Who should get mom's ring?

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0:11There's all this money moving through the economy, and a big chunk of it comes from someplace we don't talk about that much. It's money that's inherited or passed down or whatever you want to call it. Over about the next quarter century,$124 trillion is expected to change hands that way. That's like five times the size of the GDP. Now, that money is supposed to end up in very specific hands. $18 trillion is expected to go to charity,$40 trillion to widowed women, baby boomer and older, millennials you can expect the most at$46 trillion, and which groups get the money could have all these implications for how it's invested or spent.

0:50But most of the time, those transfers don't happen successfully. There's this one thing that seems to keep tripping families up every time, a focus on assets, not relationships. Everybody focuses on estate planning. They focus on preservation of the wealth. They focus on tax strategies. They focus on growing the wealth. But yet the biggest risk is often the family itself. You know, when you don't talk to your loved ones about death and money, these super popular subjects. So much fun. It's a romp. This is The Indicator from Planet Money. I'm Waylon Wong. And I'm Sally Hersheps. Thanks for having me back.

1:32Today on the show, we look at the uncomfortable side of estate planning and what happens when it's overlooked. This message comes from NPR sponsor, Capella University. Learning doesn't have to get in the way of life. With Capella's game-changing flex-path learning format, you can set your own deadlines and learn on your own schedule. That means you don't have to put your life on hold to earn your degree. Instead, enjoy learning your way and pursue your educational and career goals without missing a beat. A Different Future is Closer Than You Think with Capella University. Learn more at capella.edu.

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2:56Just a few clicks can tailor your tone and writing so you come across exactly as you intend. Get time back to focus on your high-impact work. Download Grammarly for free at grammarly.com slash podcast. That's grammarly.com slash podcast. Mary is 65. She lives in Florida, and for the past few years, any time she goes to the hospital or the doctor, she's been asked this series of questions, including one that really stresses her out. Do you have a will? I think what most worries me is that I do have a blended family. I have always been the breadwinner. Mary says she always made more money than her second husband.

3:38We're not using her full name because Mary's worried about damaging her relationship with her family. But here's how she sees things. Her first husband passed away and she married her second husband 25 years ago. They own a house together. But she's not sure exactly what she wants to happen to the house when she's gone. She has two stepdaughters and also a son from her first marriage. But the really squishy thing is that I feel like my son should get the majority of whatever my life insurance is going to be or the value of the home because I'm the one that earned the money to be able to buy these houses.

4:14And things get even squishier because Mary's stepdaughter and her husband and their kids hit a rough patch and moved in with Mary and her husband. So they have three bedrooms, two baths on one side. We have three bedrooms, two baths on the other. We share the kitchen and the laundry room. But I always thought, well, I would certainly give her family something or leave something to the boys, you know, for college or for their first home or something, especially now that she lives with me. But this is where Mary keeps getting stuck. She feels like she's been a generous Grammy and stepmom and mother-in-law.

4:47So she's been toying with all these different options. Like maybe everything goes to the grandkids? Or maybe her stepdaughter stays as long as she needs, but eventually the equity in the house goes to her son. But she finds it hard to talk to her family about this, even her son. Wait, what do you think he would recommend? I think he's going to think he should get more, to which I agree. But I still want to be the one that's making the decision, not him pushing me one way or the other. Mary says she feels a knot in her stomach even talking about this, and she's not alone. Amy Castoro knows how hard talking estate planning can be.

5:21It's her job to make those conversations easier. She is CEO and president of the Williams Group. They do what you might call relationship planning. We make sure the families are all still speaking to each other after the wealth transfers. That's probably the cleanest I can get on that. And by the way, if you're thinking, oh, estate planning, that's a topic just for rich people. No, more than half of the$124 trillion that's expected to be passed down does come from high net worth individuals. But the other half, that is coming from the rest of us. I've heard it all. It could be a vase. It could be something as simple as a vase.

5:59We've seen families break up over that. But, you know, if you walk the dog back, you find out that it's not really about the vase. Where did they feel loved? Think about it. Amy says a will is a legal document. It's designed to take care of assets, i.e., who gets what and when. not to explain why you gave your grandmother's blue and gold Dresden porcelain dessert plates with the angels to one of your kids rather than the more deserving one. Oh, you already had names picked out for those angels, didn't you, Sally? I'm not going to discuss this. You know, moms and dads all have an idea of what they'd like to have happen with that money.

6:37But unfortunately, more often than not, roughly 70 % of the time, the transition doesn't go as planned. Families can start fighting. Siblings turn on each other. Cousins stop speaking. They even sue. Because you know what we are good at passing down? Screwed up family patterns. Oh, I know. The guy who founded Amy's company did a 20-year field study looking at where things break down and how to make things right. And he's got a formula for the money to go where it's supposed to and to keep everyone happy. Here's how that formula goes. You should spend 60 % of your time on building family trust and communication.

7:1425 % preparing your heirs, you know, teaching them to be kind, to care for others. And 10 % of your time getting on the same page about the values and mission of your family. Only 5 % of your time should be spent on the mechanical side of estate planning, like figuring out those interest rates, mortgages, investment accounts, that kind of thing. And yet 95 % of people's time is spent on that 5%. In other words, most of the time we have got it backwards. Louis Osterman has seen this firsthand. And he's a lawyer in Denver who specializes in estate planning. Like a couple of years ago, he had some clients, a brother and sister.

7:50The biggest issue that we had to iron out was who was going to get dad's vacuum. Wait a minute. Wait a minute. A vacuum cleaner, like a Hoover, like the kind you clean your house with. Yeah, not even like a Dyson. I don't think it was a nice one. Like, no, it's precious. Listen, some of those older appliances, they are worth their weight in gold. I mean, they were built to last, not like the stuff you get today that breaks after a year. 100 percent. But as they were transferring the retirement accounts and bank accounts, Lewis's client kept asking, what are we going to do? You know, my sibling has the vacuum.

8:23Not the kind of problem, Lewis says, you want to bring in front of a judge. So we went into the conference room and sister had a lawyer. And at my hourly rate, she brought the vacuum. We put it on the table. We transferred it over to brother. There was what's known as a receipt and release showing that brother got the vacuum cleaner. And I don't even know if it worked. We never plugged it in. So what was the bill for the vacuum transfer? I think it was about$3 ,000 to$4 ,000 in attorney time. I'm still kind of beside myself about it. Wow. That is nuts. And here is where we get into our old friend, behavioral economics and, you know, the concept of rational actors.

9:07You know, people don't always make decisions you might call rational, especially if they're feeling stressed or emotional. And when it comes to dividing up assets, Lewis says folks often get stuck trying to figure out this one thing, what's fair versus what's equal. And in economics, equal means everyone gets the same slice of the pie. But fair could mean bigger slices for the hungriest. So he says the question becomes, do we want to give your your child who became a doctor the same amount of money as your child who decided to become an artist. One might need a little bit more support through no fault of their own.

9:45And so fair does not become equal. And that's okay. Lewis says a question a family shouldn't have to ask is how much fighting can they afford? As for Mary, our mom and stepmom who's struggling with what to do with her own will in Florida, we gave her a homework assignment to listen to Lewis's interview and see if it helped. Wow. I learned a tremendous amount. I took four pages of notes and I started underlining. So Mary says she did talk to her son. We don't know the details yet. And you know what? I hope we don't find out for a very long time.

10:23Before we go, we have a question for you. How have tariffs and economic uncertainty changed your spending habits, if at all? Send us a voice memo with your name and location to indicator at npr.org. We may include it in a future episode. This episode was produced by Julia Ritchie with engineering by Maggie Luthar. It was fact-checked by Sierra Juarez. Kicking Cannon is our show's editor, and The Indicator is a production of NPR.