Have You Had the Right Conversation

Have You Had the Right Conversation

by Richard S. Bernstein on Mar 24, 2017

There is a wide divergence when it comes to how families communicate their estate and wealth transfer plans. It is each family’s decision how much to share with their children, but in our experience, this communication is a big step in protecting wealth. One concern we see is that most families don’t have enough liquidity to pay their estate tax and one way to cover the estate tax is to have enough life insurance.

Another concern among very wealthy families deals with the issue of the sustainability of their wealth. They want to avoid at all costs the “shirtsleeves-to-shirtsleeves in three generations” syndrome. When you increase the involvement and lines of communication between generations, such as disclosing trusts, life insurance policies and other assets, you will generally increase the chance of your wealth having a more meaningful future impact on your family and society.

That said, a recent study by Fidelity Investments found the communication between parents and children on the topic of wealth preservation to be seriously lacking. The study found that while the majority of parents believe they’ve had detailed conversations with their children about these topics (69%), more than half of their children say they haven’t had these conversations. Additionally, it found that 7 out of 10 beneficiaries have misunderstandings about the true value of their family’s estate.

This begs the question as to why there is such a gap between expectations and reality in this area of wealth transfer. Perhaps it has to do with the conversations being time-consuming and often sensitive, so it is understandable that families put off these conversations. Even so, these are not justifications to put off communication of the legacy and financial health of a family.

No family should be dealing with bills and taxes after an unexpected event has occurred. This is often too late, leading to consequences like sibling conflict, lack of liquidity, and even losing a cherished family business or home. One of the most important tools for this aspect of estate planning is through the purchase of a life insurance policy, as it ensures liquidity for estate taxes, estate equalization and the ability to pay bills when money is most needed. Delaying important family conversations forces crisis decision making by haste and emotion, rather than by good planning and frank dialogue.

Now is the time to have your life insurance reviewed and to communicate your needs and goals. Including an experienced insurance professional in your estate planning will avail you of additional options in creating and communicating a comprehensive plan for you and your heirs. To ensure your peace of mind, call our offices at 561.689.1000 to schedule a confidential consultation with one of our experienced life insurance consultants.