The issue of legacy planning is a thorny one. How much do you tell your children about your personal or business finances? How much do you disclose about your estate plans? Do you intend to provide an inheritance for your children, and, if so, when should you discuss it with them?
These are difficult subjects to reconcile and typically the answers will vary from family to family, person to person.
There are multiple schools of thought about this. One theory suggests that an individual who has worked hard to accumulate funds also earned the right to spend it. Many people believe there is no obligation to leave something behind for your children. Another theory suggests there is value in creating a legacy and passing family assets on to the next generation.
If an individual has been involved in some form of estate planning, their children are going to be informed about the details of the estate eventually, one way or another. The question is how will they learn about those details—directly from their parents or from an estate lawyer? Speaking with your estate lawyer and having a communication strategy is crucial at this stage.
Communication is Key
Some parents avoid talking to their children about their estate because they don’t know what to say. But, no matter how uncomfortable this subject might be for them, parents are more qualified and better suited than anyone else to inform their children about their plans. This can be accomplished in regular family councils or in one-on-one conversations, but some form of communication is essential. Inviting input from children and making the effort to understand their views will go a long way to avoid failed expectations and family discord in the future.
Begin Setting Your Affairs In Order
An absence of a plan for your affairs may increase the conflicts and costs for survivors. Even if no other aspects of an estate plan are discussed, it’s a good idea for parents to let their children know whether their affairs are in order.
Also, even though it may be difficult, if an estate plan excludes or omits a family member for some reason, consider informing that individual. Similarly, if there is some inequity in the distribution of assets—for example, one child is receiving more because they need it and another is receiving less because they don’t—consider disclosing as well.
Surprises, disappointments, and failed expectations surrounding the administration of an estate can be deeply painful for surviving children and should be avoided at all costs.
Obviously, the extent of information provided to one’s children about estate plans is going to depend on the age of the children. Information provided to a 14-year-old is going to be different from information provided to a 40-year-old. Also, it’s likely their roles could be different. Older children might be chosen to serve in a fiduciary capacity in a last will and testament or trust. Or, they might be given power-of-attorney authority or named as an agent in a living will. If children are intended to have active roles in an estate plan, they must be properly informed and prepared, and the rest of the family should be informed, too.
Actively involving children is also a way to ensure that the estate’s wishes will be carried out as desired.
Someone who has succeeded financially in their lifetime probably has assembled a team of highly qualified advisors to assist in specialized areas such as law, tax, investments, or insurance. To whatever extent that is feasible, it’s a good idea for children to know who these advisors are and how to contact them. In a time of crisis or an unexpected emergency, knowing who the professional advisors are—and where all the legal and financial records are stored—is an immeasurable source of comfort to surviving children.
As mentioned above, these issues are delicate and difficult at best. As always, working with professional tax and legal advisors—in addition to your trusted financial advisor—is crucial to this process. The more parents and children can engage in honest and forthright communication about estate plans, the better off everyone will be, and that’s an important part of any legacy left behind.
United Capital Financial Advisers, LLC (“United Capital”), is an affiliate of Goldman Sachs & Co. LLC and subsidiaries of the Goldman Sachs Group, Inc., a worldwide, full-service investment banking, broker-dealer, asset management and financial services organization. Investing involves risk and clients should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions. The information contained herein is intended for information only, is not a recommendation to buy or sell any securities, and should not be considered investment advice. United Capital does not provide legal, tax or accounting advice. Clients should obtain their own independent legal, tax or accounting advice based on their particular circumstances.
United Capital Financial Advisers, LLC d/b/a Goldman Sachs Personal Financial Management (“GS PFM”) is a registered investment adviser and an affiliate of Goldman Sachs & Co. LLC and subsidiary of The Goldman Sachs Group, Inc., a worldwide, full-service investment banking, broker-dealer, asset management, and financial services organization.
The information contained herein is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered investment advice. GS PFM does not provide legal, tax, or accounting advice. Clients should obtain their own independent legal, tax, or accounting advice based on their particular circumstances. Please contact your financial adviser with questions about your specific needs and circumstances.
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