The Topic Too Awkward to Discuss

July 23, 2014

People are so reluctant to discuss inheritance planning that they will often wait until a death in the family occurs before broaching the topic.

People are so reluctant to discuss inheritance planning that they will often wait until a death in the family occurs, according to UBS Wealth Management.

A new survey of more than 2,800 high-net-worth and affluent investors found that even those who are optimistic about giving an inheritance are reluctant to discuss it and are rarely actively engaged in inheritance planning.

Almost half (45%) of benefactors have not discussed their plans with their children, and UBS estimates $40 trillion of personal wealth is expected to change hands by 2050.

"Inheritance can be a complex and sensitive issue for both sides, parents don’t want to talk about mortality and children don’t want to appear greedy by bringing it up," Paula Polito, Client Strategy Officer for UBS Wealth Management Americas, said in a statement. "But the fact of the matter is that it’s a conversation that needs to be had among families. Open lines of communication and advance planning are critical to ensuring a smooth transfer of wealth and to preventing future conflict among heirs."

The top barrier to discussing inheritance is that respondents say “it doesn’t feel like a pressing issue” (43%), followed by benefactors not wanting their children to count on inheritance (32%), and they do not want their children to feel entitled to wealth (27%).

A majority of the wealthy think it is very important their children do not squander their inheritance, which is a very real possibility. By the time the third generation passes away, 9 out of 10 family fortunes will be gone.

Meanwhile, a large number of beneficiaries are hesitant to discuss their inheritance because their families don’t talk openly about financial issues, according to 46%. Similar to benefactors, 31% of children do not feel like discussing inheritance is a pressing issue, and another 23% do not want to appear greedy.

Wealth has little to do with how much a family discusses inheritance. According to the UBS Investor Watch, wealthier benefactors may have planned more around inheritance, but they are no more likely to have discussed plans with their heirs.

Overall, a third of heirs say they wish their parents had done something differently and 72% plan to deal with inheritance differently. The top ways heirs plan to diverge from their parents are by keeping their will updated (47%), taking steps to minimize taxes on future heirs (34%), proactively discussing wealth transfer plans with heirs (34%), and planning ahead before the onset of aging or mental capacity issues (29%).

“Each generation feels like they know more than the one that preceded them, so it is natural that heirs have different ideas about inheritance than their parents,” Sameer Aurora, Head of Investor Insights for UBS Wealth Management Americas, said in a statement. “That said, they demonstrate stronger self-awareness as they trend towards greater transparency with their own potential heirs and planning for inheritance earlier. They don’t want to be caught off-guard or leave their own children in a state of uncertainty.”