Family conflict is a common cause of estate plan disputes. This can result in costly litigation, which can lead to a delay in the disbursement of assets. Families can reduce this risk by having open conversations with their adult children about their estate plans.
What is an estate plan?
It is important to understand this concept to help guide the discussion. An estate includes all assets. Financial assets like bank accounts and retirement assets, property like real estate and family heirlooms as well as business interests are all included within the concept of estate. The estate plan guides the distribution of these assets. Without a plan, state law guides the distribution of the estate. With a plan, the owner has control over who gets what.
There are different legal tools that can help to develop an estate plan. A will, arguably the most well-known legal tool in estate plans, is a document that explains who gets which assets. Estate plans can also place an individual in charge of financial and healthcare decisions in the event of incapacitation. High net worth families are wise to consider trusts, as well. These legal tools can be structured to help protect assets from creditors, helping to better protect family wealth.
What should I tell my adult children about this plan?
The answer will vary for each family. In the least, it is often a good idea to let your children know what they are in charge of. Discuss who will make financial and healthcare decisions on your behalf. This can help reduce animosity when the plan goes into action.
Why should I have these discussions?
As noted above, confusion over the plan can result in dispute. These disputes can take place in the courtroom and result in the details of your estate becoming public knowledge. The process can also diminish your estate, as funds could be removed from the estate to cover the cost of litigation.