Americans don’t like to talk about sensitive topics like money and death. I deal with both of these topics on a daily basis with my clients, so to me it’s pretty much second nature. It’s apparent, however, that most of my clients squirm at the thought of revealing their financial condition, as they must in order for me to properly help plan their estate. Couple that with discussing their own mortality, and you’ve got a pretty nasty combination.
And that’s just the beginning. While communication with your team of legal, tax and financial professionals is important to put a proper estate plan in place, the project isn’t complete without informing your loved ones.
I’m not kidding.
“Why do I need to tell my family about my finances and my will? It’s none of their business!” I’ve heard on more than occasion.
I reply that you don’t need to tell your family, but the more that you communicate, the less likely problems arise.
Consider a situation where in his last will and testament Tim designates his Florida property for his son and another Michigan property for his daughter. Tim then has a stroke and becomes unable to communicate. He eventually needs a nursing home, but Tim doesn’t have a lot of money. Discovering his lack of liquidity, daughter decides to move Tim to his Michigan lake house (near where she lives), and sells the Florida property to provide money for his care.
Daughter’s actions effectively disinherited her brother from Tim’s estate. Daughter and son didn’t realize this until Tim’s death, as Tim didn’t communicate his financial condition or the contents of his will with his children. Daughter disinherited her brother innocently, but that could easily devolve into bad feelings and finger pointing. Communication of his financial condition, along with the contents of his will prior to his illness, could have helped his children consider alternatives that could have avoided these problems.
Yet another common communication problem arises in blended families. Consider the situation where Joe is married to Laura, his second wife who is not the mother of his children, Matt and Luiza. Joe loves Laura and wants to provide for her, but he doesn’t want to leave everything outright to her, since Joe wants his children to benefit from his wealth following Laura’s death.
Joe leaves a life estate in his residence to Laura, along with a marital trust that pays Laura income for her life. At Laura’s death all of the assets are left to Matt and Luiza.
Joe should communicate his intent to Laura and his children. Who knows what their expectations are? While Joe might feel that no one should have expectations, that attitude defies human nature. Laura may not have many assets of her own to live off and may be quite fearful of her financial future if Joe predeceases her.
If Joe doesn’t discuss and share with her what he intends to leave her and how he intends to leave it, Laura’s anxiety is only going to increase. In the best of all worlds, Joe and Laura meet not only with the estate attorney but also with a financial planner to discuss budgets and needs under various conditions. Joe’s portfolio may or may not be appropriate to meet his intent.
At the same time, there’s the danger that Laura’s relationship with Matt and Luiza becomes acrimonious after Joe’s passing. If Joe sits down with his children and explains how he wants his estate plan to work, then they are less likely to be wary of any money that Laura spends. Consider that every dollar Laura spends for the rest of her life is one less dollar the children will inherit.
The children might even bring up valid points that Joe may not have considered. What if Laura is close in age to the children? What if Laura doesn’t want to live in the house any longer and needs nursing home care? Should the house be sold to provide money for that care? Is it more important for the children to inherit the home than the money one day? What about the contents of the home? Are there any items that Laura wouldn’t value but are invaluable to the girls?
There are a million things to discuss. The problem is, no one wants to. Then when something happens everyone wishes that these things were discussed while Joe was healthy.
A joint meeting with a third party like an estate attorney may help get the ball rolling with delicate topics like these. Just don’t sweep them under the rug because they’re uncomfortable topics.
© 2018 Craig R. Hersch. Originally published in the Sanibel Island Sun.