Contemplating discussing your estate planning with your children or siblings? There are lots of issues, and many disincentives to having those discussions, starting with facing one’s own mortality. Matters open to discussion break down into a few categories, and it is helpful to lay them out so that planning is more effective:
- Avoiding conflict later
- Dealing with family mementos
- Coordinating inheritances
- Deciding on the correct executor or successor trustee
- Meeting individual needs
- Leave it now or leave it later?
- Business succession or tax planning
Perhaps the best starting point for a family discussion is the desire to avoid conflict after both parents are gone. For whatever reason, the death of the second parent is when decades-old family issues are likely to surface. It may be so much easier to fight over the soup tureen used at Sunday dinner fifty years ago than deal with the fact that “Mom always liked you best” (courtesy of the Smothers Brothers for those in the 55+ set). Parents can solicit interest in family heirlooms and treasures, and then decide who gets what or provide a system for bidding or selecting in turns. The family may not be happy with the decisions the parents make but will find it more difficult to take it out on each other!
If there’s a family vacation home involved, it is very important to decide who has what responsibility for maintenance, taxes, major repairs and related costs. Although all may wish to enjoy the property, perhaps not all family members can equally afford the cost. After a family discussion, parents may decide to set aside funds to pay for anticipated expenses rather than rely on the children to come up with a means of sharing the costs.
It may be that the children in the family have different financial needs; one may have a special needs child while another may have no children. Dividing the parents’ estate into equal shares for each child with a deceased child’s share passing to his children may seem fair, but could be disastrous for a special needs child eligible for needs-based public benefits. A frank and open family discussion might result in a wealthy child suggesting that the parents leave their estate to the other children. Without the discussion, the parents might come to the same decision, but with resulting hurt feelings that all children were not treated equally.
Parents generally select one or more of their children to serve as executor, and the nominated child sees it as an honor. Parents who have settled the estate of their own parents understand that it is a time-consuming, paperwork intensive process, fraught with tension between executor as fellow beneficiary, and the other members of the family. They consider steps to avoid probate such as creating a revocable trust, or opt for a corporate fiduciary to avoid creating or exacerbating conflict among the children. A family discussion can bring these needs to light before the estate plan is created and the documents are signed.
Some parents are able to make substantial gifts during their lifetimes, and should consider whether gifts now would make a difference in the lives of their family members, more than an inheritance when both parents gone. A child who struggled to make ends meet while the parents were alive may not be as appreciative as expected upon receipt of a sizeable inheritance later.
If there is a family business, farm or ranch involved, the family discussion needs to take place. Are there family members interested in continuing the venture? How about the children who want to share in the business revenue but not be active in the company? Likewise, if the children have substantial assets of their own, is an inheritance going to create future estate tax liability? Would it be better to leave the parents’ assets in trust for the grandchildren?