“Should I give my estate planning documents to my children?” “Do you think my son will be upset when he finds out that I chose his sister as my healthcare agent?” These and many other questions are common.
Choosing how much to disclose is both a personal decision and, at least at times, an impactful decision. Many families have the “go to” child or family member that everyone designates to take care of everything. For example, the sibling without children that is designated as guardian for all of the nieces and nephews; the nurse or doctor that everyone wants as healthcare agent; the accountant or lawyer who will hold power of attorney. Sometimes parents want to treat everyone the same and create a committee to make all decisions. Whatever you choose, the next question becomes how it should be communicated.
It is important for everyone to know who the decision makers are. Secrecy rarely produces happy results. Additionally, in most families, the children know who is more likely to be chosen for what. That does not mean that they will agree but it does mean that disclosing the information is not going to surprise anyone. Additionally, everyone needs to know who has authority to act in the event of an emergency. That person also needs to know where to find the documents.
A slightly more difficult question is whether the plan for the distribution of assets should be shared. When the assets are divided equally among children, it is less of a question. However, when there are factors that create a distribution plan that is different, family members may decide to challenge the Will or Trust and such a challenge can deplete most of the funds of many estates. You know your family members best. If sharing will just create constant drama with family members constantly hassling you to change the plan, it is probably not a good idea to share. It may, however, be worthwhile to document why you made the decisions that you made so that those thoughts can be shared after your death.
It is not uncommon for a parent to provide financial assistance to a child during the parent’s lifetime. When there is a clause in a document equalizing the distributions based on advances paid to a child during lifetime, the failure to communicate that to the child whose share will be charged can have costly results. With documentation of the competency of the parents and of the gifts, challenges can be successfully defeated. But is it worth the litigation and emotional costs?
A child who has a financially comfortable lifestyle may not need to get assistance with paying a large medical bill, while one who struggles may. Sometimes, the parents choose to view what happened during life as having nothing to do with how the assets will be divided at his or her death. Other parents, however, do want to equalize the support out of their estate. Neither way is always right or always wrong. What is frequently a problem, however, is when there is an equalization provision and the child expecting a large inheritance is caught unaware of the fact that he or she will receive a smaller portion of the estate. Ideally, this should be discussed by parent and child. When it is not, the child for whom the advances were made can become angry and question the adjustments being made to the inheritance. In addition to the discussion, there should be written records of the advances. When there are not, there is much more of a chance that there will be a challenge. If, on the other hand, you choose not to make an adjustment, it may be helpful to explain that, at least in writing, to your other children.
Second marriages can create financial uncertainty for everyone. A “second spouse” of thirty years is certainly entitled to share in the largess created by the couple or to continue to live the same lifestyle he or she lived while married. That does not mean, however, that the children from the first marriage will agree. Additionally, when each spouse brings children to the marriage, understanding what will happen with the assets at the death of the survivor, and what changes the surviving spouse can make, is important. Spouses are not always on the same page where this is concerned which makes communication even more important. There are many ways to divide the assets, but not deciding and then just leaving it to chance, is not usually the best way to handle it.
Should you tell your children why you made the choices you did? Communication is key. Clarity is helpful. Providing the “why” can be difficult but usually results in less animosity after you are gone.
Elizabeth A. Green is a Member in PK Law’s Wealth Preservation Department. Ms. Green advises individuals and families on basic to sophisticated estate planning. She works closely with her clients in preparing the necessary documents including wills, powers of attorney, healthcare directives and various forms of trusts to ensure her clients’ estate planning needs and wishes are achieved. Her depth of knowledge in estate planning, tax and charitable planning combined with the compassion she extends is greatly appreciated by her clients who are often in crisis and in desperate need of guidance. Ms. Green has assisted many clients in addressing the unique issues surrounding disabled and elderly family members; the difficult process of handling the affairs of a deceased family member or close friend; and business owners with succession planning, mergers and acquisitions, financing and day-to-day business concerns. Ms. Green can be reached at 410-769-6150 or firstname.lastname@example.org.