Warren Buffett, the well-known chairman and CEO of Berkshire Hathaway, stands by the idea of openly discussing estate plans with your family. Douglas Boneparth, a certified financial planner, echoes this sentiment, stating that while these conversations can be challenging, they are essential and lead to stronger family bonds. Boneparth, who spearheads Bone Fide Wealth in New York and is part of CNBC’s Advisor Council, stresses the importance of ensuring your children have realistic expectations when it comes to their inheritance.
He points out, “Kids often have wild imaginations regarding what they think they’re entitled to.” Therefore, being clear about who gets what—and the reasons behind those choices—is crucial in managing those expectations.
Boneparth notes that many parents are concerned about causing hurt feelings or dealing with accusations of unfairness among siblings. However, that’s precisely why these talks are necessary—to avoid leaving a complicated situation for others to handle when you’re gone.
In Buffett’s letter, he reflects on numerous families torn apart due to misinterpretations or emotional tensions following a will’s execution. Old childhood resentments and other perceived slights can become exacerbated under such circumstances.
Bonesparth advises that if assets aren’t being split equally, it’s important to explain the reasoning. Perhaps one child has already benefited from financial support, like help with a mortgage down payment or attending a more costly college. Meanwhile, a child with spending issues might receive an inheritance through a trust, distributed in regular amounts.
Carolyn McClanahan, a fellow CFP and the founder of Life Planning Partners in Jacksonville, Florida, suggests a conversation with the better-off child might be in order. You could ask them if they’d be comfortable with a smaller share to support a sibling, perhaps one who’s pursuing a less lucrative career, like an artist.
By having straightforward discussions, you lessen the chance of anyone feeling slighted. As Buffett mentions in his letter, being open to explaining your decisions is important. He learned this firsthand, saying, “My dad did the same with me.”
McClanahan, also on CNBC’s Advisor Council, agrees with Buffett that involving adult children in these discussions is generally wise. Asking them ahead of time about their priorities helps create a more considerate estate plan.
However, she cautions that there are unique situations where discretion might be better. For instance, if a child has financially taken advantage of their parents, or if a child’s financial immaturity might worsen because of a large inheritance, it could be prudent to limit what’s shared with them. In some cases, she suggests parents write a letter to be opened posthumously, detailing their decisions.
“Every family’s dynamics are different,” McClanahan emphasizes. “That’s why a one-size-fits-all rule doesn’t apply here.”
