How to Talk to Your Family About Your Estate Plan

July 31, 2023

Nothing is more important than providing for your loved ones if something happens to you. Yet according to a Gallup poll, only 46% of Americans have a will to provide instructions of how to manage their money and estate after their death.

If you've been putting off having a plan in place, now's the time to get started. Along with that plan, having an honest discussion with your loved ones is just as important.

First, the Plan

You may think estate planning is just for the wealthy or is too complicated for your personal situation. However, reviewing your personal profile and drafting legal documents to carry out your wishes if you pass away is vital, particularly if you have a family that depends on you to take care of them. If you don't have a will, many of your assets are distributed according to your state's intestate succession laws. This means the state determines the order of who will inherit and may not align with your wishes.

Will or Trust?

Depending on your circumstances, a standard will may suffice. In this instance, you choose an executor who is responsible for the distribution of your assets as well as a guardian if you have minor children. While a will is an affordable option, it only takes effect after you pass away and won't account for you becoming ill or incapacitated. A revocable living trust allows a family member, trusted friend, or professional corporate institution to manage your assets for your beneficiaries if you die or become unable to make financial decisions. And unlike a will, assets held in a trust avoid state probate.

Having the Talk

Discussing death and last wishes with your loved ones may be difficult, but getting the conversation started is the best way to get over any reluctance you may have. Consider having a group discussion so everybody is on the same page. Should the unexpected occur, you want your family to have the information they need, particularly when they are grieving. Share your plan and wishes so they know what to expect. Your executor should know the whereabouts of your important personal information including your will or trust documents, social security number, birth, marriage and divorce certificates, phone numbers of professional contacts (i.e., attorney, CPA, financial advisor), financial and insurance accounts, and where you keep valuables.

Remember, this conversation is not likely the last one you'll have. As your life changes, so can your plan. For instance, once your children are adults, there is no need to have a guardian. Make sure you review your plan periodically and update it when you need to.

Keep your important information in a locked home safe or locked filing cabinet. A bank safe deposit box may not be the best place to keep such items if your executor(s) will have difficulty accessing if you become incapacitated or die. There are many estate-planning organizers to help document all the details.

Discussing Your Parents' Estate Plan

In addition to your own estate plan, if you have elderly parents, it's important that you understand their circumstances and if they have a plan in place. Even if you are not the executor, knowing and understanding their wishes will help avoid family disagreements and provide peace of mind because you'll know what to expect next. If they have no plan in place, consider helping them meet with a financial advisor to start the conversation.