If you’re preparing to develop your estate plan, you likely feel good about how much you’ll be able to leave to your loved ones and perhaps other beneficiaries. Everyone wants to make their children’s lives a bit better and easier than theirs. You may have enough so that your children don’t have to be tied to jobs they hate or to help your grandchildren attend college without worrying about graduating with thousands of dollars in student loan debt.
What too many people don’t anticipate is that their loved ones will feel guilty about their inheritances. However, “inheritor’s guilt” is all too common. The Baby Boomer generation is leaving behind some $68 trillion. It’s being called the “Great Wealth Transfer” because it’s the largest generational transfer of wealth in history. Unfortunately, “inheritor’s guilt” can happen when people are left an unexpectedly large inheritance.
People are more likely to feel this guilt if they grew up watching their parents pinch pennies and go without (even in retirement) only to find that all that work, savings and investment amounted to more money than they ever imagined. People who’ve grown up around considerable wealth may fully expect to inherit it – yet still feel guilty that their parents or grandparents worked hard for that wealth.
How you can prevent it
There are a number of things you can do as you’re working on your estate plan to prevent this guilt. First, giving your children and other heirs some idea of what they’ll inherit can prevent the shock. While you don’t know how much will actually be there when you die, you can likely them some idea.
You may choose to set up trusts for your adult children and/or grandchildren with directions that the assets be distributed in specific amounts each year and for only specified things like education, starting a business or buying a home. Talking with your loved ones about your hopes and expectations is also a good idea. Limiting disbursements can also be wise if your heirs don’t have experience managing wealth.
You may also want to gift some of your assets while you’re still around so that you and your advisors can help them manage and invest these assets. By having sound legal guidance as you develop your estate plan, you can help prevent inheritor’s guilt and help your assets last longer for your loved ones.