Your Estate Plan Should Be No Secret

Many people are uncomfortable discussing with their loved ones how they plan to distribute their estates. Perhaps you don’t want your children to realize how much they may receive after your death. Or maybe you think your choice of heirs could change in the future.

However, if you don’t discuss your estate plans, disagreements and conflicts could erupt once the details are revealed. For instance, after your death, siblings may resent each other if distributions aren’t equal — even if one child is
substantially less financially secure than the others. Or children may feel anger toward a deceased parent’s spouse from a second marriage if they feel the spouse is spending their inheritance. At that time, you won’t be able to explain
your thoughts and wishes regarding the distribution of your assets.

Discussing your estate plans gives you an opportunity to inform heirs about the distribution of your estate and explain why you decided to handle matters in a certain way. You can go into specific detail, informing heirs how each asset
will be distributed, or you can give a general overview of your estate plan.

If you’ve selected one heir as executor, explain why you chose that individual. As an alternative, you can leave a personal letter with your estate planning documents explaining these items.

A Personal Letter

Even if you reveal your plans to heirs, you may also want to include a personal letter. In it, include information about benefits, special wishes, who should receive personal effects, your cemetery and funeral preferences and the
location of important documents.

At minimum, specify where the following documents are located:

  • Income tax returns,
  • Life insurance policies,
  • Other insurance policies,
  • Investment details,
  • A list of household contents,
  • Outstanding loan documentation,
  • Automobile titles,
  • Important warranties and receipts,
  • Checking account information,
  • Credit card details, and
  • Information about your home.

Your Children’s Estate Plans

If you have a sizable estate that you’ll be leaving to your adult children, your children probably need estate plans of their own. To encourage them to plan, consider these tips:

Explain why estate planning is important. You don’t want to dictate what they should do, just emphasize the need for estate planning. When your children encounter major life events — such as marriage, divorce or a child’s birth —
remind them to review their estate plans.

Coordinate estate planning across generations. If you have a substantial estate, you may want to coordinate your planning efforts with your children’s plans. For instance, if your children also have substantial estates, they may prefer
that their inheritance be distributed to your grandchildren instead. A coordinated effort can help minimize taxes.

Encourage your adult children to get important estate planning documents in place themselves, such as a will.

This letter will help your heirs identify all assets and benefits and avoid speculation about your wishes. Preparing the letter will also force you to organize your records and make sure all important documents can be easily located. Because the information is likely to change, review the letter at least annually.