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Navigating Difficult Estate-Planning Conversations

A retired Phoenix couple in their mid-70s thought they were all set. A decade earlier, they’d put together an estate plan and set up a trust for their three children to direct the distribution of their assets. What they didn’t realize was that they were missing a critical next step: communicating those plans to family.

“In the course of discussing the finer points of their estate plan, it came to light that they hadn’t communicated any of their plans to their loved ones,” says Anna Sinatra, a Phoenix-based financial planner in Schwab’s Wealth Strategies Group. “The truth is, these often-overlooked conversations can be as integral to an estate plan’s ultimate success as the legal documents that underpin them.”

Anna’s clients are far from unique. “There’s often an aversion to sharing such highly personal financial and health care information, even with family,” says Tate Matthews, a Denver-based Schwab wealth strategist. Indeed, more than half the respondents to Care.com’s 2016 Senior Care Survey hadn’t discussed senior-care issues—including finances, health care and end-of-life decisions—with their loved ones.

“In my experience, the more assets, the more reluctant people are to share information,” adds Mark Porcelli, a Schwab wealth strategist in New York City. “I’ve heard some clients say they don’t want to foster a sense of entitlement, and others who simply want to avoid uncomfortable conversations, like why they decided to leave more to a struggling child rather than an equitable distribution among the beneficiaries.”

Although the families they work with have various reasons for not wanting to have such discussions, Anna, Tate and Mark—with a combined 50 years’ worth of experience helping clients to create and preserve wealth—deliver the same piece of advice: Sharing your estate plan with your heirs, however uncomfortable, can avoid confusion, infighting and, perhaps most of all, mismanagement of your estate and end-of-life care.
 

“It’s worth the effort”

The key to navigating such conversations, Anna says, is to plan ahead. As you prepare to sit down with loved ones, she suggests thinking through some key questions in advance:

  • Who is your estate executor and/or trustee—and have you already apprised them of your plans?
  • Who are your heirs—and have you discussed the terms of your will or trust with them?
  • If you’re leaving money to minor grandchildren, have you discussed your plans with their parents?
  • Are there special circumstances—such as providing for a spouse from a second marriage or having to divide assets among competing heirs—that might cause conflict?
  • Have you planned for incapacity, including who will step in if you’re unable to manage your financial or medical affairs yourself?
  • What, if any, long-term-care plans have you made?
     

If you’re unable to answer any or all of these questions, make sure to get to the bottom of them before you broach the subject with your family. Some topics—such as unequal inheritances—might be more challenging to address than others, Anna says, so it’s best to start small and work your way up to the potentially thornier subjects.

“It’s a lot to address all at once, so it’s more likely to be successful as a series of conversations,” Anna says. Be that as it may, the sooner you discuss these important issues, the sooner everyone involved can air their concerns, reach consensus and achieve the peace of mind that comes from putting one’s preferences on paper. “As tough as these discussions can be, I’ve found that, by and large, it’s worth the effort,” she says.
 

“An informed ally”

Inherent in the questions above is the need for a durable power of attorney, which designates an individual authorized to conduct broad financial and legal affairs on behalf of those no longer capable of doing so themselves.

Once you decide who might be a good fit—it can be a family member or any trusted individual—it’s important to discuss the responsibilities of the role and outline the scope of your financial and legal situation.

“I’ve seen estates where the heirs simply weren’t aware of all the various accounts,” Mark says. “This could result in a longer and more costly estate settlement. Also, assets can go missing, especially when there isn’t a thorough cataloging of a family’s finances.”

Whether or not a family decides to disclose to heirs precisely how much is in each account—or even the overall value of the estate—is beside the point, Mark says. The important thing is to chronicle each asset, have a method for providing access, and, of course, ensure you’ve properly named a beneficiary or beneficiaries for each and every account.

Tate says it can also be helpful to provide a family member with access to a parent’s or grandparent’s accounts to prevent cases of elder fraud. “Numerous times I’ve seen a financial institution thwart a potentially disastrous situation because they were able to reach out to someone with a durable power of attorney who could step in as an advocate for the account holder,” he says. “Having an informed ally can be its own powerful form of protection.”

Whether you have a durable power of attorney or not, Schwab recommends you designate a trusted contact who can answer questions about your account should the firm suspect financial exploitation, diminished capacity or other unusual or suspicious circumstances.

On par with a durable power of attorney for financial issues is a durable power of attorney for health care, which authorizes an individual to make medical decisions on behalf of those who become mentally or physically incapacitated.

Anna says many of her clients go so far as to establish an advanced health care directive, which states in no uncertain terms what life-saving treatments a person will and will not accept should they become unable to speak for themselves. That said, it’s better to make your power of attorney—and, in turn, your family—aware of your wishes long before the need arises. “I like to think of durable powers of attorney—be they for financial and legal affairs or for health care issues—as advocates,” Anna says. “And the more informed they are, the more effective they can be.”
 

“A trigger that gets people talking”

In theory, there’s no wrong time to detail your assets to those with a stake in their eventual distribution. But in practice, many procrastinate until unforeseen circumstances spur them to take action. For a client of Tate’s, it was when she was preparing to undergo chemotherapy.

“Usually there’s a trigger that gets people talking,” Tate says. “However, planning your estate under extreme stress isn’t ideal. Such potentially fraught conversations can be complicated enough without adding crisis to the equation.”

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The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.

Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.

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