sharing is caring

My clients often fall into two categories: those who want their children and loved  ones involved in their estate plan and those who do not. When asked which is better, I often answer, “It really depends on your family dynamics and circumstances.” Generally, greater communication is helpful in the event of an emergency or upon one’s passing. However, learning of a windfall inheritance, for example, can do strange things to people. And on occasion, you will hear stories of elder financial abuse being committed by “trusted” family members. So here are a few tips for addressing your estate plan with your children:

1. Communication helps set expectations.
Since each generation has different values, investment priorities and expectations as to the safeguarding and distribution of assets, it is important to communicate your goals and wishes in the event of your incapacity or death. If, for instance, you have four children and are only choosing two to act as co-executors, it may be helpful to explain that decision: perhaps they are geographically closer to you, or you are appointing your executors in age order or based on their knowledge of financial matters. Similarly, setting expectations for how you would or would not want your money spent in the event of incapacity can be extremely helpful to your appointed agents and successor trustees so they can ensure your wishes are followed. The same can be said about communicating your medical wishes.

2. Communication avoids an asset hunt.
When those who will be receiving and/or able to access your assets upon incapacity or death do not know what your assets are, it creates the issue of locating and marshaling them. Keeping an updated list of your assets, account holdings, contact information for financial advisors, accountants and attorneys will help set up your family for success when transitioning into a decision-making role for you.

3. Communication helps tax efficiencies.
Estate planning and transfer of wealth not only effect the individual creating the plan, but their children and future generations as well. For individuals with potentially taxable estates, transfer of wealth between generations may require information as to your children’s net worth in order to ensure you are passing wealth to them in a tax efficient way. Lifetime Trusts or generation skipping transfers to grandchildren or more remote descendants may want to be utilized to avoid creating a tax liability for your children, especially when they have potential for a taxable estate due to their own personal wealth.

4. Communication and access are not the same.
Clients are sometimes concerned that by communicating their estate plan to their children, they are giving them access and the ability to start “calling the shots.” Access to funds does not need to be given in order for family to be prepared when the need arises. The goal should be to ensure that mechanisms are in place and legal documents are executed to allow for access when needed. A child does not need to be a joint owner on a bank account. Granting them Power of Attorney and the ability to make financial decisions, if necessary, may suffice. For those who are hesitant to share the details of their finances and net worth, it may be sufficient to let their children / loved ones know an estate plan, naming their children as those “in charge,” is in place. The children should be given the contact information of the attorney who was used to create the estate plan and their parent’s accountant so they can obtain proper guidance when the time is right. Your attorneys and trusted advisors could also be provided a list of assets and additional information to share with the children.

Opening the lines of communication can set your family up for success during difficult times. It can also significantly decrease the likelihood of conflict, disagreements and disappointment when a plan is not what a loved one anticipated.

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