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The Wealth & Wisdom Blog

Information on Estate Planning, Estate and Trust Administration and Unique Asset Planning

Son, we have decided that your brother is going to lead our family company.”

Those of us who are “Minnesota nice” have a difficult time initiating difficult conversations, especially with family.  For example, have you and your spouse had conversations about his or her wishes to remarry if you die? (without naming names, of course).  According to a study entitled, “The Better Than Expected Consequences of Asking Sensitive Questions,” those who fail to initiate difficult conversations are missing out on important benefits. According to the authors, “individuals make a potentially costly mistake when they avoid asking sensitive questions, as they overestimate the interpersonal costs of asking sensitive questions.”  While we often avoid difficult topics for fear of offending others, we miss out on the opportunity to use the difficult topics to deepen our relationships.

In this month’s update, I share a few thoughts as to how clients might communicate difficult estate planning topics with their family.

Information To Share Now

If you were a client of mine, I would encourage you to share the following information during lifetime:

  • You should let your children (or whomever you name as your beneficiaries) know about the appropriate key individual or “fiduciary” appointments that comprise your estate plan.
  • If you own unique, difficult-to-value, or perhaps even “indivisible” assets, such as valuable artwork, a family cabin, or a business, you should share with your children your plan for the distribution of those indivisible assets.
  • You should provide your key individuals with contact information with the names and contact information of for the professional advisors that you have worked with during your lifetime (financial advisor, CPA and attorney). You should let your key individuals know where you are keeping your legal documents.
  • You should keep and retain in your possession an up-to-date list of your current assets and online accounts.

Information To Withhold from Family

I am mindful of the disincentive effect on some adult children of sharing one’s entire financial net worth.  I generally therefore advise against clients sharing their current net worth with clients.  You might simply say, “I am naming all of you as equal beneficiaries, but your father and I might use all of our remaining assets during lifetime, and you may not receive much at death.”  Some of our clients, by reason of the character traits demonstrated by their adult children, decide to provide their adult children with a full financial picture.  In these instances, you might say, “here is our current net worth, but keep in mind that I am planning on using these assets for the rest of my life, including meeting long-term medical care expenses.”

The Three Benefits of Ongoing Communication

There are three key benefits to communicating your estate plan during lifetime.

  • Legal Certainty: First, you would be certain that the plan is, from a legal perspective, not subject to challenge. Your plan can only overturned by a court after your death if the circumstances surrounding the execution of your legal documents demonstrate either (1) that you were “unduly influenced” by someone into signing the documents or (2) you did not have sufficient mental capacity to understand the document(s) creating the plan.  If you have adequately communicated your estate plan to your children at a time when you have no evidence of undue influence or diminished capacity, you will have a “bullet proof” legal plan.
  • Desired Asset Distribution Format Among Children: Second, adequate communication might allow for a revised plan of asset division among your children that more closely aligns with the desires and needs of each of your children. For example, a plan for the division of the family cabin equally among the children would need to be reconsidered when a son announces that he and his wife have bought their own family cabin, or a daughter takes a new job and moves from Minnesota to New York.
  • Clearance of Emotional Baggage: Third, adequate communication creates an opening for children to respond to you, now, over the coffee table or conference table, and not respond with animus towards their siblings, later, after your death and over your coffin. Once told by parents of a plan, an aggrieved daughter or son can deal directly to mother and/or father during lifetime, not following death. In many cases, these responses are the result of longstanding emotional obstacles that exist between parents and their adult children.  Financial advisor Ross Levin emphasizes the long-term benefits to a family of those meetings that might end in disorder or tense words. “Rather than wonder what people are feeling, disorder leads to a better understanding of various viewpoints and therefore helps alleviate the unsolved mysteries after death that occur in families that don’t talk about challenging things.”

In our current age of hundreds of “surface” relationships, introducing difficult conversations allows the respondents to share thoughts, beliefs or feelings of more significant importance. Not only do these difficult questions allow us to deepen our relationships with our clients, and our clients with their children, but it may actually prove to be beneficial when it comes to managing relationships for their estate planning matters.