You stand to inherit an estate from your parents, or you are a parent wondering what the strategy for wealth transfer should be….the bottom line – what statement will you make when you are gone, that cannot be undone, and that “isn’t about the money”?
Power and money. Money used as power. Interchangeable ideas, and in that sense synonymous.
How can you avoid the inheritance fight?
What will be phase one? When the boomers of today’s parents leave an estate. And the reason for the battle:
“We believe that as more and more boomers (many of them spenders who have lots of debt) inherit from their depression-era parents (many of them savers), there will be many more families at war,” Kotzer predicted.
Phase two will occur once you succesfully make it through phase one, and the guilt of your good fortune sets in, as you look toward the legacy you will be leaving your kids.
Your children may not be as fortunate as you will be this time round. You have not been able to amass the wealth your parents did that you stand to gain.
What to do?
How to keep the piggy bank full from generation to generation....life insurance
What can you do to “even the score” and ensure your children inherit the advantage you stand to?
Simple answer that is all too often forgotten – life insurance.
Life insurance - the instant estate.
The least expensive way to ensure the distribution to children is to allocate each as equal beneficiaries so they know the amount they are receiving has been well thought out, with “fairness at the root of the consideration”.
Joint last to die policies fit nicely for this reason. Exisiting term plans can also be converted to permanent versions of insurance to make sure they exist for the ultimate goal of leaving your kids with money.
Should husband and wife have a term plan each, then when an inheritance comes, the best thing to do is pay off existing debt, and replace the money used to pay debt, in part, to changing the insurance program to permanent coverage options.
All too often, people take out smaller face amount permanent coverage when bills are highest, the kids are youngest, and the need for the larger insurance amount is vital to replace the income that would otherwise be lost if we were to die prematurely.
But, at certain junctures in life, such as coming into an inheritance, then your financial circumstances and focus changes, or it should.
There may be many of us looking to the next 20 years or less, and although we should not count on the inheritances we can foresee, at the same time it is impossible to ignore.
There may be circumstances where the parent is facing pressure from the grown children, and there may exist family infighting, and “jockeying for position” in the favor department with elderly parents. Sad, but it happens all too often.
There may be manipulation from either the elderly parent or the children, either way, to exercise and gain control over money. Again sad, but also common.
There truly is only one acceptable way to look at wealth and it’s transfer.
The only way you as a parent will send the proper message to your adult children is to make it clear, through the distribution of your estate, that you love them all equally, and the will and estate should reflect this with full explanation.
Because, here is the crux.
When you are gone, the time for questions is past. The “final statement” you make with the allocation of your assets has been made, and cannot be undone. If there were children that manipulated you to the detriment of siblings, then that can and will create unnecessary hardship and damage the relationships between the surviving family members.
A revised will over the bedside of the sick and elderly is not a reality any of us want to see, but we’d be burying our heads in the sand if we thought it doesn’t happen. Sad, sad, sad.
And for those children looking to ensure equality one generation from now, assess your own situation, and determine if you should be preparing for the present and the future with sizeable amounts of term insurance.
Term life insurance can be converted without proving health in the future, and is a good guarantee that wealth will be available for transfer.
The bottom line and the best advice that can be given – is keep it fair, and ensure the heirs know it!
