How to discuss your estate plan with heirs (and why it’s critical to do so)
July 28, 2014
Special to The Globe and Mail
My wife, Carolyn, and I revised our wills recently. The hardest decision was around the guardian of our kids. “Tim, I just want someone who is loving, caring and a good role model to look after our kids if we’re gone.”
“Carolyn,” I replied, “if we knew someone like that, why wouldn’t we just give the kids away today?” Well, we decided to keep the kids. And then we sat down with them to talk about who will look after them if we’re gone. We’re starting to share our estate plan with them.
What have you shared with your heirs about your estate plan? Over the past two weeks I’ve introduced a framework for thinking about that plan. Specifically, I introduced the five “Ds” of estate planning: Define, design, document, discuss and distribute. Today, let’s talk about discussing your plan with your heirs.
Some people won’t initiate a conversation with their heirs because they don’t want the heirs knowing how much they stand to inherit for fear of fostering a sense of entitlement, or causing the kids to change their own career plans or become less productive.
Kids and other heirs often won’t initiate the conversation because they don’t want to seem greedy or curious about what they might receive one day. And the kids have a point: If they do start the conversation, many parents will think precisely those thoughts. Here’s a message to everyone involved: Get over it. There are some very important reasons why a conversation about your estate planning is necessary.
Having a conversation about your plan will demonstrate that you’ve given thought to your own financial well-being. It can also prevent confusion – and even legal battles – after you’re gone. Setting up your heirs to live in harmony with each other and with the decisions you’ve made often depends on having a discussion while you’re still alive. I’ve seen more than one case where hard feelings – and even psychological damage – have resulted because parents took an approach to their planning that some surviving family members couldn’t understand. And let’s not forget that sharing your plan with your heirs can often result in some tweaks to the plan that could make it even better.
I can hear some comments already: “There’s no way my heirs are ready or equipped to hear about my planning.” If this is your thinking, barring some incapacity an heir may have, the real issue should not be whether you speak to them, but when you speak to them, and what you share. Perhaps some education or counselling from a trusted adviser today can prepare them to eventually hear your plans.
Here are some guidelines for having a conversation with your heirs:
Choose the right time. If it’s tough to schedule a formal time for a discussion, have a conversation more casually when you happen to be together, taking a walk or over dinner, for example. You might unveil your plan in stages. We’ve talked to our kids about guardians, but not about dollars yet, given that they’re still in their early teens.
Decide whether together or separately. You could speak to your heirs at the same time, or in separate discussions. In some cases, separate discussions may be best if there are sensitive issues to discuss (perhaps you’re leaving unequal amounts to each child, for example).
Take a team approach. If you have a spouse, you should conduct the discussion together in most cases. Make sure you’re in agreement as to how things will work when you’re each gone, and be of one mind when speaking to the kids.
Agree on what you’ll share. My view is that, in most cases, your heirs should eventually understand the complete plan, including how much they will inherit. How much you share should depend on the maturity of your heirs, and their stage of life. A word of caution: Many people conclude that their heirs are never ready to hear the complete plan. Only in rare cases is this the case. By the way, simply giving a copy of your will to your heirs is not the same as having a discussion about your planning.
Explain why. Make sure you share with your heirs the principles that guided your decisions when preparing your estate plan. If they understand why you’ve created the plan you have, there’s a lower potential for hurt, harm and misunderstandings after you’re gone.
Ask for feedback. Ask each heir individually how they feel about the plan. You may not change your mind on issues of concern, but it will let them know they’ve been heard, and you’ll have had a chance to explain your thinking.