Communication is Essential in Estate Planning

When we think of estate planning, most people think about wills, power of attorneys, personal directives, trusts, and life insurance. Most commonly estate planning centers on how to minimize taxes and probate fees so that beneficiaries can get the most of the estate. While all of these things are important, I think the most important element of estate planning is overlooked.

Communication between generations

When it comes to family finance and money, families tend not to talk. A while back, I mentioned a study suggested that more than one third of parents do not talk to children about money.

Estate planning also involves talking about death. Another topic often avoided by families. A difficult situation such as discussing a loved one’s death can bring out the best and worst in families. The topic is uncomfortable, and also frightening to many. Feelings of resentment and anger can surface, and tension may build. However, through open communication, even the most dismal of circumstances can bring a family closer together and illustrate strength and love.

Death and taxes are inevitable. Confronting death – and the fate of your estate – can quickly quiet a conversation. In the end, it is up to family members to face up to the fact that lack of conversation and an unwillingness to open up can bring devastating consequences. It cannot be assumed that basic estate planning issues will be resolved by simply having a will.

What needs to be discussed?

  • The will. The cornerstone of the estate plan is the will. The will is the formal document that outlines how the assets are dealt with and distributed. Not only is it important to have a will but also important to communicate to your executor and children where they can find a copy of that will. If you make updates or changes to the will, let your family know this has been done.
  • Financial contacts. Do your beneficiaries know how to reach your financial contacts like lawyers, accountants, financial advisors, stockbrokers, life insurance agents, etc.? Do they know who these people are? If you have made changes to some of these advisors, would your executors or beneficiaries know? Lots of seniors deal with two or three different financial advisors that might include a bank representative, a stockbroker, a financial planner and an insurance agent. If your kids live in a different city, that communication gap can get even wider.
  • Funeral arrangements. Funeral arrangements are not usually high on the list of things we want to plan. However, it is important to let your family know if you have some specific wishes. In my case, when my mother passed away, there was real comfort knowing that some of her needs and wants were addressed like knowing she wanted a burial and not a cremation; that she wanted to have flowers; that she wanted her dog present at the service, etc. It was also frustrating for us when a question came up that we did not know what my mother might have wanted. Help your children and spouse to understand what your wants and needs are when it comes to funeral arrangements. If you have already made arrangement through pre-paid funeral services, make sure you notify your beneficiaries so they know who to contact.
  • Contact lists. If you were to die, whom would you like to have notified and whom would you not like to have notified? There are always the obvious people like immediate family. But what about old friends that may want to pay their respects? I recently had a friend who’s cousin passed away and she found out through the newspaper and not through the family. This was somewhat disappointing to her. However, consider that death is a difficult and emotional time. It is difficult to think straight and remember everything that needs to get done and everyone that needs to be contacted. Help your beneficiaries by making a list of phone numbers and contacts and keep a copy of this with the will? It makes sense to make that list when times aren’t so emotional.
  • Financial stuff. Does you family know what you have, where they are and the people to contact if something happens? The financial stuff will include things like life insurance policies; group benefit plans from work, pension plans, RRSPs and investments, savings bonds, property, royalties, and bank accounts. Usually, the bigger accounts and items are well diarized. It is the small stuff that can get overlooked. For example, seniors often have multiple banks accounts because they do not want to keep all their eggs in one basket. Often these accounts can be forgotten because the point was also to keep them a secret.

Breaking the silence

Its time to break the silence and get families to communicate better about finance, estates and money. Next week, we will talk about some ideas to help you make life easier for your executors, beneficiaries and family when it comes to estate planning.

Written by Jim Yih

Jim Yih is a Fee Only Advisor, Best Selling Author, and Financial Speaker on wealth, retirement and personal finance. Currently, Jim specializes in putting Financial Education programs into the workplace. For more information you can follow him on Twitter @JimYih or visit his other websites JimYih.com and Clearpoint Benefit Solutions.

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