Many people are uncomfortable discussing how they plan to distribute their estates with their loved ones. Perhaps you do not want your children to know how much they may receive after you die. Or maybe you think your heirs could change in the future.
Your Children’s Estate Plans
If you have a sizable estate that you will be leaving to your children, they probably need estate plans of their own. To encourage them to plan, consider these tips:
Explain why estate planning is necessary. You do not want to dictate what they should do, but just emphasize the need for estate planning.
When your children encounter major life events — such as marriage, divorce, or a childbirth — remind them to review their estate plans carefully.
Coordinate estate planning across all generations. If you have a large estate, you may want to coordinate your planning efforts with your adult children’s plans. For instance, if your adult children also have large estates, they may prefer that their inheritance be distributed to your grandchildren instead. A coordinated effort can help minimize taxes.
Encourage your adult children to get important estate planning documents in place themselves, such as a will.
However, if you do not discuss your estate plans, conflicts or disagreements it could erupt once the details are revealed. For instance, after your death, siblings may resent one another if distributions are not equal — even if one child is less financially secure than the others. Or your children may feel anger toward a deceased parent’s spouse from a second marriage if they feel the spouse is spending their inheritance correctly. At that time, you won’t be able to explain your wishes and thoughts regarding the distribution of your assets.
Discussing your estate plans gives you an opportunity to inform your heirs about the distribution of your estate and explain why you decided to handle matters in a particular way. You can go into specific detail, informing your heirs how each asset will be distributed, or you can give a general overview of your estate plan.
If you have selected one heir as executor, explain why you chose that individual. As an alternative, you can leave a personal letter with your estate planning documents explaining these items.
A Personal Letter
Even if you reveal your plans to your heirs, you may also want to include a personal letter. In it, include information about special wishes and benefits and who should receive personal effects, cemetery and funeral preferences, and the location of important documents.
At a minimum, specify where the following documents are located:
- Life insurance policies,
- Income tax returns,
- Other insurance policies,
- Credit card details,
- Investment details,
- A list of household contents,
- Outstanding loan documentation,
- Automobile titles,
- Information about your home,
- Important warranties and receipts, and
- Checking account information.
This letter will help your heirs identify all benefits and assets and avoid any speculation about your wishes. Preparing the letter will also force you to organize your records and make sure all important documents can be easily located. Because the information is likely to change, review the letter at least once a year.
