A Financial Advisor's Guide to Family Estate Planning

BlogEstate PlanningFinancial PlanningRetirement Planning

Jul 8

Talking with loved ones about estate planning and inheritance can be challenging, especially as it centers around two taboo topics - money and death. But talking with your adult children about estate planning and their inheritance can provide signature advantages for you and them. It can help your heirs better prepare for the future and give you a chance to explain the reasoning behind your decisions.

Here's a look at the importance of estate planning with your kids and how to start that conversation when you're ready to have it.

Setting and managing expectations

Your children might have some idea of your assets, but they likely won’t realize the full picture unless you tell them. If you’re comfortable doing so, walk your kids through your estate in detail, discussing exactly what they will inherit. If dealing with exact figures is too much, even a general idea of the size of your estate can help inform your kids’ financial choices and manage expectations about what they may ( or may not) inherit.

Discussing your estate is also an opportunity to talk with your kids about your family legacy. Share the decisions you made throughout your working years to build and preserve wealth and what your financial goals were. Discuss charitable giving priorities and values surrounding how to handle money.

You may also wish to pass along financial goals and financial wisdom, such as financial mistakes you’ve learned from over your lifetime. This discussion could even open the door to financial topics your kids may not have felt comfortable discussing with you before.

Finally, be sure your children know where you store important documents and how to access them. Similarly, provide them with the contact information for important players in your estate plan, such as your financial advisor, estate attorney, and whoever has power of attorney.

Explaining your choices

Depending on how many kids you have, the ages of each one, and other life factors, the inheritance each child receives may not be equal. Maybe you’ve decided to leave more to one child due to a disability or health condition, or maybe you’re leaving most of your money to a favorite charity, leaving less for your kids overall. Going over your estate plan now can head off hard feelings and confusion about how you want your money managed after you die.

If you’d like one of your kids to take on an important role such as executor or power of attorney, explain their responsibilities ahead of time. You may discover they don’t feel up to the task and that you need to choose another person. Whether you’ve chosen someone else in the family, a financial advisor, a certified financial planner or even a professional executor, use this discussion to explain why.

How and when to begin the conversation

There’s no perfect time or place to bring up an emotional topic like estate planning, but some situations may be better than others. While it may be tempting to open a dialogue around the holidays when everyone is home, family get-togethers can be stressful and chaotic. Instead, find a quieter time of year, and pick a comfortable environment with positive associations.

If you’re unsure of how to begin, your financial advisor can help you facilitate the discussion. Your financial advisor can answer your children’s questions and explain their responsibilities in the execution of your estate.

It’s all right if the discussion doesn’t go exactly as planned. You’re opening a dialogue about your estate plan with your kids, and it may take more than one conversation to get on the same page.

But working through any issues now reduces the risk that they’ll develop into conflict later and increases the chances your wishes will be carried out as planned.

Family Meeting

One often-overlooked aspect of estate planning is the family meeting. Family meetings are important to the estate planning process because they allow you to communicate your wishes to your loved ones while you are capable of doing so.

Transparency with your family is vital in order to lessen any surprises to them after your death, to reduce or eliminate fighting between your beneficiaries, and to explain any steps you have taken and the reasons for those steps. A meeting can also be a good time to resolve any conflict between your family members and to set general expectations about the distribution of your assets as well as any decisions you have made about your end-of-life care.

If possible, it is best to schedule a family meeting when you are in good health, and after your estate planning documents have already been signed.

A well-planned family meeting will allow everyone to have access to the same information at once and will give family members a chance to ask questions to better understand your wishes and their roles after your death. You may wish to have a neutral third party such as your financial advisor or certified financial planner present if you feel that there may be potential conflict needing to be resolved. Your attorney may also be able to better explain the legal documents that you will be discussing.

Inventory your stuff

You may think you don't have enough to justify estate planning, but once you start looking around, you might be surprised by all the tangible and intangible assets you have.

The tangible assets in an estate may include:

● Homes, land or other real estate

● Vehicles including cars, motorcycles or boats

● Collectibles such as coins, art, antiques or trading cards

● Other personal possessions

The intangible assets in an estate may include:

● Checking and savings accounts and certificates of deposit

● Stocks, bonds and mutual funds

● Life insurance policies

● Retirement plans such as workplace 401(k) plans and individual retirement accounts

● Health savings accounts

● Ownership in a business

Once you inventory your tangible and intangible assets, you need to estimate their value. For some assets, outside valuations like these can help:

● Recent appraisals of your home (use our home value calculator to keep track of how much it's worth)

● Statements from your financial accounts

How to Plan Your Estate Family Meeting

1. Create An Agenda

Decide what you need to discuss in respect to your estate, whether it be your long term financial goals or long term financial planning and in what order to discuss it.

2. Decide Who to Invite

Next, decide who to invite – usually, your financial advisor or certified financial planner, children, and sometimes grandchildren. Take into consideration that holding two meetings may be necessary if you have a blended family and your estate plan is to keep assets separate.

3. Announce the Meeting to Invitees

After your preliminary planning is finished, announce the meeting to your invitees. Try to announce the meeting in a way that does not create any alarm – for instance, letting your invitees know that you are in good health and that a family meeting is a normal part of estate planning will help to alleviate their worries.

Make sure that you make the reason for the meeting clear so that everyone can be emotionally prepared and nobody is blindsided by the topics you will discuss. If possible, try to schedule the meeting as its own event, and not on a holiday or a day that may be significant to someone in your family, such as a birthday. While your goal should be for everyone to have a positive experience, if conflict does take place, it would be best not to create negative memories on a special day.

4. Host the Meeting

When you sit down with your family to hold the meeting, make sure to follow the agenda you have created so that you discuss everything that you want to. After your initial meeting, you may need to hold follow-up meetings, especially if you make any changes to your legal documents after a birth or death in the family. You may also want to encourage your family members to create their own estate plans.

This material is provided as a courtesy and for educational purposes only. Please consult your investment professional, legal or tax advisor for specific information pertaining to your situation