Don't wait until it's too late to discuss money, death and your personal values with your heirs. If your family can't manage the discussions, then you'll at least know that another tactic is needed.
We don't like to talk about money or death. Our children hate the thought of it, and it's uncomfortable. 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 found that 72% of parents experience at least some reluctance to discussing financial matters with their children. That's not in anyone's best interest. Disorganization and miscommunication can be costly. The costs can be in dollars, as heirs miss tax deadlines and other opportunities sorting through the files, and in hurt feelings and confusion, as children struggle to understand their parents' decisions.
Here are some ideas for boomers who want to start the process:
Decide how you want to communicate. Don't ambush your children with this discussion. Instead, the first conversation should be how to have a discussion about this subject. Tell them what you want to discuss and ask them how they'd like to proceed. Ready them for several conversations so that they're not overwhelmed with everything 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 your financial and estate planning documents.
Don't start with the bottom line. 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 should involve values, which ideally started with parents talking about money with their children when they were young and emphasizing the value of hard work and the importance of saving. If that didn't happen, it's never too late to start. Next, discuss who you plan to designate as your health care power of attorney to make medical decisions in the event you can't do so yourself 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.
Get some feedback. Children's feelings may be hurt if they don't understand why you designated one child over the other. Tell them your reasoning and ask for input through phrases like "Am I missing anything?" or "Tell me if I'm thinking about this the right way." But remember that you're the ultimate decision maker, and you don't 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 think about ending it right there and not discussing your assets. If the discussion goes south, maybe you need to just let your will or trust do the talking after you're dead. You can always include a letter of intent explaining decisions posthumously.
Move carefully with the assets. If you decide to discuss your assets, proceed with caution. There may be arguments over small, symbolic items like jewelry. If so, parents could ask their children which items they'd like the most and do their best to give them some of them.
With dividing up dollars, many middle-class families don't know how much money they'll have left over, if any, after their retirement. That's reason enough to use percentages and not dollar amounts. But adult children still need to know where assets are located if they need to pay for long-term care. If you have these discussions now, it will be much easier to communicate that 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 members a chance to get more comfortable with the concept of life continuing after you are gone.
Reference: MarketWatch (January 29, 2016) "How to tell your kids how much money you're leaving them"