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Talking to the Children about Your Estate Planning

When a Conservatorship for a Parent Is Needed
Many baby boomers may hesitate to discuss money with their children, but the reality is that a massive amount of wealth will be transferred in the next couple of decades.

Some $68 trillion will move between generations in the next two decades, reports U.S. News & World Report in the article “Discuss Your Estate Plan With Your Children.” Talking to the children about your estate plan could have a profound impact on the quality of your relationship and your legacy.  Beck, Lenox & Stolzer Estate Planning and Elder Law, LLC counsels a lot of Baby Boomers with Generation X children.

Staying on top of your estate plan and having candid discussions with your children will also have an impact on how much of your estate is consumed by estate taxes. The historically high federal exemptions are not going to last forever—even without any federal legislation, they sunset in 2025, which isn’t far away.

One of the purposes of your estate plan is to transfer money as you wish. What most people do is talk with an estate planning attorney to create an estate plan. They create trusts, naming their child as the trustee, or simple wills naming their child as the executor. Then, the parents drop the ball.

Talk with your children about the role of trustee and/or executor. Help them understand the responsibilities that these roles require and ask if they will be comfortable handling the decision making, as well as the money. Include the Power of Attorney role in your discussion.

What most parents refuse to discuss with their children is money, plain and simple. Children will be better equipped if they know what financial institutions hold your accounts and are introduced to your estate planning attorney, CPA and financial advisor. If possible, invite your advisors to a family meeting, or at least to a meeting with your executor and trustee, so that all get acquainted.

You might at some point forget about some investments, or the location of some accounts as you age. If your children have a working understanding of your finances, estate plan and your wishes, you will have spared them an estate scavenger hunt.

Most adult children do not have the same experience with taxes as parents who have acquired wealth over their lifetimes. They may not understand the concepts of qualified and non-qualified accounts, step-up in cost basis, life insurance proceeds, or a probate asset versus a non-probate asset. It is critical that they understand how taxes impact estates and investments. By explaining things like tax-free distributions from a Roth IRA, for instance, you will increase the likelihood that your life savings aren’t battered by taxes.

Even if your adult children work in finance, do not assume they understand your investments, your tax-planning, or your estate. Even the smartest people make expensive mistakes when handling family estates.

Talking to the children about your estate planning is another way to show your children that you care enough to set your own ego aside and are thinking about their future. It’s a way to connect not just about your money or your taxes, but about their futures. Knowing that you purchased a life insurance policy specifically to provide them with money for a home purchase, or to fund a grandchild’s college education, sends a clear message of care and concern. Don’t miss the opportunity to share that with them while you are living.

Beck, Lenox & Stolzer is a great resource for estate planning questions or needs.  We have a number of professional resources available to assist you in your areas of concern.

Reference: U.S. News & World Report (Feb. 17, 2021) “Discuss Your Estate Plan With Your Children”

Suggested Key Terms: Estate Planning Attorney, Children, Estate Planning Attorney, Trusts, Trustee, Executor, Non-Qualified Accounts, Step-Up In Cost Basis, Life Insurance, Probate Assets, Tax Free Distributions, Roth IRA, Power of Attorney, Inheritance

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