We’ve all had our fair share of awkward conversations.
It’s like having a delicious dinner out with loved ones, only to twiddle your thumbs when the server asks how to split the check.
Discussing your estate plan with your family is almost the same situation, except the stakes are a bit higher than a $100.00 dinner bill. Thankfully, we have found 4 simple ways to navigate the idiosyncrasies of this all-important conversation.
1. Embrace the Emotions
Like on a first date, you must accept that this conversation will likely be awkward. Going into it with an open mind and a clear expectation of some discomfort will help prepare you.
It’s common for pre-retirees and retirees to put off their estate plans. Let’s face it; you probably don’t walk to talk about and plan for a time when you’re not around!
Coming to terms with mortality can be tough. However, it’s the nature of the human life cycle, and there are some real benefits it can bring to your life.
Benefits of Coming to Terms With Our Mortality
There are positives to facing our mortality, and it usually manifests itself in the following ways:
- Living a more fulfilling life
- Having stronger and more intimate relationships
- Having specific goals of what you want to accomplish
- Fulfilling dreams and ideals and making the most of your life
When you accept your mortality, it’s easier to approach the estate planning process. You can look at it from a different lens and ensure you make choices that uphold the legacy you’re creating today and the one you want to leave behind.
Doing so broadens your perspective and allows you to set your family and loved ones up for success after you’re gone.
Embarking on the process of creating and updating your estate plan gives you more agency over what happens to your assets and legacy. Think about it, do you want your loved ones (or worse, the courts) to make decisions about you and your assets with or without you?
Each conversation will look different, but we can’t stress enough the importance of having one.
2. Pick an Appropriate Time and Place
When it comes to tough conversations, timing is critical. This isn’t something you want to discuss offhand.
When you feel ready to tackle these conversations with your family, give everyone a heads up. Doing so gives people time to think about the conversation and help prepare themselves for what you will say and questions they might like to ask.
Try to set aside specific time on a day that isn’t polarizing for your family. Depending on your family dynamics, it may also look different in terms of having this discussion altogether or with one family member at a time. Or potentially including your advisor or attorney in the initial conversation. Decide on a plan that works best for you and your family!
3. Don’t Cover Everything At Once
Estate planning isn’t a one-and-done kind of conversation. There are so many important documents, discussions, and emotions, and approaching them all at once may make you and your loved ones dizzy. So, take time to break up these chats into manageable pieces.
That way, the information is more likely to stick, you’ll be able to clearly articulate your point, and your family will have time to ask thoughtful questions.
Here are some ideas for condensing these conversations.
The “Where Everything’s At” Meeting
Here you can organize your estate and financial documents, so your loved ones know what you have and where you store them. This may include,
- Power of attorney documentation
- Financial documents (investments, banking, credit card info, etc.)
- Insurance paperwork
- Real estate documents (deed)
It will also be important that your executor has access to your passwords, including all digital assets like emails, websites, banking and investment information, and more.
Keep in mind that this doesn’t mean you have to hand over all your personal and financial information to your children or loved ones. It’s simply a way to ensure that everything is as streamlined and organized as possible as you age.
It’s best to plan when times are good, so you don’t have to try and remember the password for your mobile phone, city utilities, investments, etc., when you do need help.
The “Who’s Doing What” Meeting
Once your estate is organized, you must let your family know which roles you’d like them to play in executing your plan. You might choose to have these conversations individually or in a larger family setting. Let’s review some estate planning roles you’ll want to assign.
- Executor: This person will distribute your assets as your will and other documents state. Your executor runs point on your overall estate plan, so be sure to choose someone organized, proactive, and who will prioritize your best interest.
- Financial power of attorney: A financial POA is a legal document granting access to a third party to manage your finances should you become incapacitated. Note that this document becomes void at death.
- Health care directive. Like a financial POA, a health care directive is a legal document that enables you to allow another person to make medical choices on your behalf if you’re incapacitated. This person may be responsible for helping chart the course of your medical care if you can’t make those decisions yourself, so be sure to clearly express your wishes and choose a like-minded person.
- Trustee. Does your estate have a trust? If so, you’ll need to establish a trustee. The trustee is the person in charge of managing and distributing the assets according to the trust’s language. Say you have three kids and wanted to use a trust to better control when they get access to the money. The trust terms state that each child will receive 50% when they turn 25 and the rest when they turn 35. Suppose you select your sister as the trustee. In that case, she’s the one making the financial decisions concerning the trust (like ongoing asset management, taxes, etc.) and who ultimately gives the money to your children when it comes time.
Take time to consider who may be the best fit for each of these roles. Don’t just select your oldest child because “that’s the way it’s done.” If your oldest isn’t organized and doesn’t know much about finances, they might not be the best trustee.
Select these roles with care and intentionality and deliver the news in clear, plain terms so that everyone knows their role and responsibilities.
Sometimes it can be beneficial to host this meeting in a financial planner’s office. That way, your advisor can help you explain the duties and responsibilities associated with each role and why they’re so important.
The “Who’s Getting What” Meeting
How you choose to divide your estate is entirely your call. You may want to divide your estate evenly among your children, give some significant assets to charity, include funds for your grandchildren, among other goals.
Whatever you decide, it’s nearly always best to have a conversation with your children or loved ones about your plans.
That way, you can manage expectations and express your intent and wishes. It’s so much more personal and better coming from you as opposed to a lawyer or a piece of paper.
It’s a good way to fend off confusion, hurt feelings, and misaligned expectations. For example, say your daughter was sure you would leave her a precious family heirloom, but you intended to give it to your future daughter-in-law instead. You have the time to explain your reasonings and avoid family squabbles.
This conversion becomes even more imperative if you decide not to split your estate evenly among your children. For example, if your son spearheaded your caretaking needs, you may want to leave him extra for the additional costs he took on to properly care for you. While that’s completely understandable, it’s important to communicate those wishes, so your other children don’t feel resentment.
The “Health Plan” Meeting
One of the most challenging parts of aging is the changes to your health. Along with selecting a health care directive, you need a plan for your ongoing health and what role you expect your children to play in that.
In this meeting, you may want to explore the following topics:
- Your current health and any underlying or new conditions you may have
- If you have or want long-term care insurance
- Your expectations regarding long-term care. Do you want to prioritize aging in place? Does it make sense to explore independent or assisted living opportunities? Would you like to move in with one of your adult children?
- Planning for costs. This one is tricky, and you can take it at your own pace. While you don’t have to reveal everything, it is important to communicate your financial expectations of your adult children. For example, would you need their help if you required home-health or caregiving services?
The healthcare conversation is perhaps one of the most delicate and critical. Try to approach it with honesty, openness, and grace.
4. Explain the “Why” Behind Your Plans
Estate planning is more than just numbers. While it’s essential to decide how your personal property and assets will be distributed, this is also a great time to reflect on your life and family values.
Giving context for your reasoning behind the plan can be helpful for your children. You can use this as a teachable moment to inform them about your experiences that have shaped your financial lives.
It’s also important to allow space for your children to ask questions, even if they don’t come up immediately. The information may take time to sink in, and they may feel more comfortable coming to you at a later time. Everyone processes this type of information and conversation differently.
Leaving the Door Open
Once you make it through the initial conversation, each time you talk about your estate plan will only get easier.
Also, setting a precedent for open communication in your family may cause your children to be proactive in their planning and conversations with their spouses or children. After all, passing along your wisdom and knowledge is the best legacy you can leave for your family.
At Step by Step Financial, we are here to help you navigate your financial journey, and your estate plan is undoubtedly part of it. Please contact us to set up a meeting to discuss your estate plan.