Reading the May edition of Registered Rep magazine, a couple nuggets of recent research caught my eye.
- “Six out of 10 wealthy people believe that their children are not well prepared to handle an inheritance.” — U.S Trust Insights on Wealth and Worth
- “Lifetime value of what baby boomers stand to inherit: $8.4 trillion.” — Boston College, “Inheritance and Wealth Transfer to Baby Boomers”
Over the next few decades a lot of baby boomers will inherit from their parents. Some will inherit large sums. Many of these people won’t be prepared to manage these assets intelligently.
From our perspective managing an inheritance is no easy task. Most individuals have no formal training in wealth management. There is no school which combines classes in personal investing, estate and legal asset protection tactics, advanced accounting and asset protection tactics with training on how to work with other members of the family to manage, and sometimes give away, wealth.
Most baby boomers who have inherited know that they can hire professionals to help them with the various aspects of this responsibility. Accountants can do their taxes and recommend tax management strategies, attorneys can create wills and other asset protection devices, financial advisors can help manage the assets, etc.
The issue that most people have is coordinating all of these professionals to make sure that they are working together to provide the best solution for their situation.
In our experience, many advisors can offer excellent financial advice from their perspective, but that advice looks less useful when it is reviewed against the overall objective of the client.
We think that people who have inherited assets should ask the following questions when considering the management of this money:
- What is the long-term goal for these assets?
- What is the hierarchy for wealth management decisions? For instance, for some, wealth protection is much more important than reducing taxes.
- Who will make decisions about these goals and how will they be made?
Once they have the answers to these questions, they need to determine if they are comfortable managing their investments themselves or if they should work to find a person who can help them coordinate the management of experts with the goal of better managing this process.
~ Allyn Hughes, CFP®, CLU®, ChFC® — Brooks, Hughes & Jones, Partners in Wealth Management – Tacoma, WA