Planning Your Family’s Future
Posted by: Joseph Kuo | April 28, 2021
In my role as a financial planner, I frequently work with clients who feel unready or uncomfortable when it comes to estate planning. In their minds, they know it’s the right thing to do and that it needs to be done. But emotionally, it can be a touchy issue because it generally involves your loved ones. This is especially true with more complex family situations, such as when clients have several children, when there are multiple large assets such as businesses or second homes involved, or when the client has had more than one spouse. Oftentimes, it can be all of these factors combined.
So why are parents and children reluctant to bring up the topic of family estate planning? Some common reasons include:
From the parental standpoint:
- Don’t want to “ruin” their children’s motivation and drive.
- Don’t want children to know about certain aspects of their finances.
- Worried about being judged by their kids.
- Worried about losing control of their assets to the children.
- Worried about family relationships if there would be an unequal distribution of assets.
- Cultural beliefs/superstitions (“It’s bad luck to talk about such things!”).
From the child standpoint:
- Don’t want to think about parents aging/dying.
- Worried about finding out how the parent thinks of them.
- Worried about being perceived as “greedy” or being a “vulture”.
- Worried about relationships with siblings and the surviving parent or step-parent.
These concerns are valid and should not be ignored. So, how can there be any family estate planning with all of these emotional headwinds?
As a best practice, I generally recommend to my clients to include at least the spouse and adult children in the creation of a family estate plan, assuming they are in good standing and that you are intending to leave them assets. After all, the best way to ensure that everyone is happy with the plan is to work with them on its creation. Including family members also helps ensure that a legacy will have the greatest impact.
One way to start the conversation with your family is not to talk in terms of life and death, but instead about the “vision” for the family. Instead of getting into dollars and cents, we can talk about goals: what we want the future (our legacy) to mean, the story of what we’ve learned and want to pass down, and the vision we have for the family’s future. This is where we can include everyone’s input into this vision. Make it a positive conversation about future hopes and dreams for your loved ones instead an awkward review of accounts and assets.
From this collective family vision, the legacy that is crafted should not about how much each person gets. It should be about we want to accomplish for them. The estate plan is how we want to be perceived and remembered by our loved ones. When it’s complete, you should feel satisfied that you’ve done the right thing and the most that you can.
This last part is important especially if parents want to focus on equity instead of equality. There can be many rational reasons for parents to want unequal distributions among the children. For example, an asset might be worth less in the short term but more in the long term. Or one child might have a situation that necessitates a larger share to help with financial security. What we communicate shapes how we’d like the wealth we leave to be used or not used, and the rationale behind an unequal distribution.
By telling our loved ones what’s important to us, we can alleviate possible family misunderstandings about our intentions confusion and can head off potential conflicts among our heirs. Without clear and open communication of values and family mission, we increase the likelihood of bad feelings in our heirs rather than gratitude. We risk situations such as what happened in this case, where a well-meaning retired physician watched his family descend into chaos and conflict as they fought over his assets in his final years.
Another important consideration in creating a family estate plan is to include details on the process itself. When the time comes and your family needs to need to deal with your affairs, they will know how things are set up, the first steps to take, and the people to talk to. This helps take out the mystery of what they need to do in the aftermath and reduces chaos and stress at a time when they might be overwhelmed with grief.
With the help of an experienced financial planner, the creation of the estate plan should actually not be that difficult. Depending on your individual situation, your specific estate plan can be complicated to structure and to execute. Even if you have a complicated situation, complicated problems are made of different moving parts that can be solved systematically by an experienced financial planner working with an estate attorney who draws up the actual legal document that outlines your estate plan. While not easy, there are regulations and best practices which address each component of an estate planning. With the right experts, you can create the plan that will fit your unique situation.
With a robust and collaboratively-created family estate plan, you can be secure in your golden years knowing that your loved ones know your intent and vision and will be taken care of.