4 More Estate Planning Action Steps

Bob Carlson

No matter what your net worth is, an estate plan is always worth putting into place.

It’s a legally binding document that spells out who gets your assets…

It offers ways to limit the tax burden on your estate…

And it helps your loved ones from having to deal with too many administrative nightmares after you’ve passed on.

These are just a few of the benefits of having an estate plan. To that end, as a follow up to last week’s post, here are four more action steps to consider for your family’s estate plan.

Estate Planning Action Step #4: Handling Family Conflicts

Some sources of conflict are unique to a family. There might be a long-standing dispute between siblings, or a particular piece of property that is coveted by more than one family member.

Other sources of conflict are more common, such as conflicts among families formed by multiple marriages, jealousy or distrust directed at the adult child being appointed executor of the estate, etc.

Sometimes, one child believes the parents always favored another child. It’s not unusual for dislikes or disputes among family members to simmer unresolved while the senior family members are alive, only to explode after their passing.

An estate plan itself can also create conflicts.

For example, the plan might require siblings with different values to share and co-manage assets.

A trustee or executor might be given significant discretion over the distribution of income and assets.

Or siblings who haven’t worked together might jointly inherit the family business or real estate.

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Too many people choose to either deny the potential conflicts in their family, or decide to ignore the conflicts and let the next generation work things out. Others inadvertently create conflicts in their estate plans.

It’s better to work with an estate planner to identify potential conflicts and consider ways to reduce them. An experienced estate planner has seen or heard most of the possible conflicts already. So the planner will be able to recommend strategies.

Unfortunately, too many people decide that an effective strategy will hurt someone’s feelings or result in a confrontation. The result is often a far more complicated and expensive drama played out during settlement of the estate.

Estate Planning Action Step #5: Keeping Up Communication

Most people fail to communicate the outlines of their goals and wishes to their spouses and children.

The desire to avoid conflicts is at least partly responsible for this. Some people just aren’t comfortable talking about their money and estate plans.

The unfortunate result is that loved ones often don’t understand the property owner’s intentions, and more importantly, the best way to handle the estate.

It’s not unusual for the spouse and children of a financially successful person to have very limited understanding of how wealth is created and preserved.

If you don’t want to communicate details about your finances, one solution is to give property through trusts and other vehicles. Professionals will handle the property while loved ones will benefit from it.

Another option is to introduce your loved ones to your estate planner and other financial advisors. Have the professionals educate your loved ones and answer their questions.

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This should be considered a long-term process. Most likely, a series of meetings with increasing details are necessary to bring the loved ones up to speed and make them comfortable with your advisors and plan.

Estate Planning Action Step #6: Making Sure to Revise and Update

Most people don’t like estate planning, because it requires them to address their mortality.

They like to think of estate planning as a one-and-done exercise. They don’t want to reopen the discussion after a plan is complete.

However, for a plan to be effective, it must be up-to-date.

Of course, there are likely to be changes in your family. Your goals might change. There might also be changes in the laws, your assets and liabilities, the markets and more.

Every couple of years or so, you should talk through the plan with your estate planner and see if revisions are needed.

I suspect the major cause of such holes in people’s estate plans is that many people don’t really understand their plans. It might be their fault, or the planner’s fault, or a bit of both. Nonetheless, it is important that you understand your plan. Only then you are likely to know what might be missing.

Estate Planning Action Step #7: Having a Business Succession Plan

It is remarkable how few business owners have real succession plans. Too often, the plan is a vague belief that a particular child or employee will run the business.

A business isn’t going to survive long without a clear plan about who will own and manage it (they can be separate people) after the current owner.

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There’s a greatly reduced probability of the owner’s loved ones receiving much value from the business without a proper succession plan. In fact, the value of a business declines rapidly when the owner departs without a firm succession plan in place.

A succession plan requires a transition, and that stops many business owners. They don’t want to set a time frame when they will sell the business or turn it over to someone else, even a loved one.

Even when the plan is for the business to be sold, the business must be managed to be ready for a sale. Whether the succession is to sell the business or have a loved one take over, a successful succession plan usually takes five years or longer.

If you expect the business to provide some wealth to your survivors, you need to have a succession plan in place, revisit it often and execute the plan.

If you wish to learn more, check out the previous 3 action steps right here.

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