk
about money
36%
30%
26%
Source: Northwestern Mutual
After Talking, Heirs Feel
Positive Emotions
Why It's Crucial
Open dialogue about inheritance not only leads to preparedness but also serves as a joyous family milestone and can even minimize cognitive load by providing clarity, trust and family harmony. In fact, 79% of wealth creators and 82% of heirs felt better after communicating, citing emotions like relief, happiness and connection.
“Parents with wealth want their resources to enhance the lives of their children, but that enhancement doesn’t just happen on its own,” says Whitaker. “It requires communication with—and education of—rising family members. Chances are you’ve taken steps to prepare the money for the family, but don’t forget to prepare the family for the money.”
Accomplished
Relieved
Source: Northwestern Mutual
47%
27%
21%
Close
Appreciated
40%
Happy
26%
Northwestern Mutual is the marketing name for The Northwestern Mutual Life Insurance Company (NM) and its subsidiaries in Milwaukee, WI. Investment advisory and trust services are offered through Northwestern Mutual Wealth Management Company® (NMWMC), Milwaukee, WI, a subsidiary of NM and a federal savings bank. Not all Northwestern Mutual representatives are advisors. Only those representatives with “Advisor” in their title or who otherwise disclose their status as an advisor of Northwestern Mutual Wealth Management Company (NMWMC) are credentialed as NMWMC representatives to provide advisory services.
Keith Whitaker is not affiliated with Northwestern Mutual, and the views expressed by Keith Whitaker do not necessarily represent those of Northwestern Mutual or its subsidiaries.
5 Steps For Starting
The Conversation
Get On The
Same Page
Identify Heirs
& Clarify Roles
Break Up The
Conversation
Gather Documents & Share Numbers
Work With A Financial Advisor
STEP 1
Get On The Same Page
Benefactors should start by thinking about what they want their money to achieve for the next generation.
Couples should map out wishes with each other before involving heirs, advises Kelli Stiles, Northwestern Mutual’s VP of concierge planning. “Not only are many couples not talking to their kids about their planning, but often they don’t talk to each other,” she says. “That’s especially true where it’s not the first marriage. They might have different children, grandchildren, assets and ideas about how to plan.”
Whitaker says individual reflection can be a handy exercise, too. “What values have motivated your family?” and “What values are you seeking to instill in your children?” are two prompts he recommends parents ask themselves. Couples can then come together to identify common ground and ask clarifying questions before setting ground rules for family discussions—like alternating turns speaking.
“
Partners should ask each other: ‘What are our shared goals, and what do we want to see happen?’”
Kelli Stiles, VP of Concierge Planning, Northwestern Mutual
Identify Heirs
& Clarify Roles
Passing on family wealth means passing on certain responsibilities, too. Define the various duties heirs may need to take on during a wealth transfer and in the years to come.
Seek candid feedback from heirs about what roles they’re comfortable stepping into, says Stiles. “Whether it’s a power of attorney, a successor trustee or co-trustee, there are duties that go along with those roles. Explaining to kids what that role means and how they feel about it is going to prevent a lot of heartache and trouble.”
Center the discussion around values and skills. To do so, Whitaker offers thought-starters like “Which skills regarding money have your children already developed?” and “Which skills do they still need to develop?” to foster fruitful dialogue and set your family up for success.
STEP 2
Seek candid
feedback from heirs
about what roles they’re comfortable stepping into.
Consider holding a series of small yet intentional family talks so everyone can process information—and feelings—at a reasonable pace.
Talking about the future can prompt big emotions. Avoid inconsistent, off-the-cuff discussions and consider holding a series of small yet intentional family talks so everyone can process information—and feelings—at a reasonable pace.
“These aren’t conversations that you want to pop up out of nowhere,” says Stiles. “Everybody should be prepared for what’s discussed.” Often, the conversation requires grappling with the future loss of loved ones. Discomfort with death stifles communication from both sides, she says. “Sometimes it’s from a kid’s point of view, too. They can’t handle that conversation and the thought of losing that parent, so there’s resistance.”
Scheduling meetings covering different topics—the types of investments involved, how to divvy up assets or what a healthcare proxy does, for example—can alleviate stress and anxiety. “Setting these conversations up as, ‘Let’s do a little bit now and a little bit later’ can make it more manageable,” says Stiles.
Break Up The
Conversation
STEP 3
Come equipped with resources, strive for transparency and devise a customized strategy that works with your family dynamic.
Only one in five wealth creators reports being prepared with key information and documents during family meetings. But glossing over instructions (like how to access wills or transfer assets without a huge tax burden, for example) leaves family members in the dark.
Come equipped with resources, strive for transparency and devise a customized strategy that works with your family dynamic, says Stiles. “Clients don’t always understand how much control they have over what a trust does and does not do,” she says. “With a trust, you’re writing your own rules and deciding how those rules play out.”
Some benefactors may prefer to avoid sharing exact dollar amounts, for instance, and Stiles says there’s room for that flexibility—within reason. “We’re projecting 10, 15, 20 years in the future, so we don’t know. But it makes sense to give kids a range.” Providing a numbers-based outlook, even if approximate, empowers heirs with knowledge and security.
Gather Documents
& Share Numbers
STEP 4
Kelli Stiles, VP of Concierge Planning, Northwestern Mutual
They can be a more objective third party in guiding the conversation.”
“
Nearly 80% of families consider financial advisors the most trusted resource for legacy planning. An advisor can assist with logistics, shepherd discussions and even help navigate complex emotions.
“If parents had an ongoing relationship with a financial advisor, that person already knows the family’s concerns and can be a more objective third party in guiding the conversation,” Stiles says.
Whitaker agrees that advisors contribute balance and wisdom to a fraught process: “They can share examples of what they’ve seen work in other families,” he says.
Plus, when parents highlight an advisor’s contributions to the family’s financial journey, it could inspire heirs to be more proactive about their own finances—a win for the family’s future, Stiles says. “It could motivate the next generation.”
Work With A
Financial Advisor
STEP 5