What Should I Include in an Estate Plan Discussion?

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An estate plan discussion can preserve family relationships.

Death is an unpleasant topic.

I get that.

As Woody Allen famously quipped: “I’m not afraid of death; I just don’t want to be there when it happens.”

Few people want to think about their loved ones being gone.

The harsh reality is everyone dies.

According to a recent U.S. News & World Report article titled “Discuss Your Estate Plan With Your Children,” this unavoidable truth makes having an estate plan discussion with your loved ones a priority.

It is estimated $68 trillion will be transferred between generations in the next 20 years.

For this reason, parents need to explain their plans to their children.

Before you can have an estate plan discussion within your family, you must create an estate plan.

One thing you may need to address is the federal estate tax exemption.

The current high exemption threshold is set to revert back to $5 million in 2025.

With the current occupant in the White House and his like-minded colleagues running Congress, this exemption could revert before the 2025 deadline.

Whether you choose a last will and testament or a revocable living trust to transfer your assets postmortem, you may select your children to serve as the executor or the trustee.

Part of your estate plan discussion should involve educating them on their roles and the reasons for your wishes.

Another important aspect of estate planning is incapacity planning.

You will need someone to manage your financial affairs and make medical decisions on your behalf should you be ever be unable.

Consequently, you will need a general durable power of attorney for your finances and an advance health care directive for your medical concerns.

Making decisions about medical treatment can feel quite daunting.

Talk with your children about what you want or do not want under a variety of foreseeable scenarios.

That way they can act confidently on your behalf.

Many parents do not want their children to know their financial situation.

Unfortunately, leaving your children in the dark will only create problems when they must act on your behalf.

When you have your estate plan discussion, provide your children with the names of relevant financial institutions, your CPA, your financial advisor, life insurance professional, and your estate planning attorney.

By listing your accounts and investments and the location of important information, you will save your loved ones time when it comes to settling your estate.

You cannot assume your children will intuitively understand the reasons behind your estate plan design.

After all, they are not mind readers.

You may need to explain qualified and non-qualified accounts, life insurance proceeds, probate, step-up in cost basis, and the differences between Roth IRAs and traditional IRAs.

If they understand the reasons for your decisions, they will be better equipped to follow your wishes without any attending unnecessary stress.

Having an estate plan discussion as a family can preserve your wealth and your family relationships.

Reference: U.S. News & World Report (Feb. 17, 2021) “Discuss Your Estate Plan With Your Children”

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