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Some Thoughts on Inheritance


Important as the subject is, people are uncomfortable discussing estate planning ahead of time, to the inevitable detriment of all.

Last Will and Testament

First of all, there are 2 sides to this issue: 1) planning for leaving assets when you die; and 2) planning after(!) reception of a bequest. I say planning after the fact because, as Shakespeare put it, “There is often a slip twixt cup and lip.” TV and movies are full of stories about expected windfalls that did not materialize either when or in what amount was expected. So let’s talk about this common, freighted life situation in reverse order.

Planning for an expected bequest is tough because you do not know when you might receive it. People are living longer than ever. Fifty percent of 65-year-old men live to over 80 and half of women to 85 or older. That means half live longer than that. One notable financial side effect of longer life is that there might be proportionally less left when the grantor finally dies.

Secondly, too many people have wasted too much of their lives waiting anxiously for the “guaranteed’ financial security of an inheritance and putting the rest of their life on hold. Even taking loans against the likelihood of a future inheritance and then having to deal with the consequences of delay or a change in the will is not unheard of.

These situations are complicated by all the emotion that rises to the surface, sometimes unexpectedly, when generational transfers come on the table. Important as the subject is, people are uncomfortable discussing it ahead of time, both the telling and the asking, to the inevitable detriment of all.

Another complication for communication errors is that people do not keep their estate plans current. The firm of Rothstein Kass found that over 75% of its clients’ plans were at least 3 years old, even though 95% of those clients had experienced some life changes since the plans were drawn. So we need to put regular, if uncomfortable, estate review on our calendars.

When communication and discussion of intent among the family is not done or kept up, old grievances rise that can both tie up and whittle down an estate. One estate lawyer told me that a client of his had said “I don’t care if the whole estate goes to lawyers’ fees, I am not letting one dime go to that #$%&.” This kind of thing is both tragic and completely preventable. Folks, talk it over with your heirs or parents, plan with experts and then talk again with your heirs or parents. Regularly.

Again on the reception end, be prepared for the reality that even the most meticulously scripted estate still takes about a year to be executed. And there are potentially pitfalls along the way, regardless of planning. Like the (rare, happily) sudden appearance of an unknown second family, or, more commonly, unexpected creditors.

The first thing to do when you are an inheritor is to do nothing. “Don’t do something, just sit there!” to let the emotional sequelae play out. Then, as the buzzards start to gather, get expert advice from your lawyer, CPA, and financial advisor. Remember, your inheritance is not income, it is a one-time windfall and you have many practical factors to deal with, like taxes and the application of the assets to your life goals over the long term.

A couple of last thoughts to ponder. One is that a survey showed that 82% of American millionaires in the Boomer generation believe that each generation should be responsible for generating their own wealth. “Why deny them the fun we had?” to put a positive spin on it.

The second is the reminder when planning your estate and final wishes to include your newly acquired online virtual life. All of your online accounts have to be dealt with and that has become more difficult than you might think. So add it to your list. And oh yes, do leave a list of your passwords where your executor can find it. No passwords means a world of hurt for the poor soul assigned to close your estate.

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Victor J. Dzau, MD, gives expert advice
Victor J. Dzau, MD, gives expert advice