Preparing Heirs to Inherit—The NON-Financial Stuff

Many people assume that once they have been to an attorney and gotten a Personal Will and a Trust signed, their inheritance planning job is done.

That is seldom the case, for two reasons.

First, there are multiple ways that property of various types can be inherited. Many of them take precedence over anything that a will or trust says. For some examples of these issues, read more here (Link to Inheritance Planning Pitfalls).

Second, even if your inheritance plan is perfectly planned and coordinated, there still can be major issues created by the complexities of human nature. If large enough, the inheritance can become a curse more than a blessing. When I bring this topic up, people sometimes say “I don’t care what my heirs do with the money. I’ll be dead.” I feel this is often a rationalization to put off thinking about such a difficult issue. If we truly love our heirs, even with their imperfections, there are some simple (though not necessarily easy) things we can do to better prepare our loved ones to inherit our wealth as a blessing, not a curse.

“Wealthy people save first and spend what’s left over. Poor people spend first and save what’s left over.”

Jim Rohn

Most of my age 60+ clients have accumulated enough to be financially independent and secure. They got there the old-fashioned way, by living within their means while they accumulated savings and investments over the years. When it comes to their heirs, there are often some family members who are “chips off the old block” saver-accumulators, while others are more spendthrift.

Several years ago, I spoke about inheritance planning to a group of fellow financial planners. I would estimate the average career tenure of the room was 30 years. There were about 50 planners, so the room represented about 1500 years of experience. I asked two questions to the group:

First, “Who has ever seen a non-saver who did not squander an inheritance?” The answer was no one. Second, “Who has seen a saver-accumulator squander an inheritance?”  Again, no hands went up.

I help my clients avoid this problem by serving as a mentor to their adult heirs. I have a process where I coach heirs to learn to live within their means, make their spending more conscious, and become consistent saver-accumulators like their parents. One of my 30-year-old clients, learning to become a saver-accumulator, calls me his “Financial Dad.” I tell him I prefer the term “Financial Uncle.”  I don’t replace his dad, but I can be a coach in the manner of an uncle, emotionally one step removed and supplemental to his father. As his “financial uncle” I can be blunt with him in ways I would never be with my own adult children.

The other aspect of preparing to inherit involves volunteering and philanthropy. Psychologically and spiritually, the success of the founding wealth holder can become a black hole for their heirs. The greater the founder’s success, the greater the emotional gravity-well for heirs: They can never measure up to the success of the founder. Volunteering and philanthropy can help fill that void and mitigate this negative impact.

“To know and not do is not to know.” Stephen Covey

As I mentioned above, I have created a process where I coach future heirs to learn to live within their means, resist the constant marketing pressures of our society, save first, live on what is left over, develop a satisfying career, and decide where they would like to volunteer. This process can help prepare your heirs to be blessed by the inheritance you leave them.

If you would like to learn more, let’s talk. E-mail me at russ@strategicexit.com and I will send you a link to my calendar.