Many individuals believe that estate planning is only for the very wealthy and required to save on estate taxes. However, an estate plan can be so much more.
You’ve worked hard to accumulate an estate that you hope to pass onto your children, but have you talked to them about it? Are you pushing off the conversation because you’re concerned that talking with your adult children about your plans for their inheritance will incite family drama?
Many parents face this dilemma, however I can assure you that delaying or avoiding the conversation will only create more anxiety, tension, and havoc. Most parents want their assets and more importantly their family relationships to be preserved after they’re gone, the best way to do this is to have the inheritance talk with your children in advance.
Have a Family Conversation
It’s never too early or too late to discuss money with your family. Instilling your values early will help set a sound foundation for the next generation. That said, if you’re one of the 40% of parents with investable assets of $1Million or more who haven’t told their children about their estate plans, it’s not too late.
Communicate Your Values
Start the conversation by discussing your values. Beforehand, sit down with your spouse and consider your own financial values. What does money mean to you? What do you hope to accomplish through this inheritance? Do you want your children to be charitable? Self-sufficient? Is education a priority?
What to Discuss
Write down your values and begin the conversation by sharing these thoughts with your children. Discuss your own life and the factors that led to your wealth, such as disciplined spending and investment decisions. Discussing where the money came from will help the next generation understand that the estate didn’t just happen by luck, but rather they are being entrusted with an opportunity and should handle it responsibly.
Who Gets the Jewelry?
After discussing your values, it’s extremely important to discuss with your children how your personal property will be divided. One of the most contentious aspects of settling an estate can be the distribution of items such as Mom’s engagement ring, Dad’s book collection, or Grandma’s china. This is just as true for items that don’t hold significant monetary value but have great sentimental value.
Try to Maintain Equality but Explain Your Actions
As a rule of thumb, I’ve found its best to treat your children equally when it comes to inheritance. Of course, if one of your children is incapacitated or has special needs you may want to provide financial assistance through a special needs trust, insurance policy, or larger portion of the estate. If one child will receive a bigger inheritance than the others, it is imperative you discuss this early on. Often, family discord arises when children discover they will be receiving unequal shares after one’s passing, generally this can be avoided by communicating beforehand.
Meeting with Children
Also, if you are aware one or more of your children has issues involving money, I would encourage you to arrange a separate additional meeting for this individual and create an arrangement that will work to address those circumstances.
Family Estate Planning Meeting – Explain, Listen, Bring a Pro
After discussing your values and personal property you may want to have your attorney draft a simple summary or diagram of your estate plans and distribute it to your heirs. Then, hold a family meeting to review the document and answer any questions.
Use this time to explain you actions and listen to your children’s thoughts. Choose a quiet, private place for the meeting where everyone will feel comfortable and secure. If the conversation turns south don’t respond by lashing out or shutting down, but rather give your children an opportunity to speak and listen to what they have to say. Often, it can be advantageous to have a trusted advisor such as your attorney or advisor at this family meeting to ensure an atmosphere of tolerance, patience, and impartiality.
The hardest part of communicating your plans for a child’s inheritance is simply starting the conversation.
For more information on this topic, contact a member of your Central Trust Company team today.