More Than (Just) Money

Inheritance can be a sensitive issue, primarily for clients of course but also for their advisors. For clients, there may be the shock of death, the shock of sudden wealth and in some instances the dagger of disinheritance. Advisors often fall into two camps when it comes to these sorts of issues. Some feel their job is to offer dispassionate estate tax planning and to distance themselves from emotional issues. Others embrace the softer side of finance and are all too eager to help clients sort through family issues.

In reality, no a priori approach of this kind will suit every client or circumstance. Some clients want their advisors’ cool, analytical judgment and others want deeper involvement. What advisors can and should bring to the table in addition to their left- or right-brain orientation is experience. That is because most clients will only go through inheritance issues once in a lifetime, whereas an advisor who’s been around will have seen a variety of scenarios. (And until he has sufficient experience, an advisor would be wise to consult other professionals.)

Beyond technical estate tax issues, which of course are crucial and must be mastered, the knottiest issues tend to arise when a parent disapproves of the life choices, character or personal responsibility of one or more heirs. While such parents would not want to subsidize in death behaviors they object to while living, people experienced with these issue attest to the devastation felt by children who are disinherited. A less extreme tack taken by testators is to tie money to cessation of behaviors viewed as undesirable or irresponsible. But from the heir’s point of view, this can seem punitive or manipulative and can inflame a strained relationship that continues even after the parents’ death.