Plenty of unpleasant tasks might keep sliding down on your to-do list, everything from cleaning out the garage to updating your estate plan (or doing it for the first time).
Guess which one we’re going to focus on here.
It’s unpleasant because it requires us to confront our own mortality. It’s unpleasant because it may mean having uncomfortable conversations with people who are really important to us. But it’s important because we can make their lives a whole lot easier after we are gone. You want to avoid the turmoil and petty jealousy of “Succession,” even if your estate is not worth quite as much as Logan Roy’s.
The process involves getting your house in order – literally and figuratively – and having open, honest talks with the people you want to inherit your money, property, digital life, and most valued possessions.
Start With the Will
Hopefully, you already have a Will or living trust. If not, don’t wait any longer. None of us expects to die anytime soon, but inevitably, some of us will.
Your life changes, and these documents may need to change, too. Divorce, the death of a spouse, and the birth of a grandchild are all major life-cycle events that need to be factored in.
A Gallup poll a few years back found that more than half of all Americans did not have a Will, which could have devasting consequences for your heirs.
If you die without a Will, known as dying intestate, state law determines who inherits your assets, and those laws may not match up with your desires. Even though the laws vary state-by-state, unmarried partners, step-children, and others you love get nothing in almost all cases.
And remember: this document is not necessarily the final word. You can change your mind and revise your Will at any time.
Also, don’t forget to check and update the beneficiaries you name on IRA, 401(k), and other retirement plans, as well as life insurance policies. No matter what your Will says, the named beneficiary gets the loot. There are plenty of cases where an ex-spouse you haven’t seen in decades inherits millions.
You don’t have to leave the entire account to one person. You can designate percentages to be divvied up by several people.
That’s Just the First Step
After the Will is taken care of, you want to get organized. This is a critical step for your heirs to be able to find your assets and follow your wishes.
Create a binder or notebook with all of the information they may need. You are doing your heirs a huge favor by getting organized.
The notebook should include:
- Your Will, along with an advanced health care directive and a medical power of attorney
- The names and contact info for all bank and brokerage accounts
- The names and contact info for your estate planning attorney, your accountant, and your financial advisers
- Real estate and financial records, or an easy guide to where they can be found
- A list of life insurance policies, retirement accounts, annuities, and other assets
- Information about any funeral arrangements you have made
- A list of your debts, liabilities, and automated payments
Don’t forget about your digital life. Until a few years ago, no one thought too much about those parts of your life, including passwords for your email and social media accounts, access to photos, and cryptocurrencies.
The entire value of your crypto investments could be lost forever if you don’t share your private account number.
How to Avoid Family Conflict
The reason for all of the work mentioned above is to make life easier for your heirs and to avoid family turmoil.
The Will, the estate plan, and the notebook are all critical, but the most important thing (and maybe the hardest) is to communicate your wishes openly and directly. Make sure your heirs not only understand your desires but also know the reasons behind them.
By the way, you don’t have to provide dollar figures about how much your heirs will inherit. You can offer a ballpark number if that’s comfortable, but the key is to communicate your thought process.
As well-adjusted and reasonable as you might think your heirs are, there are many, many horror stories about bitter family splits – often because the deceased failed to do enough planning. The key is communication. If you fail to explain your wishes, it can lead to havoc and resentment for your loved ones. Don’t assume that they will figure out your intentions.
One increasingly common problem area comes with blended families. You might want to make sure that your current spouse is well taken care of, but you might want your biological kids to end up with the bulk of your assets, not the step-children.
These can be difficult conversations, but it is imperative that your heirs not only know your wishes, but your reasons as well. It’s the key to avoiding misunderstandings, surprises, and resentments later on.
This may be especially important if you are making unequal distributions, or naming one child as the inheritor of a business or a piece of art. You have your reasons. Explain your intentions, be empathetic, listen to what they have to say and address their concerns compassionately.
Estate planning is a gift to your family. Don’t pass up the opportunity.
