Kathryn Pomroy
No matter where you are in life, having an estate plan is both necessary and considerate.
While talking to your loved ones about end-of-life decisions can be difficult, it's necessary to clearly communicate your wishes to avoid misunderstandings later.
Despite the sensitive nature of the conversation, communicating your desires to family through an estate plan can help ensure your wishes are respected in the future. It can also give you peace of mind by bringing everything out into the open before your passing.
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Above all, it requires careful timing, an understanding of its importance and the ability to handle emotional responses that might arise.
Studies show that the lack of an estate plan can lead to needless disputes among families, with 58% of respondents experiencing conflicts over finances and assets. Without clear end-of-life instructions, families might face lengthy court battles, which can be financially and emotionally draining.
Here are six things to keep in mind when discussing estate planning with your family.
1. Get your plan in shape before talking to family
Clarify what you want your estate plan to include before you sit down with your family.
You might be wealthy enough to need an estate plan for millionaires, or you might be struggling and need guidance on how to save money on estate planning.
In either case, it's important to designate who will inherit your assets and manage your end-of-life health care 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.
Take a look: The Basics of Estate Planning.
2. 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. Do you have a 401(k) or pension tucked away? What financial institution do you use? How much is your coin collection worth, and who gets that pristine 1955 Mercedes-Benz stored in your garage?
In many cases, financial decisions might need to be made quickly after you're gone, but your family won't be able to act if they can't find your paperwork.
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.
3. Emphasize the importance of family unity
Families squabble about all sorts of things. Make sure you have a plan in place so your final wishes are carried out in a cooperative and respectful manner, without the possibility of a turf war.
One of the main goals of an estate plan is to promote family unity and avoid conflicts among your loved ones following your death. It isn't just about finances and possessions; it's also about preserving relationships and family values.
4. Consider the emotional impact on your family
Discussing estate planning also requires consideration of the potential for emotional responses. You might not always be there as a shoulder to cry on.
Many adult children are surprised about the size of their inheritance because they expected either significantly more or less than what you left behind.
If you put guardrails in place so your heirs don't blow their inheritance, they might feel that you don't trust their judgment.
If you've left an unequal inheritance to your children or other family members, you can explain your reasoning in your estate plan. For example, if one child has special needs or has many children, you might want to provide more support to that child.
To avoid conflict, talk to your estate lawyer about how best to structure these differences in your plan. When dealing with the loss of a parent or other loved one, emotions are often running high, and when there are significant surprises, it adds to the confusion.
5. Determine who will be in charge of your estate
Be realistic when setting your plans. For example, it might be a good idea to put more than one beneficiary in charge of your estate and the transfer of your wealth.
If you only choose one person, other heirs might feel resentful that they weren't allowed to participate in the process. On the other hand, piling all the responsibilities onto one person might make them feel overwhelmed, especially if they're dealing with their own challenges.
Another consideration pertains to large assets such as a family business. Not every child wants to follow in a parent's footsteps and maintain the family business.
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.
6. Choose the right time and place
Because end-of-life conversations can be difficult and sometimes a bit awkward, choosing the right time and place is important — for you and your family.
Select a time and site that lead to open and honest communication. Family gatherings, holidays and other celebrations when emotions are already running high might not be the best time.
Instead, schedule a family meeting at a setting that works for everyone, or set aside some one-on-one time with each member of the family to discuss your estate plan privately.
Bottom line
Discussing estate planning with your family can be a real challenge, but with a little forethought, the transfer of wealth doesn't have to result in confusion or resentment.
Communication is key, especially when it comes to important life decisions that could impact your loved ones long after you're gone.
Finally, whether you're a millionaire or a pauper, estate planning can be a complex process.
A wealth manager or estate planning attorney can explain all of the intricacies of your plan and help you make the best decisions based on your wishes. If something changes along the way, a professional can also make sure the revisions are properly incorporated into the documents.
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