Five Steps to Reducing Risks of an Inheritance, Ideas from an FT Article

Last week a very flattering article for J.K. Financial, Inc. (lead interview) was written by a division of the FT on inheritance planning. Since this article was geared more towards advisors, we thought clarification would be worthy.

Some Estimate Trillions to transfer

Over the next several decades there will be a large transfer of wealth. According to this ABC news article, the amount could be in the trillions.

FT Article on Inheritance PlanningFT Article John Kvale

After an extended interview, a division of the FT had the following  article on Inheritance planning geared toward advisors featuring J.K. Financial, Inc. and John Kvale. Here are the questions from the reporter (Chris Latham) and my answers. Following this electronic communication, we also had a lengthy discussion which formed the basis of the article. (Click the picture to see the article.)

The Questions

  1. How far in advance should the inheritance planning process begin for clients who expect to receive?
  2.  What does the planning process involve, for clients’ life goals, types of investment assets, tax mitigation, etc?
  3. What can the advisor do to address any potential emotional fallout for the client regarding guilt, family squabbles, etc.?
  4. If the client wants to splurge on that dream home after an inheritance, rather than invest the assets according to the advisor’s plan, what is the best next step?
  5. How does any of this change based on whether the inheritance is modest versus significant, comes when the client is under age 40 versus over age 60?

My Answers

  1. Planning in advance is usually completed by helping to insure the heir’s predecessors have completed an accurate plan and process. Depending on the size of the inheritance, we actually try to not include inheritance in our current clients recipient plans.
  2. The planning process is very dependent on the type of inheritance, but would mainly change life goals as well as tax mitigation, again depending on the type of inheritance.
  3. Family squabbles are a commonality, expect them and plan for them through full, complete, accurate and ongoing disclosure of the process. We find the biggest squabbles occur due to lack of contact and clarity for all members. Keep them all in the loop and less feelings will be at risk.
  4. Splurging is ok as long as it does not create an unsustainable expense i.e. Property tax that the client cannot afford. Staying frugal at first is usually the best option.
  5. The smaller and the younger an inheritance may occur the less overall effect on the client. The larger and the later, GENERALLY the more planning that is necessary.

Have a Great Monday! John Kvale PS Since this was a rather long article, I have limited my comments. PSS Looks like capital markets are going to stumble to the end of a second straight quarter.
8222 Douglas Ave # 590
Dallas, TX 75225

One response to “Five Steps to Reducing Risks of an Inheritance, Ideas from an FT Article

  1. Pingback: September 2013 End of Quarter Capital Market Review (Video.. 2 minutes finally) | $treet-¢ents

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