A thoughtful estate plan can make your family’s lives easier. But it is your parents’ estate planning that will make your life easier.
Not every family has fostered the ability to speak openly in love–I’ve written about that necessity in the past. But if you have begun that process, here is an outline of what grown children need to know about their parents’ affairs. In fact, adults of any age should review their estate plan at least every 3 years.
Children may wish to ask their parents about their financial status but worry about being overly intrusive. Or they fear their elders may perceive their questions as motivated by self-interest. They may conclude mistakenly that their parents would prefer to keep their finances private.
However, whether it’s our parents or ourselves, we are all certainly mortal, so planning for the future is always wise. Estate planning is just as critical when we are young as when we get older. And if you think estate planning information is hard for YOU to pull together, imagine how challenging it would be for someone else who may have to step in for you during a family crisis.
As a parent, if you are willing to share some of this information with your children (or ask about it if you are a child)–especially if one of them is also the executor of the estate or trustee–they’ll appreciate having the facts and be more prepared emotionally when the time comes. They will know your wishes ultimately anyway, and good communication will lessen any surprises ahead of time. They will benefit from knowing the answers to the following questions:
Do you have enough saved for a comfortable retirement? Many financial planners use a safe withdrawal rate by age to make sure their clients will still have enough money toward the end of their retirement. But this isn’t always the case, and it’s worth looking into.
If your spending is under this withdrawal rate, you have more than enough and probably can leave a family legacy. But if you are over this rate, you may run out of money and have to compromise your standard of living abruptly. It may be uncomfortable, even embarrassing, for parents to share their finances with their children, but grown children often want to know how their parents are doing.
Where are the important documents? The five documents your children should be able to retrieve quickly are a Michigan Will (and Trust if you have one), a Michigan Durable Power of Attorney, a Michigan Patient Advocate Designation, a directory of basic information, and the latest end-of-year financial statements.
The directory of information should list the assets of your estate along with account or policy numbers and contact phone numbers. It also helps to indicate your intentions for the distribution of each asset, which will help confirm you have the correct titling and beneficiary designations on every portion of your estate. In my practice I refer to it as the Family Wealth Inventory or Asset Spreadsheet.
You may have structured your Michigan Will (or Trust) to divide your estate equally among your children. But if you have tried to make it easy for one child to access your bank accounts by adding his or her name, you have overridden your estate plan and left that child as a joint tenant. This can be a problem.
Titling and beneficiary designations are legal estate planning actions. It’s best to review them with your legal adviser. Various types of assets are best designated differently in the estate plan. This is not the occasion for do-it-yourself thrift. It is a rare family that has compiled and reviewed a complete list of estate assets: bank accounts, investment accounts, retirement account, real estate holding, life insurance, health savings accounts and so on.
Are there any special distributions? Any promises you want kept should be documented. Your good intentions won’t matter if you aren’t around to implement them. If you have promised money to a charity and want that obligation kept, document it. If you have promised to loan a child money, document it. If you have promised to help fund your grandchildren’s college education, document that. Without documentation, none of these promises can be kept if you aren’t around to make the decisions.
Are there plans to remarry? If parents have remarried, inter-generational estate planning is even more critical. Prenuptial agreements and careful estate planning are required in the case of second marriages to avoid disinheriting children or grandchildren from the first marriage. The default is rarely a good option. I referenced this in a recent blog post that you can read here.
Do you have any prepaid funeral arrangements? Do you want to be buried or cremated? Do you have any preferences for a memorial service? Although it may seem macabre to plan your own funeral, a memorial service takes time and thought. It will be that much more special and comforting to your family when it is filled with your favorite music and readings.
Encourage your children’s interest in your estate planning. And children encourage your parent’s interest in their own estate planning. . . you’ll be the one dealing with it. Most of the time, their intentions are honorable. They may simply want to understand your values and therefore your wishes.
Michael Lichterman is an estate planning attorney who helps families and business owners create a lasting legacy by planning for their Whole Family Wealth™. This goes beyond merely planning for finances – it’s about who your are and what’s important to you. He focuses on planning for the “experienced” generation, the “sandwich generation” (caring for parents and children), doctors/physicians, nurses, lawyers, dentists, professionals with minor children, and family owned business succession – and he is privileged to do so from a Christian perspective. He takes the “counselor” part of attorney and counselor at law very seriously, and enjoys creating life long relationships with his clients – many of which have become great friends.