Warren Buffett, chairman and CEO of Berkshire Hathaway Inc
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‘Tough conversations’ that ‘strengthen relationships’
“These are tough conversations to have, but they’re meaningful and when approached correctly, can strengthen relationships,” said Boneparth, who is founder and president of Bone Fide Wealth in New York City and a member of CNBC’s Advisor Council.
You want your children to have realistic expectations about their inheritance, Boneparth said.
“Kids’ imagination can run wild with what they think they should be getting,” he said. As a result, you should be as clear and thorough as possible about who will receive what and why.
People might worry about hurting their kids’ feelings, or hearing from one that they think something is unfair. Well, that’s exactly why you want to discuss it, and not “punt that mess for when you’re not around,” Boneparth said.
Kids’ imagination can run wild with what they think they should be getting.
Douglas Boneparth
a certified financial planner
In his letter, Buffett recalled that over the years he witnessed “many families driven apart after the posthumous dictates of the will left beneficiaries confused and sometimes angry. Jealousies, along with actual or imagined slights during childhood, became magnified.”
If the inheritance is not split equally between siblings, you’ll want to explain why, Boneparth said. Maybe one child will receive more because another got help with a down payment on a house or attended a far more expensive college, he said. A child with a spending problem might inherit a trust, Boneparth added, in which they receive their bequest in regular installments.
If one child is in a much better financial situation than another, you might explore with the more comfortable one if they’d be OK with you leaving them less, said CFP Carolyn McClanahan, founder of Life Planning Partners in Jacksonville, Florida.
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You might ask the well-off child, McClanahan said, “‘Do you really care how I leave our assets? Because your brother is an artist and could use a little more help.'”
“That way that child is not slighted when they actually find out,” she said.
In Buffett’s letter, he writes: “There is nothing wrong with my having to defend my thoughts. My dad did the same with me.”
When ‘sharing that information can be damaging’
Buffett’s point that adult children should be invited to weigh in on the will is usually a good one, said McClanahan, who is also a member of CNBC’s Advisor Council.
“When you’re creating your estate document, ask your children in advance what’s important to them,” McClanahan said. “That way, you can keep that in mind.”
In rare cases, it’s best for parents to withhold certain information in their will, McClanahan said.
For example, she would recommend a parent be more cautious if a child has exploited them financially. Meanwhile, if a child is irresponsible with jobs or money, learning that they stand to inherit a lot may further erode their work ethic and ambition, McClanahan said.
“If you have children who are not mature, sharing that information can be damaging,” she said, adding that she may recommend clients in these situations write a letter to their children, which they won’t see until after they’ve died, explaining their estate decisions.
“Every family is different,” McClanahan said. “That’s why there should be no set rule.”