Disclosing the intent and mechanics of your estate plan may be beneficial to your heirs. Advanced and consistent estate planning has many benefits, but one of the main goals of estate planning is to minimize post-death confusion and tension. Accordingly, it is good practice to consider all of your options, and then discuss your intent, including the rationale for the decisions you make, with the involved parties concurrently with finalizing documents. This does not mean that full disclosure is always the right decision; every family’s situation is unique. However, for the following reasons, it is important to at least consider the benefits of being an “open book” to your heirs.
- Prevent mistakes and improve post-death efficiencies. You do not want your loved ones searching for assets and questioning your intent soon after they finish eulogizing you! Having an open conversation now, with full disclosure about intent and asset inclusion, may save your heirs from a lot of stress in the future.
- Minimize intra-family conflict. Having an open conversation now about your intent may go a long way towards preventing future conflict. I have clients who are beneficiaries under a trust that simply did not know the grantor’s intent; this confusion causes them to question almost every decision made by the trustee. These questions cause tension between and among the beneficiaries and also with the trustee.
- Help your heirs realistically plan for the future. Consider the situation where one of your heirs, who always wanted to be a schoolteacher, is going to graduate school to be a doctor because she feels pressure to make a higher income. If she knew about her inheritance, maybe she would have followed her true dream. Likewise, if you are wealthy and your children expect a large inheritance, but your plan is to donate most of your estate to your local church, then your children may benefit from knowing this information in advance.
- Tax planning. Depending on the individual financial situations of your intended beneficiaries, early discussions may provide tax-planning opportunities. For example, knowing that there is disproportionate wealth between or among your intended beneficiaries may affect which assets you leave to whom. Additionally, there may be other strategies to employ, such as using gifts during your lifetime or you choosing to leave assets directly to your grandchildren.
As noted, not all family situations are ideal for full disclosure conversations, but there are times where having an open conversation now can lead to wiser estate planning for you and for those you love.
For assistance with any legal matters related to your business or estate planning, contact Fournier Legal Services at firstname.lastname@example.org or 860.670.3535 now for a consultation and planning session.
Joseph E. Fournier is an Attorney and a CPA who has more than twenty years of experience in a variety of business legal matters, including start-ups and company formations, drafting shareholder and operating agreements, contracts, employment law, commercial litigation, tax planning and audit defense, and mergers and acquisitions (M&A). He also handles estate planning matters, such as business succession planning, wills, trusts, and probate.