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Prepare your heirs for successful wealth transfer

August 13, 2019
Jackie Wilson
Jackie Wilson

You’ve worked hard for your wealth, and you’re proud that you’ll be able to pass a financial legacy to your children. Unfortunately, research and experience show that one generation’s wealth can be heavily diminished within the next generation and completely gone by the third. So how you do you ensure that your heirs will manage your money wisely when they get it? Following the steps below can help.

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Step 1: Have a plan

We’ll assume that you already have a solid financial plan designed to build and preserve wealth while meeting your overall financial objectives. Make sure you also develop an estate plan that helps distribute your legacy as you wish.


As part of this, consider:

  • Potential tax implications for your heirs
  • The need to possibly establish a trust for an heir with money management challenges
  • Whether that trust should include incentive provisions — authorizing distributions when the beneficiary achieves milestones you define, such as graduating college or abstaining from illegal drugs


“It’s important for parents to spell out their specific wishes in their will, especially in the case of special needs children, and not leave those decisions to someone unprepared to handle the responsibility of an inheritance,” says Kim Austin, a trust advisor at Hancock Whitney.


Step 2: Establish the foundation

Ideally, your preparation steps should start when your children are still young and should include teaching them basic financial management skills. From essential saving smarts, you can build up to budgeting, credit card use and debt, and investing.


Remember that your own example is one of the best teaching tools, says Austin. To that end, encourage your child’s interest in your financial affairs, and be open to their questions and to discussion about the way you manage wealth.


Step 3: Talk early and often

Lack of communication is one of the primary reasons wealth doesn’t transfer successfully to the next generation, so it’s important to make it a cornerstone of your legacy planning. While you don’t need to disclose specific amounts you’ll be passing down, you should share with your heirs an overview of how you plan to distribute your assets. By discussing your intentions in advance, you give your loved ones time to ask questions and come to terms with your decisions.


It’s equally important to share your family’s story — how your wealth was built, the accomplishments and missteps made along the way, your values and how they relate to your finances, and your investing philosophy.


Also share your expectations for how your heirs will manage their inheritance. For instance, you may want to let them know it’s their responsibility to continue to generate wealth and preserve it for future generations. You may provide guidelines related to philanthropy, education or entrepreneurship. And you may share thoughts on how not to use their inheritance, such as making extravagant impulse purchases. Also ask your heirs how they want to use the money and have an open dialogue on the subject.


Step 4: Introduce heirs to advisors

Last but not least, as your children reach young adulthood, begin including them in meetings with your financial team, including your financial, estate, accounting and tax advisors. This serves multiple purposes:

  • Helps heirs develop relationships with your advisors and understand advisors’ capabilities, so they know who can answer questions and provide guidance once they inherit
  • Lets your advisors get to know your heirs on a personal level, learn their goals and even help them develop their own financial plan for before and after inheritance
  • Gives heirs insight to how you manage wealth and investments, and how you interact with your advisors
  • Develops a “buy in” to the money, its management and your strategies


The payoff

Establishing a solid financial foundation for your heirs and maintaining an ongoing dialogue about your legacy can help give you peace of mind — and prepare your heirs to successfully inherit the wealth you’ve worked so hard to build.


If you're ready to discuss a legacy plan or schedule time for your heirs to meet with a member of the Hancock Whitney team, we're ready to talk with you. 


Talk to a Private Banker


The information, views, opinions, and positions expressed by the author(s), presenter(s) and/or presented in the article are those of the author or individual who made the statement and do not necessarily reflect the policies, views, opinions, and positions of Hancock Whitney Bank or Hancock Whitney Investment Services, Inc. Hancock Whitney Bank and Hancock Whitney Investment Services, Inc. make no representations as to the accuracy, completeness, timeliness, suitability, or validity of any information presented. This information is general in nature and is provided for educational purposes only. Information provided and statements made should not be relied on or interpreted as accounting, financial planning, investment, legal, or tax advice. Hancock Whitney Bank and Hancock Whitney Investment Services, Inc. encourage you to consult a professional for advice applicable to your specific situation.


Investment products and services, such as brokerage, advisory accounts, annuities, and insurance are offered through Hancock Whitney Investment Services, Inc., a registered broker/dealer, member FINRA/SIPC and an SEC-Registered Investment Advisor.


Hancock Whitney Bank offers other investment products, which may include asset management accounts as part of its Wealth Management Services.


Hancock Whitney Bank and Hancock Whitney Investment Services, Inc. are both wholly owned subsidiaries of Hancock Whitney Corporation.


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