3 big reasons to share your estate plan with your kids

November 11, 2022

Allworth Co-CEO Scott Hanson shares three key reasons why you should make it a priority to discuss your estate plan with your adult children.

In the next 25 years, $68 trillion (roughly 3X the yearly United States’ Gross Domestic Product) will be transferred from Baby Boomers to (mostly) members of Gen X. ¹

Consciously putting aside for just a moment the immeasurable sadness of losing a parent, the repercussions of the above transfer of wealth will include the good, such as greater financial security, and the bad, such as money that will be squandered and feelings that will be hurt.

And yet, despite everything that’s at stake – considerations about legacy, economic security, and keeping taxes to a minimum, as well as the opportunity to bond with adult children – many people are reluctant to speak to their kids about their estates and personal accumulations of wealth.

And that can be costly

The reasons for a Baby Boomer-generational reticence to speak about money aren’t a mystery. Not only were previous generations encouraged to never speak thy name, but there’s simply a lack of understanding surrounding the estate planning process, which is further buffeted by the fear that telling adult children what they might someday inherit could adversely impact their behavior, decision making, and planning.

However, difficult as it may be, I encourage you not to be dissuaded.

What follows are 3 reasons to discuss your estate plan with your children.

1. To limit misunderstanding

The first, and arguably the biggest, reason you need to discuss your estate plan with your children is concerned with making sure your wishes are carried out.

I know of a lot of people who were named executors for their parents’ estates and had virtually no idea about the responsibility and pressures that were headed their way. If you’ve accumulated money and property that will be passed down to your heirs, you need to have a conversation with your children, and explain why you want them to be your executor and then ask if they would be comfortable in the role.

Again, of course choosing one child as an executor can be touchy. But my experience has been that the biggest issues arise from lack of clarity. And while, yes, estates are a minefield of potential trouble, clarity can be achieved by clearly communicating your intentions early and often. What you most desire is to never have any of your children or heirs faced with guessing (or interpreting) what you would have wanted.

2. To keep taxes and costs to a minimum

You’ve almost certainly spent a lifetime accumulating your wealth. And what seems simple to you – say, the difference between the money in a tax-deferred retirement account, and the money saved in a Roth IRA – might seem like a foreign language to your children. And that lack of clarity and familiarity can lead to expensive, and unnecessary, mistakes.

Communicate. Brokerage accounts, retirement accounts, savings, bonds, Certificates of Deposits, and safety deposit boxes. Most Boomers not only have money stashed in numerous investment vehicles but also hidden all over the place. If you have more than one heir, please just don’t just say, “You’re all taken care of equally in the will,” and leave it at that. Tell your heirs where the assets are, and how they differ from one another, and, even better, if possible, introduce your children to your advisor and your estate planning attorney. For instance, have them explain the future tax implications of withdrawing money from your 401(k).

Also, make certain that your beneficiaries are all up to date. Far too few people understand that the beneficiary listed on a retirement account will typically supersede the beneficiary listed in a will. For example: If your will says that your 401(k) is to be divided four ways, but the beneficiary on the 401(k) still lists your ex-spouse from 35 years ago, your children are likely not going to receive that money no matter what your true intention.

3. To let them know that you care

I understand well that family dynamics are complicated. And further, I understand that it’s one thing to say, “Speak to your children now about your estate,” and quite another to execute that conversation without drama or hurt feelings.

Still, I encourage you to try.

Think of this: you worked your entire life to accumulate the money you will pass along. Speaking to your children about how it all came to be, the sacrifices, the decisions, the things that worked, and those that didn’t, is not only an opportunity to bond, but it also adds to your legacy while serving as a lifelong teachable moment.

¹^{Reasons to Discuss Your Estate Plan With Your Children (usnews.com)}

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^✢ Scott Hanson, Investment Advisor 2005, 25 most influential people in the financial services industry. The ranking reflects 25 people who Investment Advisor magazine believes have had or will have the greatest influence on the financial services industry.

^✼Pat McClain, InvestmentNews 2014, Invest in Others Community Service Award, presented to an advisor who has made an outstanding impact on a community through managerial contributions to a non-profit organization.

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