As income inequality continues to grow, building generational wealth has never been so important. Transferring an inheritance to your children is the keystone of the familial wealth-building process in Arkansas. Although it might seem unnecessary or uncomfortable, talking to your children about estate planning is more important than you might think.
What is estate planning?
Whether wealthy or not, everyone has an estate. Estates consist of things you can’t take with you when you die, meaning all your assets. Estate planning consists of any and all attempts to influence what happens to your estate.
Simply telling family members, whether verbally or in writing, how to divvy up your assets upon passing away won’t work. Instead, you must use tried-and-true, legally recognized directives such as trusts, financial powers of attorney and wills.
Why is estate planning so important?
Financial research shows that anywhere from 30% to 40% of American households receive an inheritance. Estimates indicate that nearly half of all wealth isn’t self-made; rather, it’s inherited. People who receive inheritances have much higher social mobility, giving them significantly more control over their outcomes in life.
It’s never been more important to discuss wealth transfer with your children. Families will transfer some $68 trillion to future generations over the next 25 years.
Reasons to discuss estate planning with your children
Talking about your children’s inheritance will help your beneficiaries avoid unnecessary expenses, taxes and other financial woes. It will also ensure that your children understand any legal responsibilities they have; even the most detailed estate planning documents don’t inform beneficiaries of how they need to handle wealth transfers.
Arguably the most important reason to discuss estate planning with your children is to show that you care. Caring, loving parents don’t leave them unprepared for life’s most trying challenges.
No matter how well you construct your estate planning strategy, informing your children about what will happen to your nest egg upon death will always be an essential part of the process. The sooner you start discussing estate planning with your loved ones, the better.