Estate planning can be a difficult topic for families to discuss. However, good communication can help ensure that family members know what to expect, and this reduces the likelihood that the estate plan will face a challenge. It will also help to ensure that your plans are understood.
Every family has its own needs, but the below may be things your family should consider when you have a conversation with them about your own estate plan.
What happens if you become incapacitated? You may think about estate planning in terms of how your assets will be distributed, but it is not uncommon for a person to experience a period of short or long term illness prior to their passing.
A power of attorney can appoint someone to handle financial matters if you are incapacitated. An advance health care directive can outline your wishes for medical care and appoint someone to handle that as well.
A living will may also be needed to specify what kind of end-of-life care you want. The person who is chosen to make financial and health care decisions should be someone you can trust to carry out your wishes as well as someone who is able to manage any conflict that arises as a result.
For planning how assets will be distributed, there are a number of questions to ask as well.
- Is the estate large enough that it may incur an estate tax, and if so, how might that be managed?
- Will any assets be donated to charity?
- Do you have children from a prior relationship?
- Are your children still under the age of 18, or are there grandchildren to whom you would like to leave assets?
- Do you want most or all of your estate to go to your spouse?
You might choose to divide assets equally between children, or may decide to give one child more than the other on the basis of that child’s income or other factors.
Another thing to consider is whether to pass the majority of the assets on using a will or a trust.
Trusts have a number of uses. They can hold money for children who are minors, protect an inheritance from a beneficiary’s creditors or distribute assets based on certain conditions.
For example, you may wish to only distribute assets to an heir once they have finished college or reached a certain age. A trust can also be used to support a loved one who cannot manage their own finances.
However, even though probate can take some time and cost some money, a will may be the best choice for some families if the distribution of assets is fairly straightforward. The best choice for executor should also be discussed. It may be a family member or a professional such as an attorney.
You should endeavor to have multiple ongoing conversations around estate planning. An estate plan is likely to change over time just as a family does, and the needs of the family should continue to be reflected over time in that plan.