Many people are uncomfortable discussing with their loved ones how they plan to distribute their estates. Perhaps you don’t want your children to realize how much they may receive after your death. Or maybe you think your choice of heirs could change in the future.
However, if you don’t discuss your estate plans, disagreements and conflicts could erupt once the details are revealed. For instance, after your death, siblings may resent each other if distributions aren’t equal — even if one child is substantially less financially secure than the others. Or, if you’re remarried, children from your first marriage may feel anger about assets you leave to your second spouse. At that time, you won’t be able to explain your thoughts and wishes regarding the distribution of your assets.
Informing Heirs About Asset Distribution
Discussing your estate plans gives you an opportunity to inform heirs about the distribution of your estate and explain why you decided to handle matters in a certain way. You can go into specific detail, informing heirs how each asset will be distributed, or you can give a general overview of your estate plan.
If you’ve 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. Even if you reveal your plans to heirs, you may still want to include a personal letter with information about benefits, special wishes, who should receive personal effects, your cemetery and funeral preferences, and the location of important documents.
At a minimum, specify where to find:
- Income tax returns
- Life insurance policies
- Other insurance policies
- Investment details
- A list of household contents
- Outstanding loan documentation
- Automobile titles
- Important warranties and receipts
- Bank account information
- Credit card details
- Information about your home
This letter will help your heirs identify all assets and benefits and avoid 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. Since the information is likely to change, review the letter at least annually.
Your Children’s Estate Plans
If you have a sizable estate that you’ll be leaving to your adult children, your children probably need estate plans of their own. To encourage them to plan, consider these tips:
- Explain why estate planning is important. You don’t want to dictate what they should do, just emphasize the need for estate planning. When your children encounter major life events such as marriage, divorce, or a child’s birth, remind them to review their estate plans.
- Coordinate estate planning across generations. If you have a substantial estate, you may want to coordinate your planning efforts with your children’s plans. For instance, if your children also have substantial estates, they may prefer that their inheritance be distributed to your grandchildren instead. A coordinated effort can help minimize taxes.
- Encourage your children to get important estate planning documents in place, such as a will, an advanced health care directive, or a power of attorney.
For more information on estate planning, speak with a lawyer, like an estate planning lawyer from Bott & Associates, Ltd., today.