Money Talks
Article published in Northampton Living
(April 2023)
EXPERT CONTRIBUTOR
LOU DAVIS
Financial Planner
Davis Financial Group 413 584 3098 ldavis@davisfinancialgrp.com davisfinancialgrp.com
Inheritance is the third rail in financial planning. No one wants to go there. Yet when you think about your future financial circumstances, you need to estimate any wealth you might inherit. Without it, you’re flying blind when you consider these questions:
When can I afford to retire?
If I/we buy a more expensive house now, will the mortgage be affordable later?
Will we be able to send the kids to private colleges?
How will inheritance impact my estate planning?
One or both of your parents may still be living. When that changes, it will inevitably affect your assets and estate plan. That’s why it’s important, whether you’re single or coupled, to include inheritance as a component of your financial plan.
Breaking Taboo
Some families never talk about money. It would seem gauche to violate this taboo. Or such a conversation could open an emotional can of worms. There may be equity issues between siblings, and things could get even more complicated if there’s a disabled sibling, stepparent or stepchildren in the picture.
Maybe you see self-sufficiency as a badge of honor. Rather than “depending” on the estate that your parents sacrificed and worked hard to build, you are determined to stand on your own. No matter what your rationale, you’re doing yourself -- and perhaps others -- a disservice if talking about inheritance remains off-limits.
Planning to Talk
To develop a financial plan, consider not only your income and expenses, but also your current and future assets: employment income, savings, investments, insurance, annuities, as well as any potential inheritance. Only then will you be able to plan for your financial life in retirement, old age, and through your estate.
If you wait until after your parents’ estate is settled, you may over- or underestimate your inheritance. In the interim, you could make financial decisions with long-term consequences -- decisions you might have made differently. There might be lost opportunities, like a trip you could have taken before your knees gave out, or the gift you could have made toward the down payment on your child’s first house. Or putting in place a trust that could help you mitigate unforeseen estate expenses.
Having an inheritance conversation could also help your parent(s). It provides an opening for them to talk about their wishes and values, as well as the feelings, relationships and rationales that guide their estate planning. Within this context, they may be more comfortable sharing information about the rough value of the estate and their intentions for it.
Words of Wisdom
An experienced financial planner understands that you might prefer to remain in the dark. Nevertheless, planners would benefit greatly by including even a rough estimate of potential inheritance. They can also suggest ways to start the conversation with your parents.
In most cases, children want what’s best for their parents, including their financial well-being. Parents, in turn, hope to leave as much as possible to their heirs – and support them in making sound decisions about their futures.
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