Estate Plans: The Sticking Point
The discussion around estate plans is rarely easy- especially with parents and grandparents.
Dealing with oneâ€™s mortality , potentially different treatment of beneficiaries, emotional baggage developed over decades- these are all topics that normal people want to avoid. The COVID environment can make the discussion even more urgent. For people in the next generation that want to know where they stand in the context of the familyâ€™s wealth, these conversations are an important component of their financial planning.
How does one break the ice?
There is no one way to do it. Even tried and true methods may not work on some of the most hardened personalities. Many older parents have attitudes and money practices cultivated by years of positive and negative experiences. This can be complicated by shifting attitudes toward money and impact as parents contemplate their own mortality and legacy.
Furthermore, getting the conversation started by asking â€œWhoâ€™s getting what?â€ or â€œCan I see a copy of the will?â€ isnâ€™t anyoneâ€™s idea of a pleasant afternoon. Itâ€™s also potentially disruptive and counterproductive. What is one to do when trying to get the flow of information moving?
Framing the Conversation
A good step in moving the estate plan discussion forward is to discuss the implementation of the current estate plan, if it exists. Rather than go into the â€œwhatâ€ and â€œwhyâ€, start with the â€œwhoâ€ â€œwhereâ€ and â€œhowâ€. This can be a dry and confrontational topic. How does one make it approachable?
I like the concept of the â€œgo-bagâ€. Amongst military and first response workers, a â€œgo-bagâ€ is the idea of having a bag of essentials ready in case of an emergency. When hurricanes, floods or other surprises come, there often isnâ€™t time to sit down, generate and implement a methodical plan. And, as is the case with many older people, change can happen in a hurry. Accidents happen, health turns quickly, hips break, people can suddenly die. Developing a â€œgo-bagâ€, in other words, knowing where things are and whom to call when a crisis hits, has four major benefits.
- It can make all the difference in implementing older peopleâ€™s wishes especially at a time of maximum emotional stress.
- Being practiced and prepared is a concept that most reasonable people can get behind.
- Developing the â€œgo-bagâ€ is a gentle and responsible way to break the ice before getting to the larger themes of estate planning.
- Discussing the location of important information can be the bridge to discussing the rationale behind the plan, build context for the people affected, and provide a basis for opportunistic changes.
What does a â€œGo-Bagâ€ look like?
- The first component of the â€œgo-bagâ€ is the contact list of important people and their roles. This is the â€œwhoâ€. Phone numbers, email and other identifying information are important to have in one place.
- Family members and their roles
- Estate planning attorney
- Health care Proxies/Powers of Attorney
- Executor (if different)
- Financial advisor
- Local Banker
- Leasing manager of apartment,
- Contacts at any of the senior facilities
- Asset List (This is the â€œWhereâ€)
- Account Numbers,
- Insurance policies,
- Governing documents for illiquid assets
- Lists of Tangible Assets
- Passwords- This can be important in tracking down correspondence and other details and administering digital assets.
- Governing Documents. (This is the â€œHowâ€)
- Copies of Will
- Copies of any Trusts
- Copies of any Business Documents
- Copies of a Letter of Wishes (LOW) â€“ while not having legal force per se, this works in tandem with wills and other estate planning documents and has three major functions
- It reiterates for the executors (and beneficiaries) how they should be treated
- This is a document where it makes sense to discuss which personal items / jewelry go to whom . . . If there is personal property to be distributed, the LOW can help to make the will less cumbersome and provides guidance to the executors in dividing up or selling personal property. It is also helpful in case there are smaller changes later (i.e. a pair of earrings should go to a different child), you don’t have to go through the formal process of rewriting the whole will.
- The LOW can also be another place to lay out the account information and the location of other assets. This makes it easier for the executors/powers of attorney to identify and administer the assets. It is also a way to do a thumbnail “accounting” of oneâ€™s assets and make sure the assets are in place within the estate plan and titled correctly.
Optimally, families would practice an emergency situation. We all remember having fire drills growing up in school. It is a common experience that the conditions around wealth transfer happen at the worst possible times and under difficult conditions. The point of a drill is to make sure that there is automatic behavior in a situation of maximum stress. Drilling the plan periodically can bring comfort to both parents and the next generation that there is a system where people know their roles and what to expect.
Getting the Ball Rolling
Setting up drills for even the most organized families can be a big ask- especially without earlier context. Getting to the â€œwhatâ€ and â€œwhyâ€ of an estate plan can be even more challenging. However, creating a â€œgo-bagâ€ (i.e. knowing the location of relevant information and important documents) can be an effective way to start discussing the plans for family wealth with the older generation.
By focusing on the â€œWhoâ€, â€œWhereâ€ and â€œHowâ€ the discussions often flow more freely and focus on fact-based issues. The “Who” and “Why” can come later and as a consequence of reviewing the logistics of implementing the plan in an emergency.