Why You Should Talk To Your Kids About Estate Planning

So you’ve gotten your estate plan in order, and now you want to help your children enjoy the same peace of mind. 

Talking about estate planning with your children can be challenging. However, helping your child prepare for the unexpected and protect their family is worth any temporary discomfort. 

So why should you discuss estate planning with your kids, and how do you start the conversation? Read on to find out. 

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Reasons to discuss estate planning with your kids

People have different reasons for wanting to discuss estate planning with their kids. Here are a few of the most common:

Naming a guardian for minor children

If your child has a child of their own, an estate plan allows them to name a guardian to take care of the child if they pass away before their child reaches adulthood.

If your child wants a say in who will raise their child, you must convince them to create an estate plan. If a guardian isn’t named at the time your child passes away, the courts will step in to appoint a guardian, and it might not be who your child would have preferred.

Have more control over their legacy

Your child will likely want to leave all or the majority of their wealth behind to their kids, but they can’t handle the management until they are adults. 

Creating an estate plan allows your child to name an executor who can manage the assets on behalf of the child until they are old enough to handle it themselves. 

Your child can create a trust if they want to give specific instructions on when their child can receive their inheritance. For example, they can say they want their child to inherit at ages 25 and 30 and allow for early distributions for specific purposes such as for HEMS — health, education, maintenance, and support expenses. 

They can specify who gets what in a will

Creating a will allows your child to specify who gets a piece of their legacy and who doesn’t. If your child wants to leave everything to their children, it’s pretty straightforward. But things can be more complicated if stepchildren are involved or other people your child may or may not want to leave money to. 

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How to talk about estate planning

Sometimes the most important conversations are the hardest ones to have. Here are some tips to help you talk about estate planning with your kids. 

• Know the essential documents: Have an idea of the estate planning documents your kids should have. For example, everyone should have a will, power of attorney, and a health care proxy.

• Bring it up sooner rather than later: Life is uncertain, which is why it’s crucial to help your children be prepared, especially if they have minor children or a significant amount of assets. 

• Be open and honest: Be sincere about your intentions and explain why having the conversation is important to you. They will know that your heart is in the right place.

• Be aware of family dynamics: Be mindful of who to talk to about estate planning and when. For example, if you have two children who don’t get along, it’s probably best to have the conversation with each of them separately.

• Focus on the positives: Estate planning involves discussing death, aging, finances, and other “scary” topics. Instead of focusing on the negative aspects, try emphasizing the good that comes out of having an estate plan, such as helping the family save time, stress, and money in the long run.

• Pin it on your financial advisor: If all else fails, blame your financial advisor. You can say something like, “my financial advisor and I were talking about estate planning…” to give you an easy way to break the ice. 

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Example

Let’s say you have an adult daughter, Charlotte, who has two minor children.

If Charlotte and her spouse pass away without an estate plan, a judge will select who will have the legal authority to raise her children (the guardian). This may or may not be the person that Charlotte would want to raise her children.

If Charlotte and her spouse pass away with an estate plan, they may appoint an individual(s) to be the legal guardian for their minor children. 

Additionally, any inheritance left to the children of Charlotte will be managed by a person that a judge selects versus someone she chooses. 

On the date that Charlotte’s children reach the age of majority (18 in many states), the inheritance will be dumped into the laps of Charlotte’s children (if there is no estate plan).  

If there is an estate plan, the inheritance left to Charlotte’s children will be placed in a trust and managed by a trustee selected by Charlotte. 

The inheritance for Charlotte’s children will always be available for the living and educational expenses of the children. Based on what the trust document says, Charlotte’s children will receive the remaining trust principal when the children are older and more financially responsible.

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The bottom line

As a parent, you can help safeguard your family’s future by talking to your kids about estate planning. Though this isn’t always the easiest conversation to have, it’s one of the most important steps in helping to protect your children and grandchildren.

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