Financial Journeys

SPRING 2022

Having the “talk”

The importance of discussing inheritance with your heirs

Home sweet home – for longer

You’ve achieved a level of financial success that allows you to share your wealth with the ones you love. Of course, a substantial inheritance is a generous gesture that also carries great responsibility. Having a series of conversations with your heirs – to openly discuss the transfer of wealth and what expectations come along with it – will make sure everyone is on the same page.

As you finalize estate plans and decide how you’ll distribute your fortune, it will benefit everyone involved to open lines of communication with presumed heirs. Oftentimes, your children have questions too, but money (especially large sums) feels like a taboo topic. They don’t want to seem greedy, for example. Give them permission to better understand your hopes for your family’s future.

Here’s what you should consider as you plan the conversation.

Who?

For transparency, it's ideal to include all involved parties in a group conversation, but you know the dynamics of your family best. You may opt to have one-on-one discussions first to go over details with individual heirs, then get the family together to touch on wider topics, like division of future caregiving responsibilities or carrying on certain values with the inheritance. Consider bringing in your advisor so your family can not only meet them but also feel comfortable asking any financial questions that arise over time.

What?

Consider what needs to be said to your children before you set a meeting. Most important is to address exactly what’s being gifted and what’s not. Some other common threads are intentions for your wealth and how family changes may affect the inheritance. If wealth is being distributed unequally or you’ve decided all or some of your wealth will be donated to charity, it may be uncomfortable to talk about – but this just means it needs to be discussed. Make a to-do list so it doesn’t feel overwhelming and write out discussion points so you can rest assured you’ve covered everything.

Where?

Have the initial inheritance conversation with your heirs in person, if possible. Logistics might get in the way of getting the relevant family members together in one room but, thankfully, we’ve all gotten more comfortable with technology aiding our long-distance conversations. Options like FaceTime or Zoom may be sufficient, especially for those far away. For meetings to review documentation, for example, you may want to consider inviting your heirs to your advisor’s or lawyer’s office. A neutral location can help put everyone at ease; just make sure it’s not public and it’s conducive to candid, potentially emotional and lengthy conversations.

When?

Putting off difficult conversations is all too common, but it’s important to talk to your family about the plans for your estate well before something happens. If you think plans may change over the years (and they often do), you can let your heirs know you’ll keep an open line of communication as your wishes and circumstances evolve. But, if you start the discussions early, at least your children will feel comfortable coming to you with questions as time goes on. They’ll also be more prepared to jump in and assist with caretaking duties or financial matters if the need arises.

Why?

Financial wealth is only one part of the conversation, so it’s important to have a meaningful dialogue with your heirs about your wishes as you age. It allows you to express your expectations for your family to honor your legacy after you’re gone. And it also gives heirs the opportunity to plan for their own financial future and to prepare for executing your estate once it’s time. Involving them during the planning phase by discussing details makes your loved ones feel like part of the process. Having these deep conversations often strengthens relationships and reinforces family values.

How?

You don’t want to surprise your heirs by springing the inheritance conversation on them unexpectedly. The topic warrants a meeting (or series of them) that is solely focused on discussing your plans as you age, from financial matters to desired living arrangements and caretaking responsibilities. Support your conversations with any documents you may have, like legal paperwork and insurance policies, and provide your family members with the contact information of your estate planning team for when they’ll need it later on.

Remember, your advisor is there to support you in the conversations you have around transferring your wealth. They have tools and information to help facilitate the series of discussions you’ll have with family about the inheritance. By opening the lines of communication earlier rather than later, you’ll ensure your family understands the legacy you want to leave behind with your generosity. 

Next steps

If you think your loss aversion is affecting your financial goals …

  • Set long-term goals that will encourage you to see a bigger picture.
  • Speak to your advisor about the moves you’re thinking about making before taking any immediate action.

Sources: Journal of Political Economy; Journal of Risk and Uncertainty; wikipedia.org; CNNMoney; Journal of Personal Finance

How to combat ageism

The do’s and don’ts for fighting unfairness

Retirement around the world

You may notice it subtly at first. “You look great for your age.” It’s intended to be a compliment, but why tack on “for your age”? “You look great” also does the trick. Or have you ever been asked at work if you do email? (Of course you do!) And a common one: “Are you still working/biking/[insert any other verb here]?” The word “still” makes it feel like the inquirer is surprised you’re able to partake at your age.

Usually, there is no intended malice in these comments, but it can take a toll over time. According to a new United Nations report, ageism leads to poorer physical and mental health as well as reduced quality of life. (The COVID-19 pandemic has shed more light on ageism, with physical isolation recommendations and medical interventions.)

But there is some truth to the adage that age is only a number. This should be a new, exciting chapter of your life – one that you’ve carefully planned for and are living enthusiastically. Here’s how you can fight against age discrimination if it rears its ugly head in your working or social life.

Don’t be afraid to bring it to someone’s attention if they’re being insensitive. Many people don’t realize how their words can make others feel. You don’t have to address it harshly or aggressively – instead, come from a place of care and attempt to educate.

Do make sure you feel confident about your new identity. If you’ve lived most of your life being the Ivy League law professor and now you’re retired, fill some of your time with something you’re equally passionate about to bolster your new identity. Maybe it’s working part time on pro bono cases or providing legal services to a nonprofit.

Don’t shy away from discussing it with others in your age group. Your peers may have some advice for how they’ve dealt with ageism in the workplace or in social situations. If nothing else, talking about it will make you feel like you’re not alone.

Do enlist a trusted advocate. If you’re concerned about age discrimination in a medical or legal situation, call in reinforcements. Having your child, spouse or other personal representative present who can advocate for your needs will put your worry at ease. (Then find a new provider, stat!) Age discrimination is illegal in the workforce, so if you believe you’ve been targeted, reach out to an attorney who specializes in the area.

Don’t avoid asking for help because you fear people will view you differently. As we age, we may need more help with financial matters or taking care of the house, for example. You’re wise for recognizing that need and reaching out for help. That way, you have a say in how it’s accomplished.

Fighting ageism requires you to stand up for yourself and your peers – and educate others along the way. This new chapter of life is just as beautiful as all the chapters before it, so live it unabashedly and to the fullest.

Next steps

If you experience ageism, take it seriously by:

  • Telling someone they’ve offended you with their comments or questions
  • Reporting age discrimination in the workplace to your human resources department
  • Ensuring your legal, medical and financial professionals treat you with dignity and respect. If not, consider other providers.

Sources: dailynews.com; who.int; academic.oup.com

How can you let go of loss aversion?

Don’t let it get in the way of your financial aspirations

Your legacy starts now

As the name implies, loss aversion is our instinct to not just prefer a gain over a loss but to prioritize avoiding losses over almost anything. It might sound wise to try avoiding losses, but taking it too far could keep you from realizing your financial goals.

Loss aversion is a cognitive bias that studies have proven over and over again. But that fear, when applied to buying and selling investments or strategizing for long-term financial goals, can hold you back. The unwillingness to part with something for less than you paid for it can keep you clinging to declining investments, even selling a “winning” stock to avoid selling another at a loss. It could also make you hesitant to tackle more emotional planning challenges like continuity planning for a family business.

Here are some steps for overcoming the fear of letting go.

  1. Reexamine your holdings – from investments to real estate to inherited items – with fresh eyes. If you were starting from scratch, which would you still want to have? Which could you part with?
  2. Give careful thought to what your true long-term risk tolerance is, and stress test your portfolio. This can give you the confidence to stick to the plan even when conditions or your circumstances get more volatile.
  3. Look past loss. Instead of dwelling, focus on how moving forward can help you make progress toward your goals.
  4. Study long-term market data: If an investment has lost value, consider the root cause. Is this a case of periodic market volatility, which has historically led to consistent upward momentum? Or is this particular security no longer an appropriate fit for your plan?
  5. Rely on outside help. Seek out the perspectives of people whose beliefs differ from your own and professionals with specialized expertise. It helps to work with an objective third party – like an experienced advisor – who can offer perspective in addition to wealth planning and investment support.

While it’s natural and often prudent to try to avoid loss, letting that fear loom too large over your financial decisions could actually lead to the very thing you’re afraid of. That’s why counteracting loss aversion by cultivating a healthy relationship with risk could be the key to gaining in the long term. 

Next steps

If you think your loss aversion is affecting your financial goals …

  • Set long-term goals that will encourage you to see a bigger picture.
  • Speak to your advisor about the moves you’re thinking about making before taking any immediate action.

Sources: Journal of Political Economy; Journal of Risk and Uncertainty; wikipedia.org; CNNMoney; Journal of Personal Finance

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