You may plan on living forever, but just in case that doesn’t happen, ask yourself this question: What will happen to your hard-earned cash when you’re gone? Your bank accounts, 401(k) investments, and any real estate you own are all part of your overall estate. And if you want it to go to a beloved family member or to a charity you care about, you’ll have to let someone know your plans. It’s called estate planning.
If you aren’t 30 yet, this probably seems far off. But here’s what will come up faster than you expect: estate-planning issues for your parents.
These conversations can be uncomfortable, even embarrassing. You probably don’t want to think of life without your parents. And you certainly don’t want to seem like you’re scheming for an inheritance. But any responsible adult who is remotely savvy about money has already had these thoughts.
It’s important to have conversations about estate planning while everyone is healthy and thinking clearly. Doing so avoids hasty decisions and allows everyone to think things through properly. It may even save you money if you plan the tax issues correctly and far enough in advance.
Further Reading: “How to Protect Your Parents' Assets”
Knowing exactly what you need to plan for can make the conversation easier. Here are some estate-planning tips that will help it go as smoothly as possible:
Determining the Executor of a Will
One of the first steps in estate planning is determining who will be the executor of the estate and writing that into a will.
Filling this role for a friend or family member does not require any special skills. But it does require a decision ahead of time. The person creating the will can write it up in a standard form. (Online tools like LegalZoom are helpful for this.) The will must then be signed witnessed by at least two observers with no conflict of interest to be legally valid, according to the American Bar Association.
The executor will have legal power over the deceased’s bank accounts and financial assets and will be in charge of decisions related to real estate. If there are outstanding debts, the executor writes the checks. And once everything is settled, he or she distributes the finances to the beneficiaries of the deceased.
If you're the executor, you'll have to make tough decisions. However, you're really just the messenger, delivering what your loved one wanted.
Having a plan — or at least the outline of one — before you have to deal with grief on top of it all is one of the best pieces of advice you can heed.
Further Reading: “‘Should I Write a Will?' and Other Awkward-But-Important Questions”
Considering Potential Conflicts
Far too many people face shocking financial realities that make the grieving period even harder than it should be. You may discover that your parents were heavily in debt. Or that your siblings say the family home should belong to them.
More than 44 percent of adults have experienced or heard of a family conflict over assets during an estate settlement, according to a 2018 survey of more than 1,200 Americans released by EstateExec, an online resource for executors.
You may think your family is a loving bunch that would never break apart over money. But consider that on average, it takes about 16 months to settle an estate, according to EstateExec’s research.
Think of how many decisions need to be made in a year to wrap up an estate. There could be some hard choices. And if your parents or grandparents have assets that you know will be valuable to your family, it may save your relationships if you work these things out ahead of time.
Take the time to talk about what your loved ones want their legacy to be. No one wants to be in the family that broke apart over a legal battle.