I had a phone call last week from a client who informed me that they had been diagnosed with cancer. Fortunately, at this point, it is an isolated non-aggressive type of cancer. This couple had been through a cancer journey a few years ago. They raised a question about the potential impact on their estate plan so I though it was a good topic for discussion.
In this case, they felt it was important to discuss their estate plan with their children. They have finalized a will, made sure beneficiaries are named on financial accounts, signed all other pertinent documents, and picked an executor to carry out their wishes when they pass. All was in good order except in their communication strategy.
They considered whether they might have overlooked one consideration: whether they should share the details of your efforts with your adult children. This is a tricky question and definitely depends on the family.
It’s a sentiment echoed by many advisors. Yet there are certain parts of estate planning that should be shared regardless of whether money is part of that discussion.
A recent study said an estate’s value at the time of settlement varies widely: Most are worth between $50,000 and $250,000. About 11% are worth under $10,000 and 11% more than $1 million.
Family conflict, however, is common in many cases regardless of the estate’s value according to the survey. More than 44% of survey respondents said it has happened in their family.
In other words, even if you view your estate plan as tidy and definitive, it still could blindside your adult children when you’re gone. Do you want your bequests to children to be about resentment, whether toward each other or toward you?
The basics
In basic terms, “estate” just refers to everything you own when you die: your financial assets, real estate, and possessions. An estate plan focuses on making sure those things end up where you want them to, as well as anticipating other end of life considerations.
If you die without a will — called dying intestate — the courts in your province will decide who gets what. That process is public and often messy if would-be heirs have competing priorities and conflicting notions of what is rightfully theirs.
However, not everything about an estate plan deals with money or other assets you’re leaving behind.
For example, its generally recommended that you assign power of attorney to a trusted person to handle your finances if you reach a point when you can no longer can. Same goes for medical decisions. Experts also say it’s wise to have a power of attorney for health, a living will, which outlines your wishes if you become incapacitated due to illness or injury.In virtually every circumstance, you should tell your kids who is in charge of these items. They need to know that, and they shouldn’t find it out when you’re lying in a hospital bed unconscious.
For the money side, though, it’s far more of a gray area surrounding the question of how much you should tell your kids. However, there are considerations that can help you make that decision.
Some clients simply want to keep their finances and plans private for a variety of reasons. In those cases, I strongly encourage them to at least notify their loved ones, or at a minimum anyone they have appointed a fiduciary role, of the existence of the plan, the individuals who have responsibility, and the location of plan documents and other things.
Sharing the basics helps prevent the family from hunting for information about the decedent’s assets and liabilities especially when many people now use online resources to get and store that information. In the old days, you could wait on the mail to bring statements and bills, but many folks use online resources now and the hunt is that much harder.
Influencing your decision
Again, how much you share can depend on family dynamics. When the subject comes up with clients, I say, you know your kids better than I do You have to think about the individuals you’d be talking to and how they’re going to respond. For example, your children may be doing their own financial plan. They’re figuring out their short, and long term, goals and how to fund them. If they were to find out an inheritance may be coming their way, they could factor it into their own planning.
If the client believes a peaceful transfer of assets is likely, it can help adult children with their own financial planning. Also, if the inheritance would be unexpectedly large, it may be worth preparing your kids for it. It’s surprising, but sometimes inheriting big sums of money can have a traumatizing effect on the heirs if they are totally unaware of what’s coming.
Additionally, if you are not splitting everything evenly, it may be worth communicating that in advance. For example, if one child has special needs and you are directing a sizable portion of your estate to their support, it may be worth warning the other siblings who are self-sufficient.
You may have very good and well thought out reasons for what you’re doing, but if you don’t communicate with your kids, they won’t know and when they find out, you’re not there to explain it.
On the other hand, some adult children may not be well-equipped to handle the notion of an inheritance. If it’s substantial money, they might think I don’t have to do anything now because I’ll be rich someday.
And if your children ask you about your money situation? Don’t assume the worst. Sometimes, they may just want to know that you have the financial wherewithal to get through your life, regardless of what you leave behind.
Maybe they just want to know you’re okay or maybe they’re wondering if you’re going to come knocking on their door to move in because you ran out of money.
The bottomline
Regardless of whether you share the dollar details or just the need-to-know basics, communication can go a long way.
My experience is that most people err too much on the side of not talking. Trying to err on the side of communication on most things is probably good advice, not just specific to money. Communication is always a good way of Keeping life Current.
