By Richard M. Rosso, MS, CFP®, CIMA®
Learn more about Richard on NerdWallet’s Ask an Advisor
I understand how much we all disdain planning for our inevitable demise. As a certified financial planner for 16 years, I truly get it—I, too, find estate planning a necessary but unpleasant endeavor.
It’s not what you think. I’m OK with paying an attorney, rifling through pages of legalese. Heck, I’m even fine with acknowledging my own death. What’s challenging is considering the lasting impact and influence my estate plan may have on the people I love and respect. The bound version of my last wishes that sits on a dark, dusty shelf, only to see daylight when I no longer do, is just the beginning of an overall estate planning strategy.
As I age—or, as my daughter says, my “human becomes more human”—I am increasingly aware of my living estate, which is the strategy I employ to minimize turmoil and misunderstanding among heirs. It’s a legacy mindset based on clear communication and openness with beneficiaries.
A legal estate plan is designed to communicate final requests. However, I have witnessed formal plans leave families in anguish for years because the creator of those plans failed to share their intentions verbally before they passed. There are times when unanswered questions have led to family strain for generations.
A recent survey of 2,882 high net worth investors by financial services firm UBS discovered that the majority are planning to leave inheritances. Most benefactors indicated how important it was for children to be fiscally responsible with inheritances. Yet more than half of the respondents indicated that discussing legacy plans with loved ones was not a priority.
Heirs are uncomfortable bringing up the subject, too. They’re fearful of appearing greedy; in addition, openly discussing money topics is rarely a comfortable family dynamic.
Also, many people hear the word “inheritance” and think solely of financial wealth, but that’s only part of the story. You have stuff, right? Then, you have items to bequeath, whether you’re wealthy or not.
So how are you going to communicate your legacy, prevent misunderstandings and possible hurt feelings, if nobody is talking? How do you know your heirs are going to handle inheritances responsibly?
I have learned through experience (and aging) that long before a formal estate plan is executed, another is already in motion. It’s based on assumptions formed regardless of what’s legal on paper.
Dynamic, empathetic conversation is the key to long-term estate planning success. Lack of communication holds the greatest potential for trouble.
Here are several ways to strengthen your legacy through a living estate plan based on clear, thoughtful communication.
1. Remember you’re the catalyst for good—or bad.
I have had several people tell me, “I don’t need an estate plan. Let them fight it out; I’ll be dead.” That’s a strategy. Not a good one, but still a strategy because it leaves an impact on your legacy. If you decide to say nothing, then assumptions will be made and motives questioned regardless of what’s in your estate documents. You’re the catalyst for calm or drama. Whether silent or actively communicating, you’re a spark, so you might as well embrace the need for connection and work on an approach to ignite the process.
To make your intentions clear, first list on paper each person you would like to receive an heirloom or special sentiment. I’m talking everything, down to the coffee cups. Be specific. For example: Amy B. is to receive my G.I. Joe action figure collection in original packaging. There are 12 figures with the following accessories … well, you get the picture (see, this is on my personal list).
Not only should your inventory be identified in estate documents, it should also be noted informally and used for discussions with heirs. If you feel more comfortable, have a trusted intermediary with you. It doesn’t need to be an executor of the will—I know spouses, siblings and best friends act as what I call “empathy shields” for these conversations.
2. You set the tone.
Don’t be in denial about family or inner-circle conflicts that may arise from your intentions. Before and after death, you are responsible for taking the edge off bequests that may upset or change the lives of heirs. If you’re silent, those you leave behind may jump to conclusions, which could create doubt, negative feelings or even bad behavior. If you outline bequests formally without prior clarification and ongoing communication, there’s potential to leave loved ones hanging, always wondering about your motives. Be openly verbal about what is and isn’t acceptable behavior after you’re gone. Never assume that affected parties will “play nice;” people may take the initiative and treat themselves to personal items before a legal will is executed. I’ve experienced this behavior firsthand, when my father died. Bad blood can last a long time when this happens. Best to step out there and set a positive tone that invites engagement. I’ve seen family rifts last decades over things like tablecloths, ceramic figurines, jewelry, and, once, garden gnomes. Yes, you read that correctly—garden gnomes. An individual who assumed they were hers left tiny, muddy outlines in the backyard the day after her grandmother’s death.
3. Become a legacy detective.
Ask questions about the final ownership of personal items. You may not realize how much your son wants the china and doesn’t care about your class ring. I’ve witnessed surprises by what I call “heirloom mismatching.” Your heirs are going to need to live with these things a long time, right? Might as well complete an exercise to match the goods with those who will enjoy them the most. That’ll really keep your memory alive.
Assure your heirs that it is not morbid or awkward to ask questions and receive honest answers. No judgment. Have family members and close friends write and share with you the property they would like to inherit. Compare notes and match up requests as best as possible. In cases where desires cannot be fulfilled, communicate openly and with goodwill.
4. Put your plan in action by gifting.
Want an estate plan you can enjoy? Gift items to others while you’re still here to see the smiles on their faces. For many of my clients, gifting special heirlooms and memorable items has provided the most joy. Also, if there are bad feelings among others, they can be promptly addressed by the donor.
Just be aware of IRS gifting rules that may affect your estate planning. For personal articles you choose to gift, make sure to not go over the annual exclusion, which is $14,000 per recipient for 2014. Check out the IRS’ frequently asked questions on gift taxes or consult your estate planning attorney when it comes to calculating fair market value for physical gifts.
The benefits of a living estate plan can enhance a written one and take the edge off a formal strategy.
Sharing the beauty of what remains after you’re gone can be a gift or a curse, depending on how you handle the process, beginning today. In a way, your words, coming from a place of truth and love, will shine an everlasting light on your legacy. Heirs won’t live years with bad feelings about your decisions.
You decide. What will it be? There’s a way to find out: Talk, share, ask them to share. And listen.
It will make your “human more human.”