How to navigate estate planning with your adult children
Whether you acknowledge it or not, you own an estate—everything you own, from your car to your home to your bank accounts to your furniture, is included in your estate. But one day, you may not be able to control the items in your possession, and this is where estate planning comes in.
You most likely have goals for how you want to use your wealth. Consider a well-outlined estate plan and multiple conversations to help pass down your goals.
“It’s important to consider including your children in the estate planning process,” says Minneapolis financial planner, Jenna Siverson. “It’s hard enough to deal with the death of a parent without having to wonder what they wanted for a funeral, how they pictured dealing with the family home or cabin or how they envisioned helping the grandkids through college.”
While no one is eager to plan for what will happen after their death, these conversations in your family are critical in leaving the legacy you desire.
What is estate planning?
An estate plan provides written instructions on what you want to happen to your possessions and the individuals you would like to receive them after your passing. Everyone needs a plan for their estate—not just the wealthy!
An estate plan may include:
Will: A legal document that transfers property as specified at death. It names an individual (executor or personal representative) to administer the estate.
Living Wills and Medical Directives: Documents that establish medical scenarios where life-sustaining medical treatment is either wanted or unwanted. Specific medical instructions may be included, such as whether you want certain life-prolonging measures.
Power of Attorney: A document that gives another person the legal right to manage either some or all your financial affairs if you are unable to do so. This can include health care or financial decisions.
Trust: A legal arrangement that involves three parties: the grantor, the beneficiary and the trustee. This specifies the management and distribution of your property, as well as how and when it will be distributed.
Consider working with an attorney to create these documents.
Why do I need to talk to my children about my estate?
Talking to your family about what will happen when you die can be uncomfortable, but it is necessary to avoid confusion, extra work or hard feelings when all your family should really be worrying about is mourning.
Your kids may also be as hesitant to have the conversation as you are because they don’t want to think about losing you either. This makes it even easier to postpone.
On the other hand, they may be concerned about what they would have to do when you’re gone, but they would never bring up the topic because they don’t want to appear greedy or expectant of your death.
Either way, it’s best not to assume anything and to start the conversation openly and honestly,
“When you talk to your kids, you get to share the reasoning behind your decisions,” says Siverson. “And that can keep adult children from blaming each other or holding resentment toward you with decisions you haven’t explained.”
How to start estate planning?
While it is more important to create an estate plan the older you get, this doesn’t need to be something you put off until late in life. Often, it is better to start the process earlier and make revisions throughout the years than to wait until you get older.
The earlier you start talking to your kids about your estate plan, the more time they will have to get used to your goals and ideas You can also make it an ongoing process rather than a one-time consideration.
Starting early and coming back to the estate plan often will help you be clear in your communication and answer any follow-up questions your kids have. After all, 69% of parents say they’ve had detailed conversations with their children about their estate plan, while 52% of children say they haven’t.1
How can I plan a conversation with my kids?
Even if you know talking to your kids about your financial wishes is important, the logistics of the meeting can be tricky to get right! Knowing how you want the conversation to go can help.
The first option is to schedule a meeting for a time when you’re all together. Instead of repeating yourself with each child, you can have the conversation together as a family. Another benefit of this option is that you can be sure everyone gets the same information, and no one feels left out.
Alternatively, if you’re worried about arguments or you want to adjust the conversation for each of your kids’ personalities, you could schedule time with meet with each kid one-on-one. While this may take more time on your part, it may the best option if you’re concerned with the sensitivity of the topic.
Finally, you can invite your kids to meet with your financial professional, with you or on their own. If you really don’t know where to start, having your financial professional around is helpful because they can initiate all the important topics as someone who understands your goals and financial situation as well as you do. It may also be helpful to have a third-party involved who has a limited personal stake in your decisions.
Of course, these choices are not mutually exclusive. For many families, a combination of family meetings, one-on-one conversations and consultations with a professional can be the best solution over time.
No matter which method you choose, try to let your kids know that you’ll be having the conversation ahead of time. This helps them emotionally prepare, as they may not want to think about what will happen when you’re gone.
What should you cover in your estate planning talk?
Your financial professional can help you create an outline of what you need to cover in this meeting, but most likely, you’ll want to cover these core topics:
Your financial objectives and goals
What do you want to happen with your assets once you’re gone? Usually, these goals are based on your personal values and priorities, which your financial professional can help you narrow down.
Your current financial situation
What is your situation now, and what will it likely be when you pass away? This includes life insurance coverage, long-term care plans, retirement spending and outstanding mortgages.
“Share as much or as little as you are comfortable with with your children,” says Siverson. “But be sure you don’t mislead or set false expectations.”
Who will be in charge of the finances
Which of your kids will oversee handling the finances when you’re gone? This could be the one who is more organized or has more experience with financial matters. It may just be the one who is closest geographically and who has easy access to your paperwork. Alternatively, you could also have your financial professional do this for you.
4 in 10 families disagree on the roles children will play as parents age, in terms of who will be their caregiver, who will be the executor of the estate and who will manage the finances.1
With any option you choose, just be sure to share this information with everyone involved so you have a chance to share your reasoning and the person in charge isn’t surprised by the responsibility.
How your assets will be split
This may be the hardest topic to discuss, but if your assets are going to be uneven, it may helpful for your kids to understand why. Also, this can be a good time to manage expectations.
Estate planning can be a complex process—both financially and emotionally—for a family to go through. The one thing that can ease this tension the most is an open conversation.
If you’re worried about your ability to facilitate those conversations, remember that your financial professional is your advocate. It is their job to support your decisions and make your goals a reality. Also, while you can only experience your own financial situations, they have worked with many clients with ranges of priorities and family circumstances, and they are more than ready to share their years of experience with you.
If you’re nervous about talking to your kids about estate planning, remember that it’s your plan. Kids may be surprised or disappointed by your plans. Acknowledge their feelings, but make sure they know your decision is made.
1Fidelity Investments. (2016). 2016 Fidelity® Investments Family & Finance Study Executive Summary. Retrieved from https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/Family-Finance-Study-Executive-Summary.pdf.