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MDRT INSIGHTS

When Heirs Don’t Understand: Estate Planning Consequences

Clients and advisors often operate under the assumption that they can check all the right boxes (trusts, powers of attorney, advance directives, proper beneficiary planning on their retirement accounts, life insurance, etc.) to create the perfect estate plan.

But even though all this preparation is intended to ease the transition for clients’ families after the clients die, sometimes unforeseen complications and conflicts can occur. When beneficiaries do not understand their loved one’s intentions, or don’t agree with their decisions, quarrels may ensue.

As trusted partners, advisors can help clients mitigate potential animosity and create an executable estate plan that will be well-received with only a few extra steps.

Hidden Intentions That Hinder Estate Plans

Clients tend to keep their financial lives private. For some clients, this secrecy may even extend to their families. As a result, their beneficiaries may not be aware of the full financial picture surrounding their inheritance until ownership is transferred. Clients do not want to upset their children through discussion of a sensitive topic. Nonetheless, it is better for them to engage in conversations about their inheritance while they can rather than leave their kids with unanswered questions. If family members are excluded from the process, they may second-guess their parents’ intentions, especially if the estate is not divided equally in their eyes.

I see many families who focus on what wasn’t resolved or left for them instead of the significant inheritance their parents secured for them. If siblings receive different amounts or one has limitations to their inheritance, they may fixate on disparities and create fictional, emotionally driven scenarios about departed parents in their minds. The parents’ intentions get misconstrued and distorted as they are not present to answer these questions and alleviate doubts.

Strategies To Mitigate Animosity

Advisors should encourage transparent communication between clients and their beneficiaries throughout the planning process to prevent future animosity and support healthy family dynamics. You can accomplish this through a variety of methods, such as in-person meetings and extra documentation.

Family conferences. Our firm arranges family conferences as an opportunity for clients to include their families in the planning process. We invite direct descendants to join us in our office or remotely via video chat to walk through the estate plan and address any concerns. Clients are able to explain their decisions and reasoning in their own words to all of their beneficiaries. We’ve seen this strategy resonate with clients and their families, and help clarify the estate plan objectives.

We may not attach numbers to the plan at this point. Instead, we encourage clients to focus on communication with their beneficiaries about their responsibilities. For example, we review who the successor trustee, successor power of attorney and health care power successor are, if applicable, and teach them what this means. Clients can also discuss their expectations for their children’s actions with their inheritance.

This is an opportunity for families to have a dialogue, instead of a one-way conversation when beneficiaries can’t get the answers they seek. Clients can share their intentions and we can help educate the beneficiaries about the wealth transfer.

Personal letter. We also encourage clients to write personalized “I love you” letters to their beneficiaries as an opening to their estate plan. Although we guide clients with this task, the letter should come from their heart, not our head. This is a last touchpoint and opportunity for clients to use their voice to explain the inherited assets and intended outcomes. Written documentation along with any prearrangement plans remove the guesswork out of the transitional period.

The letter should include the investment advisor’s and lawyer’s contact information and an inventory of physical locations of safe deposit boxes and relevant documents. Copies of birth certificates, marriage certificates and Social Security cards are important to include. Additionally, clients can pass along a digital imprint so family members can close out social media accounts and sort through files. The letter should conclude with the client’s core values, their wealth accumulation success stories and their hopes for each child who will receive funds.

Plan Continuity

Typically, clients who solicit estate planning services have adult children as their beneficiaries. The children often approach their parent’s advisor with questions about their individual plans. If they engage with us beyond their parent’s passing, we can seamlessly transfer assets with plan continuity.

Although that’s not the goal of estate planning, multigenerational planning is an added benefit.

The greatest intentions sometimes create the worst outcomes. If clients and advisors take a few extra steps during estate planning, they can prevent unnecessary family animosity. Often, clients value their privacy or are afraid to approach their family. However, it is essential for them to have these conversations while they still can, to provide financial stability for their family as they intended.

Gregory B. Gagne, ChFC, is an 11- year MDRT member with four Court of the Table and two Top of the Table honors. He is the owner of Affinity Investment Group, LLC, in Exeter, N.H., and is past president of NAIFA New Hampshire. For additional information, [email protected].


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