How to preserve family harmony and your wishes in estate planning.
After spending their lives building wealth, most parents hope their legacy will provide security and enjoyment to their heirs—not family strife. But unfortunately, it doesn’t always work out that way.
“People say things like, ‘The children get along great; there’s never been a problem,'” says Cyndy Ranzau, a wealth strategist at RBC Wealth Management–U.S. “But money has a way of making old wounds come back and creating new ones.”
If you want to preserve relationships among your family members after you pass away, while also making sure that your estate will be managed according to your wishes, consider these five steps.
Much of the emotional turmoil that professionals see while handling estates comes down to long-simmering conflicts that boil over.
“A lot of the fighting devolves into, ‘You got the best clothes when we were kids and I got the hand-me-downs—our parents loved you more than me!'” Ranzau says.
If you know this kind of resentment exists, anticipate that it will come to the surface after you’re gone and deal with it now, or build in safeguards to minimize it later.
It is helpful for your loved ones to have relationships with your bankers, attorneys and financial advisors. Introduce them to your children and explain why you have confidence in them, Ranzau says.
Those advisors should have up-to-date versions of your estate plan and legal documents on file and instructions on how to contact your loved ones after you pass away.
It’s also important to leave clear instructions for your relatives about what documents exist and where to find them. Too often, people spend weeks hunting through attics or trying to get access to safety deposit boxes before they discover their parents’ estate plans.
Many disagreements revolve around one heir who wants to sell the family home and another who wants to keep it in the family. Make clear what should be done with your major assets, including property.
Personal items that hold sentimental or historical value often cause fighting and hurt feelings if one family member claims he has been “promised” it, but the estate documents are not clear about that.
“Talk to your kids about what pieces in particular they would like to have,” Ranzau says. “When my mom died, all four of her daughters wanted a particular necklace. But we couldn’t timeshare it.”
Take pictures of special or meaningful items—such as jewelry, heirlooms or furniture—and list who should inherit them, either in your will or in an addendum. Making those wishes known in writing helps eliminate room for misinterpretation.
It’s fairly standard for individuals to appoint one child as the fiduciary or executor of their estate.
But Ranzau says that is usually a mistake. She recommends appointing an objective professional with no legal or family interest in the estate to serve as executor.
“When any one child steps into the chair of handling your estate, that automatically creates the type of conflict every parent would want to avoid,” she says. “This type of dysfunction is not the legacy you spent a lifetime building.”
An objective third party who is paid to deal with an estate is better positioned than an adult child, she adds.
The last people to find out the details of the estate plan are often the beneficiaries—a situation that is not ideal.
“You just can’t spring the plan on a family at the funeral,” Ranzau says. She recommends holding a family meeting and discussing your estate plans along with your reasoning.
If you’re leaving a large sum to charity, for instance, your heirs could be confused or resentful about that if the first they hear of it is after your death. But if you explain in advance that the charitable gift is your heart’s desire, they are more likely to be on board.
“There’s a point where the primary breadwinner has to let go of the secrecy, even though it may feel unnatural to disclose the fruits of your labor,” Ranzau says. “Secrecy could be your undoing. It doesn’t matter what your plan is if you don’t have buy-in.”
Ranzau often has clients schedule the meeting around a family reunion, holiday or vacation when they will all be gathered. “The Fourth of July is a good time for a lot of families,” she says. “Invite your trusted advisors to join you so the kids meet them, see your interactions with them and know who they can go to for answers.”
You can’t plan for every single family conflict that might arise after you’re gone, but by taking the time to explain your plans to your children in advance, at least that may help avoid future conflict.
RBC Wealth Management does not provide tax or legal advice. All decisions regarding the tax or legal implications of your investments should be made in consultation with your independent tax or legal advisor.
Investment and insurance products offered through RBC Wealth Management are not insured by the FDIC or any other federal government agency, are not deposits or other obligations of, or guaranteed by, a bank or any bank affiliate, and are subject to investment risks, including possible loss of the principal amount invested.
RBC Wealth Management, a division of RBC Capital Markets, LLC, Member NYSE/FINRA/SIPC.
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