Families find it difficult to talk about estate planning. While it may not be quite as awkward as talking about the birds and the bees, estate planning is one of the most critical and delicate subjects to broach with your loved ones. That's because it is an essential part of ensuring that what you want will be accomplished when you're gone.
Additionally, bringing everything out into the open before your passing is the easiest way to prevent discord after your death. This is critical because multiple studies have found that family discord is the biggest risk to the continuity of family wealth across generations. According to JPMorgan, the Williams Group chalks 60% of breakdowns in wealth transfer to a lack of communication and trust.
However, given that death and money are two of the most challenging topics to discuss with family, it will help to have a plan before broaching the subject. Here are some things to keep in mind when discussing estate planning with your family.
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Before you talk about estate planning, get your plan in shape
Clarify what you want your estate plan to include before you sit down with your family. You may be wealthy enough to need estate planning for millionaires. Or you may be struggling to save money on estate planning. In either case, you will need to designate who will inherit your assets and your end-of-life healthcare choices (called an advance directive). Talk with your partner or spouse first and get on the same page before discussing the plan with the rest of your family.
Tell your family what documents exist and where to find them
Next, take care of the practical side of estate planning, which starts with something as simple as ensuring that your family knows what documents you have prepared and where to find them. In addition to your will, you should also let them know where to find your financial statements and other relevant papers.
In many cases, financial decisions may need to be made quickly after you're gone, but your family won't be able to act if they can't find your pertinent documents and paperwork. Additionally, it's a good idea to provide some basic training to help those you plan to leave in charge of your finances to be able to make wise decisions as the end nears and in the weeks following your passing.
It's also a good idea to include details about your estate attorney, accountant or any other professional who can help with the transfer of assets after you're gone.
Consider the emotional impact of discussing an estate plan with your family
Discussing estate planning with your family also requires consideration of the potential for extreme emotional responses. For example, many adult children are surprised about the size of their inheritance because they expected either significantly more or significantly less than what their parents left behind. And if you have put guardrails in place so your heirs don't blow their inheritance, they may feel that you don't trust their judgment.
If you've left an unequal inheritance to your children or other family members, you should explain your reasoning. For example, if one child has a severe disability or another has many children, you may want to provide more support to that child. Talk to your estate lawyer about how best to structure these differences in your plan and you should present these differences to your family.
When dealing with the loss of a parent or other loved one, emotions are often running high to begin with, and when there are significant surprises, it just adds to the confusion. For example, if you left a much larger financial legacy than your children had been expecting, they may feel too overwhelmed to be able to handle the transfer of wealth wisely.
On the other hand, leaving behind a much smaller nest egg than what your children were expecting can make it challenging to figure out how to wrap up your financial affairs, especially if you’ve also left a large amount of debt behind.
Another issue that can cause emotions to run high is if the terms of your will come as a major surprise. For example, it's common for parents to consider the individual needs of their children or other heirs when setting out the terms of their will. However, it's important to communicate these individual concerns before you pass so that your heirs don't feel resentful because you left them less than what you left someone else.
Should you have more than one beneficiary in charge of your estate?
Finally, be realistic when setting your plans. For example, it may be a good idea to put more than one beneficiary in charge of your estate and the transfer of wealth.
If you only choose one person, your other heirs may feel resentful that they weren't allowed to participate in the process. On the other hand, piling all the responsibilities onto one person may make them feel overwhelmed, especially if they are dealing with their own challenges at the time.
Another consideration pertains to large assets like a family business. Not every child wants to follow in their parent's footsteps and maintain the family business. Therefore, it's important to have discussions about this issue beforehand and put plans in place to liquidate the family business upon your passing if your children don't want to be involved.
Bottom line
Discussing estate planning with your family can be a real challenge, but with a little planning and some explanations, the transfer of wealth doesn't have to result in confusion, resentment, and problems for all involved. Communication is always the best policy, especially when it comes to important life decisions that could impact your loved ones long after you're gone.
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