Talking to your family about legacy: how to get started
March 26, 2019
4 minutes to read
Talking about succession planning? This is a sensitive issue for Belgians. You often find it in the same category as that first conversation with your child about sex education. We know it has to be done, but how and when... ? We don't always know how to deal with it best. "We particularly notice that it can be a taboo subject for people in their 70s, 80s and 90s to talk about inheritance," says Diederik from Pareto (financial planning). "How big their assets are or what they intend to do with them: some of the older generation prefer to keep this to themselves."
An apple (tree) for thirst
"We often see two reasons why the older generations are less inclined to talk about succession with their children. Many are simply afraid that they will not have sufficient capital to cover their future expenses. There will be additional medical costs, they may soon have to go to a (expensive) retirement home, and no doctor can tell them whether they will live for another 25 or 50 years. These uncertainties make them uneasy about succession planning or talking about it. A second reason is that many people – both young and old – do not know the options of succession planning. For example, they do not know that you can make a donation to a child and at the same time retain control over that donation."
The appropriate starting point
"Is it time to give your parents 'a signal'? This is sometimes a difficult balancing act because you don't want to be greedy either," Diederik continues. "One thing that often works in these circumstances is telling your parents that you are already working on succession planning for your own children. Most parents will have understood your message, and may spontaneously start talking about their own financial plans. If you don't (yet) have any children of your own, you may have to find another way to broach the topic. You could do this in the loft, for example, during the annual spring cleaning session. Mum/Dad, what do you want me to do with that painting later when you aren't here anymore? Of course, you can always switch the roles around and explain what you want to happen to your assets when you're no longer there."
Talking to the children
"Vice versa - from parent to child(ren) - it's best to talk about inheritance when you feel your child is ready for it," Diederik continues. "Of course, this depends very much on the situation and the child. I usually advise not to have this conversation right away if children are still studying or are yet to 'make it'. For certain children, this can have an inhibiting effect on their own ambitions: if they know that they will receive a large amount of wealth sooner or later, this may suppress their own entrepreneurship."
Listening with empathy
"At Pareto, we regularly mediate in inheritance issues," Diederik continues. "We often see situations in which one of the children feels like they haven't been treated fairly and never expressed it before. One child has been allowed to use a parents' garage free of charge for 20 years, the other has not...Real estate that was donated to one child 20 years ago is compared to real estate that is donated to the other child today...Sometimes discussions can also ignite about objects of high emotional value, such as Mum's jewellery. So if you can have the discussion about the distribution of family wealth in time and listen with empathy, you can express differences of opinion and make sure there are no disputes."
"There may also be reasons why parents think that a larger proportion of the estate should go to a particular child," says Diederik. "Parents sometimes provide all kinds of support to children living around the corner (playing babysitter and taxi service, working in the garden, etc.). They cannot help children who live far away in quite the same way," says Diederik. "As a parent, you could then leave the other child a sum of money as a kind of balancing act. It is best to discuss something like this in an open way in order to avoid arguments later on. Being open about these things and talking about it in time are therefore the two keys to success."
Finally: when is actually a good time to start with succession planning yourself? "With the exception of the older generations, we notice that people are starting with this earlier and earlier. People in their sixties and fifties, but also more and more in their forties and even thirties. It's always good to have a succession plan anyway, in case you die unexpectedly. It is definitely a good idea to have a policy in place when your assets reach a certain level. In most cases, you can take a lot of steps forward with very simple techniques. On the one hand, you can achieve a fair distribution that causes as little discussion as possible. On the other hand, a succession plan often allows you to significantly reduce the cost of your inheritance."