Birds & Bees and Money Doesn't Grow on Trees: How to Talk to Your Kids about Your Estate Plan
The birds and the bees, stranger danger, peer pressure, texting and driving, school safety…the list of “things to talk to your children about” goes on and on. The topics only grow in complexity as children age, so that by the time they are teenagers or young adults, you are discussing things like integrity, accountability, work ethic, the importance of saving for a rainy day, the mechanics of loans and managing debt, and even death and taxes.
If talking to your children about these subjects makes you uncomfortable, rest assured you are not alone. Over 70% of parents responding to a 2015 survey by T. Rowe Price indicated a reluctance to talk to their children about financial matters. Yet, staying quiet and keeping children in the dark is not in anyone’s best interest. It may be awkward, but the consequences of not talking to your children about your estate plan and financial health are worse: lost dollars, wasted time, confusion or misidentification of assets, missed filing deadlines, and a lot of hurt feelings as your kids try to wrap their brains around the choices you have made.
And when we say children, we do not just mean your 5-year-old or your 15-year-old. We also mean your 25-year-old, your 45-year-old, and yes, even your 65-year-old. After all, once a parent, always a parent! And as a parent, your job is to nurture and care for your children, from birth until death (yours or theirs), and in the good and the not-so-good. So, do the hard thing. Have the talk. Here’s how:
Coordinate the Conversation. The first step is to lay the groundwork with your kids. Tell them you want to have a talk, and you do not mean grabbing 5 minutes at your grandson’s birthday party. Ask them for input on the best way to do this so that your kids feel vested in the process. For example, would your children be comfortable talking through these things as a collective group or should it be done with each child separately? Is everyone local and able to gather in someone’s home or at a favorite restaurant (food and drink always makes things better!) or should this be set up via Zoom? If your children are married, should the spouses be included, or would it be easier to speak openly and honestly if they weren’t? Once you have everyone’s feedback, schedule a date. You may even want to schedule several dates not only to prevent your kids from being overwhelmed but also to give them time to process things and come up with questions they would like you to answer. Although it may feel a bit like herding cats, the point here is to open the lines of communication and to set the level of expectation for your children as to the importance of the conversation you want to have.
Vocalize your Values. In other words, it’s not all about the Benjamins, so whenever you have “the talk,” resist the temptation to start with the dollars and cents. If you begin the conversation with who gets what, your kids will not hear anything else you have to say. Instead, start with the why: why you felt it was important to make a plan and why now. If you already had an estate plan in place but recently updated it, share with them why that update was needed.
Include in your explanation your values, your hopes and dreams for your loved ones, and how this plan aligns with all of that. For example, if you value the importance of higher education, then your estate plan might include paying for college for your grandchildren or setting up scholarships at your alma mater. If philanthropy is of importance to you, then talk about how you are donating a portion of your estate to charitable organizations. If your children’s inheritance will not be distributed to them outright but held in a trust for their benefit instead, explain why this was important to you (e.g., it will give you a sense of security to know that you have a cushion in case of hard times, it will safeguard your inheritance until your divorce gets finalized, we want you to build up some "sweat equity" and work for your livelihood for a time before you receive your inheritance, etc.).
At some point, you will want to transition the topic to more finite details of your estate plan. If you can, pepper in stories of past family adventures or beloved family members to illustrate the points you want to make. Perhaps you’ve all had a great laugh about sweet Aunt Edna who died years ago from Alzheimer's Disease, and you use that to segue into how you want to be remembered. Maybe things turn solemn as you remember your best friend who languished in the hospital for weeks before finally succumbing to illness and you use that to explain the choices you made in your Living Will. Examples give your kids something to connect to and will help to create bridges in their memory so that when the time comes for them to act on your behalf, they can more easily recall the details of this conversation.
Set them Up for Success. Once you have fully covered the why of your estate plan, it is a good time to shift the conversation to the who, as in who are the people to whom you have assigned certain roles in your estate plan. Who is the person that will be the Executor? Who will be your Health Care Agent? If you have minor children, who will be their guardian if something happens to you? Again, your rationale is key here. Your oldest child may expect to be "your person" simply because he or she is the oldest. The daughter who lives close by may think that she is the natural choice. Without even talking to you, your children have likely created their own expectations of how things are going to go. So, it is important that you take the time to explain why you chose a particular person for a particular role. Help your family understand what it is about a person’s strengths, personality, character, skill set, availability, age, mindset, locality that made him or her the best choice. This is the best way to soothe hurt feelings and clear the air. Our Family Round Table service is perfect for this portion of the conversation!
Listen in Love. Up until this point, you—the parent—have done most of the talking. Now it is time to be quiet and listen. Let your family members share their thoughts with you. If no one speaks, then ask an open-ended question to the whole group to get the dialogue started. You may also want to be more pointed in your questions: "Paul, are you okay with being the Executor?" "Linda, do you understand why we structured the trust this way?" This is a good way to get feedback from each person who is present. It will be harder for a child to complain down the road if they have an opportunity to talk with you, their parent, about their feelings and they chose not to.
Be mindful that no matter how gentle you are or how thorough your explanations, your kids may ultimately disagree with your decisions. They might reject the notion that a particular person is better suited to a certain role than they are or that they need the oversight a trust gives them. Allow your loved ones the opportunity and freedom to be honest in their reactions. But, at the end of the day, these are your decisions. It is okay to let your children know that you hear them and appreciate where they are coming from, but that you intend to leave things as they are. If emotions are elevated and tensions are running high, then you may want to take a break at this point and reconvene at a later date or time. But don't give up entirely. The fact is that any expressions of anger, frustration, confusion, or wounded pride would be exponentially worse had you not broached the subject and your family member found out all of this information after your death when they cannot come to you with questions.
Perhaps Present the Percentages. Only after you’ve fully covered the why and the who is it time to talk about what each family member is to receive. If #4 does not go well, you may never get to this point. And that's absolutely okay. We actually recommend to clients that they not share too many details about the dollars and cents because numbers change. Just because you have a million dollars now does not mean you will have a million dollars later. Also, circumstances change, and you might change your mind as to how you want your assets divided. You do not want to build up false expectations in your children as to the amount they will inherit. When reality does not match expectation, it is a breeding ground for lawsuits. You also do not want to give an irate family member a reason to hide or destroy your plan after your death in an attempt to disrupt your final intent.
If you do decide to tackle this final topic, we recommend you talk about it in terms of percentages or shares. “Whatever we have left will be split 50-50 between our two children,” is a lot better than “Each one of you will receive $250,000.”
This is not an easy conversation to have. There may be laughter. There could be tears. But remind yourself that, through it all, you are creating an indelible memory for your kids of this time you spent with them, preparing them for what’s to come. Whether your loved ones recognize it or not, it is a blessing for families to know what your intent is ahead of time. Talking about your estate plan is almost as hard as the birds and the bees but, like that topic, necessary and always worth it!
Phone: (919) 678-5761