Many baby boomers may hesitate to discuss money with their children, but the reality is that a massive amount of wealth will be transferred in the upcoming decades.
Some $68 trillion will move between generations in the next two decades, reports U.S. News & World Report in the article “Discuss Your Estate Plan With Your Children.” Having this conversation with your adult children, especially if they are members of Generation X, could have a profound impact on the quality of your relationship and your legacy.
Staying on top of your estate plan and having candid discussions with your children will also have an impact on how much of your estate is consumed by estate taxes. The historically high federal exemptions will last forever—even without any federal legislation, they end in 2025.
One of the purposes of your estate plan is to transfer money as you wish. Which is why it’s vital to talk with an estate planning attorney about an estate plan. We can help you create trusts, naming your child as the trustee, or simple wills naming your child as the executor.
Talking with adult children about estate planning includes discussing the role of trustee and/or executor and helping them understand the responsibilities that these roles require. They will be asked if they are comfortable handling the decision making, as well as the money.
What most parents refuse to discuss with their children is money, plain and simple. Children will be better equipped, if they know what financial institutions hold your accounts and are introduced to your estate planning attorney, CPA and financial advisor.
You might at some point forget about some investments, or the location of some accounts as you age. If your children have a working understanding of your finances, estate plan and your wishes, they will be able to help you find what you need, when you need it.
Most adult children do not have the same experience with taxes as parents who have acquired wealth over their lifetimes. They may not understand the concepts of qualified and non-qualified accounts, step-up in cost basis, life insurance proceeds, or a probate asset versus a non-probate asset. It is critical that they understand how taxes impact estates and investments. By explaining things like tax-free distributions from a Roth IRA, for instance, you will increase the likelihood that your life savings aren’t battered by taxes.
Even if your adult children work in finance, do not assume they understand your investments, your tax-planning, or your estate. Even the smartest people make expensive mistakes, when handling family estates.
Having these discussions is another way to show your children that you care enough to set your own ego aside and are only thinking of their future. Talking with adult children about estate planning is a way to connect not just about your money or your taxes, but about their futures. Knowing that you purchased a life insurance policy specifically to provide them with money for a home purchase, or to fund a grandchild’s college education, sends a clear message. Don’t miss the opportunity to share that with them, while you are living.
If you have additional questions or concerns about estate planning, contact Bob Michaels to schedule an appointment.
Bob Michaels is extremely passionate about providing the best possible legal experience for his clients, and focuses his practice on elder law, estate planning, business, and real estate matters. Bob has been able to provide piece of mind and a solid foundation to many folks in the Puget Sound area over the years and wants to provide resources and relevant information whenever he can.
For information about Estate Planning HERE.