Miscommunication Common When Discussing Inheritance

Three-quarters of wealthy families fail to discuss money and inheritance in ways that avoid misunderstandings and unintended consequences, according to a survey from Merrill Lynch’s Private Banking and Investment Group.

Conflicts can arise when individual perspectives are dismissed, ignored or never communicated, and when core values are not discussed, according to the report, “Is There Love in Money? How Families Put Wealth Into Perspective.”

Merrill Lynch found that family relationships and communications often break down between parents and children, spouses, siblings and in-laws over differing viewpoints on topics such as the division of estate assets, conditions and expectations attached to monetary gifts, the reason for signing a prenuptial agreement, and the distribution or use of trust funds in an estate.

“The real source of these conflicts, and the greatest opportunity, begins with the way families shape different perspectives about the value and purpose of wealth,” says Michael Liersch, head of behavioral finance and goals-based consulting at Merrill Lynch Wealth Management.

Nearly one-quarter of families avoid conversations about wealth, generally because they don’t know how to start the conversation or who should initiate it. Thirty-eight percent of respondents say that rather than having a conversation about money, family members are typically told about money, gifts or financial decisions affecting them. Another 14% say money decisions are simply made for family members.

Only 22% of families have an open dialogue about money, which the study found is an important step in mutual understanding.

“People may avoid sharing perspectives about wealth for fear of conflict, leading to money silence,” Liersch says. “However, the ability to voice and to hear different perspectives in a collaborative way can actually be a source of conflict reduction, ultimately leading to positive and empowering outcomes for everyone involved.”

The study found that families often avoid conversations about wealth because they don’t know where to begin or who should start the discussion. More than three-quarters of families think the wealth holder should initiate the flow of information; however, the wealth holder also is the person they say is most likely to prevent open dialogue.

Sixty-two percent of families agree education about good financial decision-making is the best place to start a family wealth conversation. This is followed closely by reviewing options and considerations for planning (58%) and discussing values or the reasons behind decisions (53%). Less productive ways to start a family conversation about money are to talk about how much money the family has (45%) or who will get how much of it (42%).

NEXT: Can buy me love

Generational differences exist when it comes to discussing and thinking about wealth. The survey found that more than two-thirds of wealth holders—including 69% of Baby Boomers and 78% of family members over age 70—consider monetary gifts to family members an expression of love. Only 50% of Millennials, on the other hand, equate monetary gifts to love. Nearly two in five Millennials see gifting of family assets as a tax optimization strategy on the part of the giver, or a means to exert influence on others (30%). As a result, they may even reject or misuse the gift. 

Considering the connection between love and money, it’s understandable that many wealth holders would want to divide assets from their estate in a way that shows equal love for family members. Fifty-nine percent of Baby Boomers and 68% of those over 70 years old believe the fairest way to divide wealth is in equal shares among their heirs. Only one-third of Millennials, however, consider equal shares as “most fair.” They believe the money should be given based on individual factors (e.g., who needs the money the most, who put more time and energy into the family, and who is the most likely to handle wealth responsibly). 

When thinking about wealth, the survey found that terms like trust, gratitude and happiness come to mind most often, especially for older generations. Thirty-six percent of Millennials equate money to trust, compared with 55% of 51- to 69-year-olds. Conversely, 27% of Millennials say silence comes to mind, compared with 16% of older generations, and 29% of Millennials associate money with tension, compared with 16% of older family members.

A copy of the full report is available here.