Don't wait until it's too late to discuss money, death and personal values with your heirs. If your family can't manage the discussions, then you'll at least have time to try another approach.
By Stephen K. Lehnardt
We don't like to talk about money or death and it's uncomfortable for our children. But Baby Boomers who have not had conversations with their heirs about estate plans need to start talking, and soon. A recent MarketWatch article, "How to tell your kids how much money you're leaving them," provides excellent guidance to help the process along.
A recent survey by T. Rowe Price found that 72% of parents are reluctant to discuss financial matters with their children. That's not in anyone's best interest. Disorganization and miscommunication can be costly if heirs miss tax deadlines as other opportunities sorting through files. The emotional cost includes hurt feelings and confusion, when children struggle to understand their parents' decisions.
Here are some ideas for boomers who want to start the process:
Check your strategy. Don't ambush your children with this discussion. A first conversation may be how to have a discussion about this subject. Ready them for several conversations so they're not overwhelmed in one sitting. If you have several kids, ask if they'd like one-on-one conversations or a group talk. Decide on a date for the first conversation, set the agenda, and review you’re financial and estate planning documents. This way you will be more organized and reduce miscommunication.
Sit Still in the Chute. You might want to jump to the big stuff and discuss who's getting what, but an estate plan involves much more than divvying up assets. It involves long term family and financial values, who you plan to designate as your health care power of attorney to make medical decisions, and who you'll name as your financial power of attorney to handle financial transactions on your behalf. Many people name their spouse as their primary agent, but you should also name a younger person to serve as a secondary agent if the first can't. Also, mention who you plan to name as the executor of your will.
Rosin for Your Bull Rope. Children's feelings may be hurt if they don't understand why you designated one child over the other. Explain your reasoning. Ask for input with phrases like "Am I missing anything?" and “Help me understand why you feel this way.” But remember that you are the ultimate decision maker, and you do not need to change your plans because of your children's opinions. You can just say, "I respect your feelings, but I decided to go ahead with this plan."
If the discussion about powers of attorney and executors doesn't go well, you may need to pick the discussion back up at another time or think about ending it right there and not discussing your assets. If the discussion goes south, you may need to let your will or trust do the talking after you’ve passed. You can always include a letter of intent explaining decisions posthumously.
8 Seconds to the Whistle. If you decide to discuss assets, proceed with caution. There may be arguments over small, symbolic items like jewelry. Parents can ask children which items are most significant and do their best to accommodate some of them.
Many middle-class families don't know how much money they'll have left over. In that scenario it’s more effective to use percentages instead of dollar amounts. Nevertheless adult children will need to know where assets are located if they need to pay for long-term care. It’s much easier to have these discussions now rather than in the unforeseeable future where it may be harder to communicate in the wake of a sudden accident or illness.
Your estate planning attorney can be a helpful part of this conversation, and you may even want to invite your family members to meet with your attorney as a group. You'll be able to cover any technical questions, and this will give your family a chance to get more comfortable with the concept of life continuing after you are gone.
For more information in Liberty, MO and the Kansas City Area about effective planning and to access free information and tools to organize your estate, visit our elder law and estate planning website.
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Reference: MarketWatch (January 29, 2016) "How to tell your kids how much money you're leaving them"