Estate Planning with Adult Children 101

Some parents worry that discussing inheritance with their adult children will result in the children relying on that windfall rather than becoming financially stable on their own.  Others think that  communicating about assets could cause familiar strife amongst siblings or other beneficiaries.

But the benefits of clear communication and inheritance etiquette – even without sharing a full picture of your portfolio – typically far outweigh the risks. 

The Inheritance Discussion: Why It Matters

Having transparency around finances is important in helping your kids make smart choices about money while they’re young and setting them up to handle a large sum of money when they receive an inheritance. Approximately one in three Americans who receive an inheritance blow through all of it within two years, but starting early can help ensure open, healthy communication that allows children to ask questions, provide input and express confusion so it can be addressed early on.

Even if you haven’t fostered conversations about money in their early years, your adult children likely already have an idea about your financial situation based on how they were raised and how you spend your money. When you are ready to have a more formal inheritance discussion, consider sharing your Journal of Wishes and Records, which will ensure that your children have an outline of your financial picture and serve as a roadmap for them as they carry out your wishes.

How to Talk to Adult Kids About Inheritance

Before talking about any end-of-life wishes or inheritance, work out the details with an estate planner. Once you have the estate plan in place, you can discuss the bigger picture with your family without delving into the specific amounts: Talk about the legacy you want to leave. Share your values toward giving and social impact and the role you want money to have in the family’s future. You’ll also need to give them an overview of things like end-of-life care, advanced healthcare directives, the location of important documents and who is identified for various roles. These conversations can be difficult, but they’ll save your children from added stress in the wake of your death.

How to Handle Leaving Inheritance to an Irresponsible Adult Child

If you are worried that your child will blow through their inherited money or not manage it well, you can put those decisions in the hands of someone else. One of the best ways to pass on an inheritance is by leaving the money in a trust, and appointing someone as trustee (the person who controls trust assets) to dole out the money on behalf of, or to, the beneficiary. There are a variety of ways to control the distribution of assets in a trust, so be sure to consult with an estate planner when setting one up.

When to Talk to Your Kids About Inheritance

Each family’s situation is unique. Two important things to take into consideration are your own age and health, as well as where your children are in life. If you’re retired or you’re having medical issues, have the talk sooner rather than later. If your children are financially independent and have started their own paths in life, that might be a good indicator that they are capable of handling these discussions. Remember that you don’t have to have a talk that irons out every last detail the first time you sit down together. Just open the lines of communication and go from there.

For additional guidance, talk to your Farm Bureau agent or financial advisor. As a full-service financial services company, your agent or advisor has access to additional resources and support to help you make the best decisions for your family.