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Planning Ahead: Now Is the Time to Introduce Heirs to Your Estate Plan
Published Date : July 30, 2014
While it is commonplace for our clients to craft thorough estate plans and trusts with focus on attorneys and legal documents, the follow up process of engaging and educating the successor generation is often overlooked. By actively discussing your intentions with family members or an executor tasked with settling your estate, you can gain significant legal, financial and emotional benefits. Thorny issues such as familial conflicts, interpretations of wishes, administrative hassles, and stress can be minimized, if not entirely avoided, prior to your death through an on-going dialogue between your heirs and your enlisted financial and legal professionals.
After your estate plan is completed or modified, it is important to introduce at least one successor to your estate plan so as to ensure its faithful execution. When selecting an executor or successor trustee, a logical starting point is to choose someone who exhibits financial responsibility, displays an interest in managing finances, or lives locally. In the absence of a good candidate such as a reliable child or another trusted relative or friend, it may be necessary to appoint a corporate trustee.
Once a successor to your estate is in place, a highly productive strategy is to involve heirs in the administration of the assets prior to your death or diminished capacity. If you have a living trust, consider adding them as a co-trustee now or, in the case of retirement accounts, you may want to grant them Limited Power of Attorney. The intent is not to relinquish control of the assets, but rather it is to include your successors in the flow of information. By inviting them into client meetings, educating them on both the estate plan and taxes, and familiarizing them with the investment process, you can ensure that during the emotionally turbulent time of your passing, your estate plan is smoothly administered. Future conflicts between heirs, such as beneficiaries unhappy with their inheritance, can also be avoided if those conflicts are addressed today. While potentially uncomfortable, resolving family disagreements can help preserve your estate from being eroded by legal and court fees.
It is important to recognize that while your legal will and trust dictates the distribution of your estate to beneficiaries, it is often not done on an asset by asset basis. To avoid any misinterpretation, a Letter of Intent (LOI) can accompany your plan documents and be shared with your successor. Although not legally binding, an LOI can be used to interpret intent and provide the granular instructions to your executor regarding special requests, burial preferences, and asset distribution. For example: “The jewelry collection goes to Jenny but all the cars go to John. Use the remaining cash to equalize the division.”
Communicating your intentions to family, selecting a reliable successor, and integrating that successor with your financial, legal, and tax team will ensure the protection of your hard earned estate. At Sand Hill, we encourage the inclusion of future heirs in your planning and welcome their presence and participation in our portfolio and wealth planning discussions.
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