How to Prepare for the Tricky Business of Transferring Wealth

Estate Planning

Not enough communication. A lack of financial preparedness in the next generation. Transferring wealth from one generation to another can be a complicated undertaking. But there are actions you can take to help smooth out the process and improve the odds of a successful transition.

According to a Truist/Forbes Insights survey, nearly three-fourths of potential heirs have a “high" or “very high" interest in wealth management — yet only half rate their ability to manage their family’s assets highly.

Learn Literacy

Numerous studies show that most potential heirs have a strong interest in learning about wealth management. With some work, and the willingness to learn, families can overcome these roadblocks. Drew W. Egan, MBA, Director of Family Education at Truist Wealth GenSpring, recommends taking advantage of every possible learning opportunity, including advice from family members.

“If you're unprepared to do something, like sail a boat or drive a car, it's most likely not going to end well,” he explains. “The same holds true with the wealth transfer process. Everyone needs to acquire financial literacy. Adding wealth to the equation just amplifies the need.”

The more you learn, the better your chances of successfully managing wealth. “It’s not just a one-time event,” Egan cautions. “It’s something that should be consistent and ongoing throughout their lives.”

Get Started

Egan recommends heirs start learning about wealth management by taking good care of their own finances. Regardless of how soon or how far off an inheritance may be, get a good understanding of where you stand financially. What are your short- and long-term goals? Where are your assets and how are they allocated? What's your monthly cash flow, budget and expenses? Is that how you want your cash flow to look? Are you putting enough away to meet your goals?

“Living a life with wealth presents unique challenges,” explains Egan. “Feeling in control of your finances before inheriting can make that transition a lot less overwhelming.”

Ask Questions

Communication with the older generation is critical for a successful transfer of wealth. Egan believes it's important for heirs to understand how the family wishes for the wealth to be used: to support a lifestyle, pay for education, engage with charitable causes, pass on to future generations—or all of the above.

Based on lessons learned from families that successfully passed wealth from one generation to the next, Truist Wealth GenSpring has identified 25 best practices for multi-generational families. One of these is openly and explicitly discussing shared values. Another is to create a family mission statement based on those values.

These types of discussions yield many benefits. They can serve as guidelines for family decision-making, provide a point of focus during troubled times, and establish a clear direction for family wealth management. Often, the result is the preservation and growth of the family assets for future generations. If you can start talking with family members about your wealth intentions at an early point, you’re far less likely to encounter disconnects and disappointment,” notes Egan. “The sooner you begin, the better."

For both generations, talking about money can be awkward. For future heirs especially, it can feel disrespectful or greedy to initiate a conversation about inheriting wealth. One way to get the ball rolling is to express your desire to uphold the family’s values and wishes. When you approach it that way, it's a more welcoming conversation for the older generation.

Seek Advice

The time to seek out professional advice is well in advance of receiving an inheritance. “This gives you a runway to ramp up your financial knowledge and confidence," advises Egan. “It also allows you time for you and your advisor to develop a deeper relationship."

Engaging with an advisor means you've got an advocate to bounce ideas off of and to collaborate with—someone who will also help you stay up-to-date on legal changes, tax changes, market changes and the economy. The idea is to find someone who you can make a connection with and who inspires a strong sense of trust.

“Wealth is both a privilege and a responsibility,” Egan notes. “To successfully transfer family wealth, both generations need to feel like they have a stake in the game.” The ultimate is for wealth to have a positive impact on your life. But for that to happen, you need to get started.

Interested in learning more about wealth transfer and inheritance conversations?

Talk to your Truist Wealth advisor.