By Robert L. Warner, Managing Director, The Pilot Program from Johnson Financial Group
One of our client's spouse spent the better part of 20 years—maybe even more—trying to convince her husband to get their estate plan in order. She wasn't sure why he was so hesitant, but she speculated that he was uncomfortable contemplating his own demise and thought that somehow finalizing an estate plan might expedite it. Regardless of the reason, he finally gave in a few years ago and their estate plan is now complete.
That is to say, their documents are drafted.
But that's it. Aside from informing their son that he is named executor, no additional conversations have been had and none of their children have any knowledge of what is stated in those documents.
So I ask you, is an estate plan complete if the beneficiaries have no understanding of what it contains? I've been thinking about this recently and my response is “no.” Drafting the documents is only part of the estate planning process. Sharing the details of that plan with your family is an additional step that is often overlooked. Therefore, we suggest a family meeting—or at least suggest having one—so family members learn more about parents' wishes. We always suggest a supplement document, sometimes referred to as a “Letter from Heaven,” which can state more personal wishes, directions and locations of property to help explain a family's estate plan.
A family meeting probably isn't on your radar, but you might want to consider holding one in the New Year. I know, I know. The New Year is supposed to be a time to think about losing weight, saving more money or on a brighter note, planning a family trip, and most people find very little fun in estate planning.
However, for many the New Year is also a time to reflect on your legacy, which may very well be carried out through your estate plan. So for those of you with children and important loved ones who live far away, the New Year presents an opportunity for you to begin planning for a family meeting. If you dread having this conversation once, you certainly don't want to have it multiple times.
Scheduling a family meeting would suggest that you already have an estate plan in place or that you have already given considerable thought to it and are simply finalizing the details. If you have not reached this point please be sure to begin this process in the very near future. Failure to plan could have major negative consequences including, but not limited to tax implications, family conflict, loss of assets and a significant amount of stress for your survivors.
Speaking of family conflict, this is perhaps the most important reason for holding a family meeting. Every year siblings find themselves embroiled in disputes over how their parents' assets are divided thus creating tension within the family. Much of this tension could be avoided if parents discuss their estate decisions with their children to provide an explanation and ensure everyone understands why certain choices have been made. Regardless of how well your family gets along now, financial matters and healthcare decisions could quickly create a divide within the ranks. There are countless examples of siblings turning on each other due to jealousy or a disagreement over how things are being handled. So even if you think your family is beyond this type of conflict you might want to consider closer examination. And don't think for one minute that your estate will be too small to create conflict or jealousy. Regardless of the size of the estate, if your heirs receive unequal portions there will be hard feelings unless everyone understands ahead of time why and how your decisions were made.
Following are some questions to think about as you consider your need to call a family meeting:
As I stated in the opening paragraph, we suggest that families hold a meeting sometime in the New Year. This isn't an easy topic. Many children may hesitate to suggest a family meeting through fear of appearing greedy. On the other hand, parents may hesitate to call a family meeting if they know their estate plan contains items that will become contentious.
It is ok for children to request a family meeting, but I believe that in most cases it is best for the parents to do so. Most children—even if they have reached middle age or beyond—will look to their parents for strength and guidance. By requesting this meeting the parents show the rest of the family that it is ok to think about what life might be like without them.
Estate planning is about more than the distribution of assets. It is about preserving family values and traditions and maintaining family harmony. Therefore, the ideal time to hold a family meeting is sooner rather than later while all parties involved are healthy and emotionally mature enough to handle the serious nature of the discussions. The meeting should be held in a comfortable and convenient location with privacy and limited potential for distraction.
Both parents and all adult children should be present unless there are mental or emotional issues that prevent them from participating. Young children and teenage children can be included, but you may want to limit their level of participation. Thinking about the death of their parents, upon whom they depend, may be too much for them to take in. In addition to family, consider including a neutral mediator who will be responsible for monitoring and recording the proceedings.
Parents need to put considerable thought into this process. You must be in complete agreement regarding the desired outcome and should put thought into what the overarching message will be and how it will be delivered. Set an agenda in advance and invite each participant to suggest topics to be included. The mediator may meet with participants separately before the official proceedings to make sure no hidden agendas exist that could potentially derail the conversations.
Family estate planning meetings are a lot of work and should not be taken lightly.
This New Year, take the time to schedule, plan and execute a full discussion. Commit to planting the seed and spend a little time talking to each of the kids individually in January. Let them know that you have been thinking about the future and that you want them to be a part of your planning process. This will take some time—perhaps several months.
Do not assume your kids know your wishes. Do not assume they agree on what you think is fair. Do not assume they are unwilling to have these important conversations. Adult children are at a point in their lives where they are emotionally mature enough to handle the topic. In most cases they will be comforted to know you will be taken care of during your last remaining years. They will also be comforted to know that your wishes will be fulfilled.
Just don't let the year go by without having your family meeting. Make this one New Year's Resolution you really do keep.
Johnson Financial Group and its subsidiaries do not provide tax advice. Please consult your tax advisor with respect to your personal situation. Wealth management services are provided through Johnson Bank and Johnson Wealth Inc., Johnson Financial Group companies. Additional information about Johnson Wealth Inc., a registered investment adviser, and its investment adviser representatives is available at https://www.adviserinfo.sec.gov/. NOT FDIC INSURED | NO BANK GUARANTEE | MAY LOSE VALUE