Robert J. Ross
Robert Ross, an Inverness-based attorney, draws upon 30 years of legal experience to assist his clients and lead his team of attorneys. In the following article, Bob discusses the potential hazards and benefits of telling heirs about our estate plans and, in certain instances, gaining from their perspectives in the planning process. While many may avoid this topic for fear of triggering family strife, they may actually do much to prevent future controversy by airing the details now.
Often, one of the hardest decisions people make in the estate planning process is how much (and when) to tell their children or other heirs about their plans.
There’s no single right answer for everybody; what to do depends on the nature of your planning and your family circumstances. But it’s worth giving the issue some consideration.
Many people are very hesitant to reveal the details of their family’s expected inheritances. A recent survey by UBS of almost 3,000 investors showed that only 54% had discussed their estate plans with their heirs, and only 34% had mentioned specific dollar figures.
Many parents say they fear that if their children find out they can expect a substantial legacy in the future, they’ll be less likely to work hard and save in the present.
Another worry is that revealing an estate plan could lead to family squabbling and resentment. This is especially true if you plan to leave unequal inheritances to family members.
Imagine a family where one child is a successful banker while the other earns little money but does socially valuable work for a non-profit. If the parents leave more money to the poorer child, the banker might feel resentful and unloved. But if they leave everything in equal shares, the poorer child might feel slighted and misunderstood. Many families will simply avoid talking about the subject in order to keep peace.
If there’s a blended family with children from a prior marriage, things can get even more complicated.
But while it can be difficult, there are also some very good reasons for having a detailed talk with your family about your estate plan.
For one thing, if there’s a chance of family squabbling and bitterness, it can be better to tell everyone what to expect now, while you’re still alive and have a chance to explain your motives and smooth things over. You could explain, for instance, why you’re leaving more assets to a child with a large family than to a child who is single, or why you’re leaving money to a charity that has always been important to you.
In fact, the UBS survey showed that heirs who weren’t told in advance about inheritance arrangements were more than twice as likely to be unhappy about them afterward.
Another thing to consider is that, if someone dies suddenly, the family is often left very confused about finances. They don’t know what assets there are or where they’re located, and searching for them can be extra stressful when the family is already suffering the grief of losing a loved one. If you discuss your assets and your plan now, so that everyone knows what to expect, it can make things much easier after you pass away.
In addition, many parents who talk about their plan with their children are surprised to discover that their children sometimes have good ideas. If a family owns a vacation home, for instance, the parents might have one thought about what to do with it, but the children might come up with a plan that better protects the home and better suits their future needs.
Talking with your children also allows you to coordinate your estate plan with your children’s own estate plans. You might discover, for instance, that the whole family can save taxes if you give more assets directly to your grandchildren, or create trusts for your children instead of leaving assets to them outright.
Speaking of trusts, the issue of whether to talk with your heirs gets more complicated if you put substantial assets into a lifetime irrevocable trust. That’s because the beneficiaries of the trust might be legally entitled to see the trust statements.
Different states have different laws about how “quiet” or “secret” a trust can be, and some require full disclosure once a beneficiary reaches a certain age. Also, some institutional trustees make it a practice to send statements to anyone named in a trust, unless told otherwise – so if you have a trust for a child but a grandchild is named as a future or contingent beneficiary, the trustee might send statements to the grandchild as well.
If you’re concerned about these issues, it’s a good idea to discuss them with your attorney.
TAX NOTICE: To comply with certain U.S. Treasury regulations, we inform you that any tax advice contained in the text of this communication is not intended or written to be used by any person for the purpose of avoiding any penalties that may be imposed under the Internal Revenue Code.
DISCLAIMER: Actual resolution of legal issues depends upon many factors, including variations of facts and state laws. This newsletter is not intended to provide legal advice on specific subjects, but rather to provide insight into legal developments and issues. The reader should always consult with legal counsel before taking action on matters covered by this newsletter.
The Law Offices of Robert J. Ross featured this article in the Spring 2015 newsletter “Report From Counsel,” and it is reprinted here with permission of the copyright holder. If you would like to sign up to receive future issues of the newsletter without charge, or if you would like to read past articles on wills and trusts, administration of estates, and business law matters, please visit our website at: http://robertjross.com/newsletters/. If you would like to speak with Bob Ross or Patrick Ross about your will, trust, or other legal matters, please give us a call at 847-358-5757.