Accounting & Medicare Beneficiaries

No Mystery: Meeting With Family About Estate Planning

CPAs & Advisors

Eric Sowatsky
Eric Sowatsky CPA, CGMA, NSSA, PFS Principal CPAs & Advisors

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There is a common scene in popular literature, television shows and movies. The family of a wealthy individual gathers in an attorney’s well-appointed office to hear the reading of a recently deceased’s will. Each member usually represents a given stereotype — the spendthrift, the frugal one, the outsider — and, together, they wait impatiently for the attorney to reveal what they are getting.

In real life, this is not how an estate plan should work. To keep the mystery to a minimum, it is a good idea to hold occasional, if not regular, family meetings about your estate plan. Let’s look at some key points to consider when setting up these critical and informative gatherings.

Guest list

Whom should you invite? Start with your spouse, children and other family members who will be affected by your plan (either by their inclusion or exclusion). You should also invite any nonfamily members you will ask to serve as executors, trustees, agents, or guardians of minor children.

Also, request the presence of key advisors such as your attorney and accountant. They can be of service for two important reasons:

1. Questions and answers. Advisors can help answer questions about how your plan works. The legal machinations of an estate plan are complex, and the tax laws involved are not simple either. Your family will better understand the details of your plan if an expert explains them.

2. Team building. The meetings create an opportunity for your family, representatives and advisors to get to know one another. Getting acquainted now will help them build trust and, thereby, improve the chances that your plan will operate smoothly when the time comes for it to do so.

Agenda items

The meetings will need to include a number of agenda items. For starters, you should review the key documents that make up your plan and let everyone know where they are located. In addition, provide an overview of the estate planning decisions you have made so far and — most important — the reasoning behind them.

Many people simply divide their assets equally among their heirs. But in estate planning, equal is not necessarily fair. For example, let’s suppose Tara has adult children from a previous marriage and younger children from her current marriage. She put her older children through college years ago, and now they are gainfully employed and financially independent.

Fairness would dictate that Tara’s estate plan favor her younger children, who will need the money for tuition and living expenses. But her older children may not see it that way unless she explains it to them. A family meeting provides an opportunity for that discussion.

Other issues to discuss include charitable giving, the treatment of assets with special significance — such as vacation homes or family heirlooms — and decisions about which family members are chosen to be guardians, executors and so on.

Business matters

Family meetings are particularly valuable when a family business is involved. It may seem fair to provide a greater share to family members who work in the business.

But what if most of your wealth is tied up in the business? How do you provide for those who do not work in the business while still rewarding the “sweat equity” of those who do?

One option is to divide ownership equally but to use voting and nonvoting stock to give management control to family members who work in the business. Another option is to leave the business to those who work in it and use life insurance to create an inheritance for those who do not. Whatever the solution, the best way to avoid conflict and resentment is to discuss the issue with all interested parties and get their input.

Comforting experience

The thought of sitting down with family members and discussing what eventually is to become of your estate may seem awkward. But, often, the most uncomfortable meeting is the very first one. Once the topic is broached and the details are being discussed, many families find the experience comforting and informative. Again, involve your advisors in the planning and carrying out of the meetings and the process is likely to go much more smoothly.

© 2015

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