Family inheritance talk: How to help build trust and plan for tomorrow

It’s human nature to avoid uncomfortable conversations. Parents often prioritize having discussions with their children about health and personal safety even though it can be tough to broach topics of a personal nature. But equally important but often avoided are conversations about financial health. In families of means, this includes “the inheritance talk.”

And the avoidance is a widespread problem. For example, a recent Wells Fargo Wealth & Investment Management survey indicated parents talk with their children about money, but more than a third say their heirs have little or no knowledge of their inheritance plans.¹

Clearly, often family members would prefer to avoid these difficult conversations rather than talk about distressing topics such as end-of-life wishes and potentially unequal bequests. But these conversations are important; you will be unable to turn back time as a family if, as a parent, you become incapacitated later in life, or, as an heir, you inherit an estate that is complex, divisive, or not at all what you anticipated. Conversations now can help parents potentially avoid future family conflict.

Such conversations also can offer heirs a reasonable idea of what to expect as they plan their lives. Will the money be largely gifted to charity? Is there a sibling in more need than others who will receive a larger share? Since this is a two-way street, are the children/heirs particularly emotionally attached to a specific item or asset that they would like to receive?

So how can young adults help lead a change where financial conversations — including the inheritance talk — can happen routinely, openly, and without gender bias?

Stephanie Duignan, head of Family Wealth & Culture Services at Wells Fargo Wealth & Investment Management, says that the key to having a meaningful conversation about inheritance is to work up to it, instead of jumping in abruptly. Here, she shares how to do it.

Understand the concerns on both sides of the inheritance talk

To plan for a meaningful conversation about inheritance, it can help to understand what keeps each side from opening up. “Our experience is that parents are trying to avoid raising entitled children — they worry what the wealth could do to their children’s motivation,” Duignan says. “The children don’t want to stir up conflict, and they don’t want to seem greedy, nosy, or unprepared.”

Her takeaway for parents: Being perceived as entitled — even if it is not the reality — is something both you and your children likely want to avoid. Knowledge is not the cause of entitlement, however, so don’t let that concern keep you from talking about inheritance.

Her takeaway for young adults: It’s important to build trust by talking about your own finances — your plans and goals, and where you might want advice — to help alleviate these concerns.

Start talking about values

In the Wells Fargo Wealth & Investment Management survey, we found that parents see money and assets as part of their legacy, but passing on their values is far more important to them.² To get started, the path to talking about inheritance starts with this step: talking about the legacy that parents want to leave, attitudes toward giving and social impact, and the role they want money to have in the family’s future.

“These early conversations are about education and helping the younger generation learn about being good financial stewards,” says Duignan. “One of the things we learned in our research is that what the younger generation most wants to inherit from their parents are values. And the good news is that those conversations can open the door for other financial actions you can take together.” Learn more about bridging gaps in family conversations about money.

Work together on a family financial task

The next step in building toward more difficult financial discussions like the inheritance talk, Duignan says, is to work together on some less difficult but important decisions. Here, she gives three examples:

Family giving. “We’ve found this to be a great entry point for financial education,” Duignan says. “Communication here is the key — both parents and their adult children will need to communicate about their desired goals for family giving and then work together to help make it happen.” This may include working together on charitable disbursements from a donor-advised fund. Learn more about donor-advised funds.

Estate planning strategies. This isn’t meant to be a discussion of dollars but, instead, a way to talk through potentially uncomfortable topics. A few items to consider:

• End-of-life care/advanced health care directives
• Wishes for what happens to assets after death
• Goals for a family foundation
• Location of important documents and who is identified for various roles. For more on estate planning strategies, see Wealth transfer essentials.

Investment planning. Duignan says she has seen positive results from families who basically form an investing club with their children. “They might say, ‘Let’s invest $5,000 together,’ and then plan for regular discussions on how to manage that money,” she says. “It can be a great tool for learning and sharing knowledge.”

Ask to be introduced to your parents’ team

“This is something that we hear frequently from younger generations: They wish they could have a formal meeting about finances and be introduced to the advisor, either to talk about their own finances independently or to be part of the conversation with their parents,” Duignan says.

Many times, all it takes for this to happen is to ask to be involved so that the adult children can benefit from formally focusing on their own finances and learning. And sometimes it helps to ask for this introduction early in the financial discussion process. “A lot of times, advisors can help initiate important conversations,” Duignan says, “or know when to bring in tax advisors or attorneys for additional input.”

Plus, once you’ve put in the work to be ready for the inheritance talk, it can be reassuring to know that you have an existing relationship with an advisor who likely helped consult on the plans for the family’s wealth. “Having these relationships, and talking early and often, can help build confidence,” Duignan says. “And that can make the difficult inheritance talk a lot more comfortable.”

1. Versta Research conducted a national survey of 1,008 Wealth Creators on behalf of Wells Fargo Wealth & Investment Management (WIM), defined as U.S. adults age 50 or over who have at least $1 million in investable assets, excluding those who inherited most of their assets. The sample included 136 from Generation X (ages 50 to 57), 771 Baby Boomers (ages 58 to 76), and 101 from the Silent Generation (ages 77 and older). Data were weighted by age to match current population estimates of U.S. households with $1M+ in investable assets, derived from the Federal Reserve Board’s Survey of Consumer Finances. The survey was conducted January 3 – 18, 2023. Assuming no sample bias, the maximum margin of error for full-sample estimates is ±3%.

2. Versta Research conducted a national survey on behalf of Wells Fargo Wealth & Investment Management (WIM). Survey participants were drawn from national online research panels. Assuming no sampling bias, the maximum margin of sampling error is ±4%. In addition, 10 interviews of WIM Rising Gen clients were conducted by Ipsos. In-depth interview subjects were identified and recruited with the assistance of WIM advisors in various regions across the U.S. All research — quantitative and qualitative — was conducted in January and February 2022.