On its face, estate planning may seem like a purely financial matter—decisions are made about which assets go where in accordance with your wishes. But it’s important to remember that such decisions may carry emotional weight, especially for those on the receiving end of the assets.
That’s why it’s a good idea to not just convey your wishes, but to provide context for them, so your heirs and beneficiaries understand not just what you want to happen with your assets, but why. It’s also good to provide those heirs and beneficiaries an opportunity to express their feelings about those choices, so you can better understand the potential consequences of those decisions.
According to a recent Fidelity Investments survey,1 most people understand this. In fact, 97% of families said that they recognize the importance of having conversations about their estate plans. However, 68% of parents admitted that they haven’t actually told their children anything about what they might inherit—or whether they will inherit anything at all.
So how can reluctant families get the ball rolling? Here are 3 tips for kicking off a productive estate planning discussion with your loved ones.
Set up a clear framework for discussion
If you’ve found it difficult to get this conversation started, you’re not alone. 34% of parents expressed that they aren’t comfortable discussing finances with their children; another 35% simply aren’t interested. They feel that it’s not appropriate to share such details. Perhaps they are worried that their children won’t be mature enough to handle the assets when the time comes, or that the expectation of a future windfall may undermine their ambition and drive in the present.
“These are all valid concerns,” says David Peterson, Head of Advanced Wealth Solutions at Fidelity Investments. “But ignoring them won’t make them go away. The sooner you begin planning, the sooner you’ll be able to address and, hopefully, resolve these issues. And the sooner the better, because should the worst happen and you end up passing without a plan in place, the consequences for your family—both financially and emotionally—could be much more significant.”
Learn more: Preparing your children for their inheritance.
A structured discussion in which everybody understands their roles and relationship to the family money is key. Techniques such as “family mapping” can help provide a framework in which your family can engage in a dialogue about your estate plan in a productive and respectful manner.
Learn more: Mapping your money to your family and wishes.
“Ultimately, it’s your money,” says Peterson. “You get to decide what happens with it. But it can be beneficial to listen to how the people who are ultimately going to inherit it feel and what their expectations and concerns might be. You may end up hearing something that you didn’t expect and that could change how you design your plan.”
Make sure there are no surprises
When you do ultimately make a decision about who gets what, it’s crucial that you take steps to ensure that your heirs and beneficiaries are not surprised by your choices. When it comes to plans around how estate assets are distributed, a lack of clarity can lead to serious conflicts. For example, according to the survey, 20% of parents may potentially distribute their assets among their children unequally, often because they feel their children have different financial needs. However, only 28% of those parents have discussed this with their children.
“Failing to discuss your plans with your loved ones can be a big mistake,” says Peterson. “No one wants to leave behind disappointment or confusion as a part of their legacy. And doing so can lead to long-lasting family discord; potentially even litigation and estrangement.”
Learn more: Tips for being fair—not equal—with your heirs.
Understand the roles and responsibilities
In every estate plan, there are various fiduciary roles that need to be filled. Some will have influence over your financial matters—the personal representative (aka executor) of your will, for instance, or a trustee who will manage assets you have placed in trust. Others may be entrusted with more precious responsibilities, such as the agent under your health care proxy, who will ultimately make decisions about your medical care.
Choosing the right people for these roles is critical. But, according to Peterson, people too often choose individuals who aren’t prepared or really aren’t willing to do everything that needs to be done. According to the survey, many families are not prepared for what this may entail. For example, while 42% of parents report having served as an executor of a will or an agent under a power of attorney, only 9% of adult children have served in these positions, an experience gap that may prove consequential. Furthermore, 25% of adult children say they are unsure of whether they will be named the executor of their parents’ estate.
“Unfortunately, it’s not uncommon for someone to choose a person, maybe a family member or close friend, who has neither the skill nor the will to effectively carry out these duties. People in roles like these may be asked to handle investment management decisions, tax and legal filings, and possibly even interpersonal disputes among family members.”
Peterson suggests that when choosing people to fill these roles, you consider not just their aptitude around the technical aspects of the role, but also important practical considerations: Do they have the time to devote to the role? Do they live in a place that would allow them to effectively execute their responsibilities? Are they capable of being an objective decision-maker when it comes to acting in the interest of your beneficiaries?
In each case, it’s important that you fully grasp the responsibilities of a particular role before selecting someone to fill it, and that you provide guidance to those you choose, to help ensure they understand what they’re getting into.
Learn more: Trustee vs. executor: What's the difference?
Don’t set it and forget it
Given how hard it can be to get started with your estate plan, it’s no surprise that many people are eager to move on and stop thinking about it once it’s done. But it’s important to realize that your estate plan is never really done, per se. You need to view it as a living document that should evolve as your personal and financial circumstances change over time. And that means keeping everyone involved every step of the way.
“Look, life changes. Babies are born, people pass, there may be marriages or divorces. You may experience a significant windfall or a difficult financial setback. Your family’s feelings or needs may be different. Laws can change too. You want your estate plan to reflect how your life, your family, and the world is changing over time,” says Peterson. “It’s always a good idea to go back and check up on whether your plan still makes sense, and whether you need to make adjustments to ensure it’s up to date and still relevant to your family’s goals.”