Most parents hope that their children will maintain a good relationship with each other that stretches beyond their own hopefully long natural lives, but all too often disagreements—and sometimes even litigation—arise out of differing expectations for how a parent’s estate will be handled.
Rather than simply hoping for the best, however, families can take concrete steps now to ensure their financial affairs are in order, their intentions are clear, and everyone in the family is on the same page.
Here are three essential actions to help get you started:
1. Organize finance-oriented documents.
There are a number of documents that will be helpful—and, in some cases, necessary—to guide your heirs after you pass away.
These documents include your will, power of attorney forms, health care proxy, trusts, and, if applicable, a “do not resuscitate” (DNR) order. You’ll also need a list of accounts—including bank and brokerage accounts, 401(k) accounts, IRAs and Roth IRAs, safe deposit boxes, auto-pay accounts, pension documents, savings bonds, life insurance policies, and long-term care insurance policies—as well as a plan to allow your loved ones access with minimal headaches during a stressful time. It can also be helpful to provide your executor or heirs with your tax returns from the previous three years, property deeds, mortgage accounts, vehicle title, partnership and corporate operating agreements, marriage license or divorce papers, and military discharge documentation (again, if applicable).
You could store these documents in a safety deposit box at a local bank or provide copies to your CPA, financial planner, or estate attorney who will administer your estate. You may also give copies to your children or other heirs—at the very least, you’ll want to provide information so they can obtain the documents after your passing.
2. Communicate with your family members.
Nobody likes to think about the end of their own lives, never mind have detailed discussions about what will happen once they’re gone. The reality is, however, that you won’t live forever, and your family will have a better chance of maintaining positive relationships if you can talk with them now about your goals, considerations, and plans.
Many financial experts warn that old rivalries bubble to the surface when talk of inheritance begins. Plan for it and work to defuse tension. Introduce your grown children to your financial advisors so they understand the value of an objective third party. Also, rather than naming one of your children as executor, consider appointing someone with no stake in the outcome of your estate, such as your financial advisor, to avoid tension.
Take time to talk with your children or other heirs about the “why” behind the choices you’ve made. For instance, perhaps you’re considering leaving your house to one child because she’s a single mom and is less likely to be able to purchase a home on her own. By explaining your reasoning, you can nip potential quarrels in the bud. And when your children understand what to expect in advance, that lack of surprise will pay future dividends in the form of peace, calm, and smooth transitions. In addition to talking through your plans, you can use digital tools like file sharing to keep everyone in the loop and operating with the same information.
3. Establish your estate plan.
After you’ve thought through the legacy you want to leave and all the potential implications, it’s time to get it on paper—or a hard drive. Even if your plans change and evolve over time, the basics are likely to remain the same. Be sure to consider all your assets, including investments, real estate properties, and vehicles. And if you’ve promised specific items to a specific person, include that information in your plan: If it isn’t in writing, it may not be honored.
To simplify the process, the new LegacyLink program at Fifth Third is designed to help families automate and create their plans online. The program offers valuable insights, guidance and online tools to help you gather the information you need to plan or settle an estate.