Breaking The Triple Taboo – The Inheritance
Series: Blessings & Curses Of Inherited Wealth - The Guide for Inheritors - Part 2 - Introducing Ann Perry the Author of The Wise Inheritor: A Guide to Managing, Investing and Enjoying Your Inheritance.
Our guest is Ann Perry, the author of The Wise Inheritor: A Guide to Managing, Investing and Enjoying Your Inheritance.
It’s rare to see a book about inheritance written from the perspective of the heirs. Ms. Perry’s grandmother popularized the first widely marketed Go Fish card game, helping lay the foundation for Ms. Perry’s own inheritance.
She tells us that money is the last taboo, and inheritance a triple taboo. She also reminds us that inherited money should be treated differently. We learn that with looming biggest ever wealth transfer of tens of trillions of dollars, more of us than ever will be facing the dilemmas of inheritance. What can we do to be better prepared?
Bogumil: Thank you for taking the time to talk to us. I really enjoyed reading your book. I’d be curious to know what got you interested in the topic of inheritance, where did the inspiration come from?
Thank you. My inspiration came from my own experience receiving a modest inheritance of $500,000 in 1993 after my mother passed away. I was quite surprised that her estate was worth as much as it was. After all, she was a grade-school teacher living on a fixed income. However, she was frugal—and she had preserved most of what she had inherited from her family.
As an only child, I was also overwhelmed by the gift of these assets, a family home, a summer home, an IRA account and various stock holdings.
At the time of her death, I was working as a syndicated personal finance writer and was knowledgeable about such topics as investments and real estate, but I lacked confidence. I realized that if I found it a challenge to manage my inheritance, other people were doubtless feeling the same way.
Bogumil: You discuss the importance of treating inherited money differently. How should we treat it, and why?
Inherited money IS different than other money. You didn’t receive it by working hard, saving aggressively or taking a risk in the stock market. You most likely got it because someone died, probably someone for whom you cared. Many heirs feel that these assets are not really theirs; they rightfully belong to the deceased. For that reason, they can be reluctant to sell, divest or manage the assets differently—even when that reluctance is not in their best financial interests.
Regarding your question of how to treat inherited money, I think that the first step for heirs should be to acknowledge these emotional connections. With that understanding, they can then learn more about the best approach for their own financial situations.
Bogumil: Your book reminds us that we are witnessing the biggest inter-generational wealth transfer in the history. The topic has never been more relevant than today, and the challenges of inheritance are affecting more people than ever before. Is that a problem or an opportunity for many of us?
I think it can be both. Some heirs will be too paralyzed with guilt to manage their money well while others will simply squander it.
However, a bequest can be a life-changing opportunity for many. Whether the estate is small or large, heirs can put it to good use: making a career change, starting a business, paying for college, establishing financial security or giving it to charitable causes.
Bogumil: You write how money is the last taboo, that people are much more willing to reveal very intimate details about their lives than confessing their net worth. You call inheritance a triple taboo—at the intersection of money, death and family relations. Is it something you expect to change?
It won’t change until family members begin having open communications with one another. That may mean starting the conversation by discussing your own financial situation and your estate plans to draw out other family members.
It’s also important to try to improve family relationships by mending fences with estranged siblings or other relatives. This can save much future heartache.
Bogumil: You emphasize the importance of talking to our parents about their wealth, their plans and wishes. How do we start that conservation?
First, keep in mind that such a talk can make your parents feel vulnerable. They might find discussing their own mortality an anathema or feel that you’re only interested in getting an inheritance and not in their well-being.
To get started, consider some, or all, of these approaches: look for an appropriate time to talk (not over the table at Thanksgiving dinner); suggest that your parents get a “financial checkup” with an advisor (who will surely cover their estate planning); share relevant articles with them, and gently remind them that lack of planning could mean emotional hardship for their heirs.
Bogumil: You share with your readers detailed checklists of what we should do when our parents are still around. Without giving too much away, what’s the number one item, we need to remember?
Encourage your parents to sign two types of documents, one giving you or another trusted person the power to make healthcare decisions and one creating a power of attorney for financial matters should they become incapacitated. While these might seem to be giving up too much control, they can in fact do just the opposite—ensure that your parents’ wishes are carried out. These documents can be tailored and designed to be used only in certain or limited circumstances.
When my mother was terminally ill, I found both documents enormously helpful. I could help manage her care with doctors and hospital staff in accordance with her wishes. Without the financial document, I would have been unable to use her bank accounts to pay her bills, manage her IRA accounts and file her tax returns.
Bogumil: In your book, you discuss the need for professional help, could you tell us what an inheritor should look for in the right advisor?
First off, you must choose a financial advisor with whom you have a good rapport and who will patiently answer all your questions. Your advisor should be willing to discuss how he or she will be reimbursed, by commission, a flat fee for advice or a fee for ongoing money management. You should be convinced that this person puts your interests ahead of their own.
Once you have a good financial advisor, that person should be able to direct you to trustworthy CPAs, insurance brokers and appraisers, serving as a kind of quarterback for your finances.
Bogumil: Our readers find the topic of children and inheritance especially interesting. How do children react to a parent’s sudden inheritance? What should we keep in mind?
Educate them, in age-appropriate ways, about managing money. Start with an allowance and then slowly increase the amounts and types of saving and spending, permitting them to make mistakes now that will help them cope in the future.
Children should have a sense of how well off the family is so that the amount of a bequest won’t be a jarring surprise at a time of loss. You should also convey in general terms how you will allocate your assets: to all to your children equally, more to one with special needs, or some to charity as well.
They might find such discussions awkward or frightening. If they have questions, you can keep them brief and matter-of-fact. The goal here is to avoid leaving them blind-sided. It’s also important to impart your values and the need to be self-sufficient and create meaning in their lives, so they don’t feel entitled.
Bogumil: Could you talk about the emotional roller-coaster that inheritors often experience?
I’ve identified Six Emotional Stages of Inheritance. Not everyone will experience all of them or in this order:
Disbelief—Some heirs still feel like children, even though they’re adults. They may think, “not this, not now.”
Anger—This feeling could stem from a sense of abandonment or a grievance that a parent left the estate in a mess, with no instructions.
Euphoria—Once the reality of the bequest sets in, some heirs may feel exuberant because they’ve never had so much money and they begin thinking of all that they can buy or do. But most should realize that while they can do some things, they can’t and shouldn’t try to do all of them, or they will spend it all.
Guilt—I’ve spoken with many heirs who feel guilty that they inherited only because someone died. They may find it difficult to manage their money or to dedicate it to things that their parents wouldn’t approve.
Paralysis—This may stem from reluctance to sell assets or use them differently from their parents and from fear of making poor choices.
“Heirworthy”—After a period, when negative emotions have run their course, heirs will begin to appreciate what they’ve received and the difference it can make in their lives. They learn to preserve it and invest wisely to leave for their own children and deserving charities.
Bogumil: Thank you so much for your time, we really appreciate it. We hope our readers will find your book equally interesting and inspiring.
Ann Perry’s The Wise Inheritor is available on Amazon.
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