Last year my 77-year old dad contracted CIDP, the chronic version of Guillain-Barre syndrome, which rendered him paralysed from the neck down. No chronic illness is for the faint-hearted but on the upside, this is a disease you can recover from.
It’s taken 18 months but my indomitable father is walking and living a normal life, though it remains to be seen whether he will rejoin his cronies in the spinning class.
I’m blessed that both my parents are living. But I will confess that throughout this ordeal we, as a family, did not discuss the possibility of my father, or mother for that matter, dying. And as a consequence we did not discuss the subject of wills and inheritances either.
It’s not that the subject is verboten. In fact my sister and I joke with my mom that their job is to spend our inheritance, on condition that their paperwork is sorted out. And we do know some stuff – like where to find the will and who their financial guy is. But we haven’t gone beyond that. Somehow it doesn’t feel right.
We are apparently the norm. According to a report by UBS called Begin before the End, Why families need to have inheritance conversations now, 54% of parents say they have discussed their plans with their children, but only 34% have disclosed their wealth to their heirs.
Lets be honest this is not an easy conversation to have. How would you start it? “Umm mom, what are you leaving me when you die…” It feels presumptuous and greedy. Parents on the other hand are in denial about their mortality.
But according to the UBS research, if heirs know the details of inheritance plans ahead of time – if they’ve seen the will and they know how it will be divided, where the assets are and what to do with great aunt Susie’s priceless Persian carpet – they are more likely to be highly satisfied with the outcome.
My family situation is relatively simple – we are just two daughters – but it becomes more complex in blended families when you have second marriages, second rounds of children and step-children. The Mandela clan is a prime example. Disagreements among heirs are more common and satisfaction with the distribution process is lower, making the conversation even more important.
While nobody wants to initiate it, both sides agree that it’s up to the parents, or benefactors, to start the conversation.
With increasing longevity, wealth transfer planning is also changing – in two notable ways, says UBS.
On the one hand Baby Boomers, more than any other generation, are choosing to transfer part of their wealth while living. This is to enable shared experiences with their children and grandchildren and because they enjoy helping their children do the things they like.
It could entail pleasures like joint holidays or practicalities like helping with the school fees.
However not everyone is able to do this, and to be able to share wealth while living suggests a degree of comfort or trust in one’s financial planning. This is the flip side.
The UBS report also notes that longevity adds uncertainty about how much they will need to support themselves for the rest of their lives, especially given rising healthcare and long-term care costs.
This acts as a barrier to inheritance discussions. After all, if you are worried about being able to afford long-term care or outliving your assets, how can you discuss an inheritance?
This is an example of where comprehensive financial planning can help clarify these issues and enable realistic wealth transfer planning, which in turn will aid the conversations.
Right. Note to self: Ask mom if I can inherit the pencil drawing of my grandfather that she completed twenty years ago.