What Newport Beach Residents Should Consider When Inheriting Wealth

By Lynne L. Sebastian, UBS Newport Beach

According to The Cerulli Report, about $105 trillion is set to change hands by 2045, and the future of wealth is increasingly female.

With women earning more and living longer overall, they are poised to control a substantial share of money in motion from parents, spouses, and others.

With local demographics, Newport Beach residents may be even more prone to receiving an inheritance. Newport Beach’s median household income is $156,434—more than 1.5 times that in the Los Angeles-Long Beach-Anaheim Metro Area. The median age is 42.4, with over half of the population being female.

However, when it comes to inheriting wealth, many are unprepared and face challenges as a result. According to UBS’s research in Heir Dynamics: Money in Motion, a third of women who inherited assets from parents had no prior conversations with them about it, and four in 10 inherited from parents without any wealth transfer or estate plans in place.

A lack of communication resulted in 80 percent of women inheritors facing challenges in navigating the process, and more than half uncovered a financial surprise during the transfer, with many being shocked by the amount of taxes owed or how long it took to receive the inheritance.

Specifically, for those women who inherited from parents, 80 percent said they faced a wealth transfer challenge, such as not knowing how much wealth parents had or where accounts were located. Of those who are widowed, 80 percent say they faced difficulties, including financial surprises or no estate plan or will in place.

Some heirs also expressed feelings of guilt and anxiety about how to manage the inheritance according to their loved one’s wishes, experienced conflicts with family members, or were prone, in some cases, to financial shocks as a result.

So how can Newport Beach residents avoid wealth transfer challenges moving forward? Here are three recommendations from research with heirs, to prepare:

1. Talk about it. It can be difficult but make it a point to have important conversations. Attempt to understand your loved one’s wishes and the full financial picture as much as possible to avoid future surprises. While parents may not always be open to sharing full details of their estate, any discussions are better than none and may be a way to open dialogue with other family members to prevent conflict in the future. Around 78 percent of women who have inherited from parents recommend women also understand any expectations of your loved one tied to the inheritance. When it comes to feedback from those who are widowed, 91 percent recommend taking an active role in understanding household finances, and around 88 percent suggest proactively meeting with your financial advisor while married and developing a plan together in advance in the event of one of your passing.
2. Learn all you can. Especially for married couples, identify the amounts and types of assets involved, potential tax implications, investment options and financial planning strategies for the assets. Approximately 86 percent of widows suggest insisting on full transparency into accounts, and 80 percent recommend setting “money dates” with a spouse to help stay current with finances.
3. Look to professionals. Widows and those that inherited from parents agree. Specifically, 78 percent of those who inherited from parents recommend choosing a team of trusted advisors for advice on financial, legal, tax, and philanthropic implications of the transition. Engage trusted advisors as a necessary step to get the right expertise across the financial, legal, and tax requirements.

Inheriting wealth can open many opportunities, as well as responsibilities. About 63 percent of women who inherited from parents also recommend seeking support for coping with grief, guilt, and responsibility that come with inherited wealth. With the help of trusted advisors and a plan in place, those who inherit money can make decisions more confidently about how to best manage it moving forward.

Lynne L. Sebastian at UBS in Newport Beach has over two decades of helping people build and protect wealth. She is recognized as a Forbes Best-in-State and Top Women Wealth Advisor and can be reached at Lynne.Sebastian@ubs.com.