How to Talk with Grown Children About Your Estate Plan
Why should you speak to your adult kids about your wealth and their inheritance?
- It gives you a chance to tell your children how you want your estate to be handled.
- It lets your kids know whether they need to worry about supporting you in your old age.
- They'll see whether they'll get help paying for their children's college education.
- It sets them straight about whether they'll get a windfall.
Studies say that there's a huge disconnect between how parents and children view the importance of talking about wealth and inheritance: The kids want to know whether they'll get enough money for a cushion, while parents don't seem to understand how key this knowledge is to their children.
What's the problem? Your reluctance to talk stems from the worry that a whiff of a big inheritance could prevent your kids from being independent. Maybe you think you have all the time in the world — you're in denial that you'll ever age. Because you've avoided having the conversation, it takes on a life of its own. It's such a big, scary topic, it's never spoken aloud.
Experts note that the earlier you begin talking about money with your adult kids, the better. Do it while you're young and healthy enough to get things organized. Talk about such things as:
- Drawing up powers of attorney and what that means.
- Your investments and property, and how your kids will share the estate.
- Where the documents are kept.
Have the estate-planning conversation well before a crisis. But how to broach the subject? Springboards to discussion include:
- A milestone birthday.
- A change in job.
- An update of your will.
- Recent news about long-term-care costs and how you and your spouse are planning to cover expenses.
- A friend's father who passed away and his kids are at each other's throats — have a conversation so this doesn't happen to you.
In your first conversation, skip the numbers, but provide a framework that outlines your intentions:
- We have long-term-care insurance to cover the costs should we need that.
- We're planning on gifting money for a grandchild's college education; here's how many years it might be able to cover.
- This inheritance won't set you up for life; we've put aside money to help give a cushion, but you'll still have to earn your own living.
It's a truism that nothing causes more hard feelings than leaving a surprise in your will. Another important thing to discuss with adult children is who will handle the finances.
- Perhaps one child is more organized or has experience with financial matters and is well-suited for the executor role.
- Maybe one son or daughter is closest geographically and has easier access to your paperwork.
- Designate a nonfamily member — a friend or your lawyer or financial planner.
- Set up a living trust with a nonfamily member trustee as backup. Don't let this decision come as a shock to your children. You can explain that you didn't want them to have to handle stress.
Make the reasoning behind your selection clear to your children. You never want a situation where the adult children can't have Thanksgiving together because they're squabbling over the estate.
Keep in mind that you may have to change your plans as life presents new circumstances. What you're disclosing is not set in stone — it's just a game plan. As you adjust the plan, you can share more with your children.
When it comes to division of assets, be clear. For example, if you plan to divide your assets unequally, explain why. Perhaps one child has a lower earning potential, or another is forgoing his or her earning potential to serve as a caregiver.
Having all the kids on the same page and understanding and respecting your wishes while you are still alive will mitigate hard feelings of resentment later on.