Experiencing the death or prolonged sickness of a loved one is one of the biggest sources of stress for many people. Grief is difficult enough to deal with when all family members are on the same page. But a lack of estate planning can cause family conflicts that are difficult to overcome.
So imagine if family disputes arise because of well-intentioned people who each had a different opinion on how the decedent’s estate administration should look like. Then imagine the potential family conflicts that might come up because someone decided to take advantage of the situation.
Here are 5 things you can do to keep your entire family intact in case something happens to you.
Estate planning tip #1: Update your estate plan.
Having no estate plan is one of the worst estate planning mistakes someone can make. A close second is failing to maintain a proper estate plan, especially as things change.
A comprehensive estate plan should cover the range of contingencies that might happen to you. This would include:
- Who makes critical medical decisions if you’re incapacitated
- Who will care for your minor children if something happens to you
- Who can make important decisions on your behalf if you’re not able to
- What happens to your assets and loved ones when you pass away
An experienced estate planning attorney can help you understand which estate planning documents are important in your specific situation. Here is a partial list of important documents you should consider hiring an estate attorney to draft for you:
- Last will and testament
- Powers of attorney
- Health care directive
- Living will
If you don’t have any estate plan, then creating one is a valuable first step towards avoiding a future family feud.
Estate planning tip #2: Review your beneficiary designations.
While it is important to have the right estate documents in place, beneficiary designations could be the the means by which most of a family’s financial assets are passed onto heirs. Not only that, but beneficiary designations help bypass the probate process, which in turn lowers the chance of potential conflicts.
It’s a good idea to review your beneficiary designations regularly. Many financial advisors do an annual check of beneficiary designations for their financial planning clients.
Here is a list of the types of accounts that can be transferred via beneficiary designation:
- Bank accounts, such as checking accounts or savings accounts
- Investment accounts
- Retirement accounts
- Life insurance proceeds
For a married couple, you’ll want to make sure you’ve properly accounted for the following common beneficiary designation mistakes:
- Not listing the other spouse as the primary beneficiary on individual or retirement accounts
- Not understanding whether to designate contingent beneficiaries as ‘per stirpes’ or ‘per capita’
As part of your estate plan, you should strive to ensure your beneficiary designations are up to date with your current intentions.
Estate planning tip #3: Keep sentimental items in mind.
Everyone has personal items, like family heirlooms, that have more sentimental value than financial significance. If you’ve personally earmarked certain items to go to a specific relative, then it’s a good idea to write down the important things. Especially if a loved one took the time to tell you that it’s important to them.
But don’t overweight the value of something.
It’s one thing to write down your instructions for your teacup collection to go to your oldest child. But keep in mind that not everyone thinks of things as sentimentally important as their parents or grandparents. Especially when it comes to a valuable asset that could be sold.
Here are some examples of personal items that people tend to place too much importance on:
- Real estate, such as the family home
- Family business
These are all things that decedents often overvalue or believe that their children value as much as they do. And the more valuable something is, like a house or the family business, the more important it is that you have a clear understanding of what will likely happen to them when you pass away.
If you don’t have a clear understanding, then someone is likely to be disappointed with the outcome. All of this is avoidable if you take the time to communicate.
Estate planning tip #4: Openly communicate your intentions.
Lack of communication is the biggest estate planning threat to family dynamics, and is often the biggest cause of family discord. The best way to keep the family relationships intact is to keep open communications with everyone involved, especially your adult children.
You should be clear with your family members on the major items, such as:
- What each person should expect to receive as part of their inheritance
- What each person’s expected roles and responsibilities are
- Business succession plan, if there’s a family business involved
As you have these conversations, you may receive important feedback. And that feedback will help you understand if your intentions are being well-received. If not, perhaps holding a family meeting will bring up potential solutions to the challenges that come up.
Estate planning tip #5: Choose your executor, power of attorney, trustee or personal representative carefully.
Each of these named roles and responsibilities are important. Even if you carefully outline your wishes, you’re still relying upon someone to execute them faithfully and in a fiduciary capacity for all the stakeholders.
Consider whether you need a neutral third party.
Do you have a significant amount of generational wealth at stake? Do have a revocable trust that needs administration after you’ve passed away?
In complex situations, a trust company serving as a corporate trustee might be the best way to ensure that your family wealth is protected.
Avoiding family conflict should be a primary goal for any estate plan. The best way to avoid conflicts in a difficult time is to clearly communicate your intentions, and to have them written in the appropriate estate planning documents.
If you enjoyed reading this article and would like to read about other estate planning topics, please go to our estate planning archives!
After retiring from a 24-year career as a Naval officer in 2017, Forrest became a financial planner to help people achieve success in managing their personal finances. In 2022, he sold his partnership stake in his financial planning firm to focus on helping people full-time through his writing.
Featured in: Forrest’s writing has been featured in the following publications: Forbes, Military.com, NerdWallet, Yahoo Finance, The Military Guide, The Military Wallet, Christian Science Monitor, and many other publications.
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