There are few decisions that have the power to stir up emotions within a family quite like those in an estate plan. Who inherits what, how much they inherit, and when they can inherit assets can be controversial issues during a generational transfer of wealth.
How can you balance the relationship dynamics of an estate plan with the transactional elements, while maintaining harmony within the family? Many estate planning professionals say it’s less about what you give your heirs, and more about how you handle the estate and their expectations. The first step in the process begins with ensuring you have a Will and it’s been updated, so your wishes are communicated as needed. It may sound silly, but you would be surprised at how many people don’t do this.
I often recommend that clients revisit their estate plans once a year, ideally during the holiday season when families often get together. Use that time as an opportunity to unearth any changes that occurred during the year like marriages, divorces, or new children.
This conversation should be not considered taboo. Remember, you aren’t doing the estate planning for you. You are doing it for the family and trying to make their lives easier when you are gone.
Estate plans have become more complicated because of the new, modern family. That can include second and third marriages as well as stepchildren. You can remove some of the complexity by creating trusts as a way to divide your assets in more detail and over specific periods of time. With a Will, you say who gets what. With a trust, you say who gets what, when, and how.
Giving Back Outside of the Family
Increasingly, more families are leaving their money to charities, as well as their loved ones. Consider billionaire investor Warren Buffett. He helped create the Giving Pledge, an organization that encourages ultra-high net worth individuals to leave more of their fortunes to non-profit organizations instead of just family.
In short, talking about your plans with loved ones can make a world of difference. If, for instance, you plan to leave 75% of your estate to one child instead of splitting it evenly between two children, let everyone know the reasoning behind your decision. Simmering resentments can easily boil over to into open conflict when a child is surprised by what he or she perceives as unfair treatment.
The better your heirs understand your logic, the less likely they are to contest your estate plan. If there is conflict, you are still there to help work your family through any tension. Click here to receive your complimentary copy of our Estate Planning report.
Investment Advisory Services offered through Sound Income Strategies, LLC, an SEC Registered Investment Advisory Firm. The Retirement Income Store® , LLC and Sound Income Strategies, LLC are associated entities.