Family relationships evolve over a lifetime, for better or worse--even without money factored into the picture. When finances are thrown into the mix, particularly estate planning, it's important to start strategizing ahead of time.
As of 2013, American retirees were ranked the sixth most generous in the world in terms of amount of assets passed to family members, according to a survey by HSBC, the global British bank. The latest survey noted that 56 percent of American retirees planned to leave an inheritance with an average amount of $176,814.
However in 2015, HSBC noticed a new retirement trend--more than 43 percent of U.S. retirees said they continued to provide regular financial support to at least one other person, including 10 percent saying they were supporting "at least one" adult child. Such changing demands on the resources of some living retirees indicates that the topic of inheritance may become considerably more complex in some families, which could lead to stress between aging parents and adult children.
Here are some ways to keep the peace between adult children and other relatives who may benefit from your estate.
Remember: Your financial well-being comes first. If you haven't updated your estate planning in the last 5-10 years, do so now to fully understand your complete financial picture. Like all personal finance issues, estate planning should be adjusted when significant life changes happen or if there is a major shift in assets, such as when a relative needs help. In short, your estate picture has to reflect current financial realities, so before you decide how to allocate your wealth either before or after you die, seek qualified financial, tax and estate advice.
Decide distribution and build a plan. Managing money and family are usually parallel issues until the topic of estate planning arises. For some families, splitting money, property and possessions more or less equally among adult children is a smooth process. However, when it doesn't result in the fairest outcome for everyone involved, it can be trickier to navigate. Varying situations for each child might mean that an even split won't work. Once you are able to determine your assets, start thinking through how you can distribute them.
Confirm who will direct your estate. Making a will and designating various health, financial and business powers of attorney as applicable are the standard first steps in estate planning. Generally it's smart to have those documents in place early in life. However, as your children get older, you should review those documents and assigned leadership roles to make sure those decisions are still appropriate.
Communicate your plans. Hollywood has produced many a movie scene with family members sitting nervously in a lawyer's office waiting for the will to be read. Such moments make for great comedy or drama, but not great modern estate planning. Based on what you hope to leave your family, the state of your relationship with your adult children and whatever weigh-in you get from qualified advisors, it's usually better to communicate your plans to your children in advance and make sure your legal documents confirm what you plan to do.
Plan for the unexpected. Whether you expect agreement or argument from your adult children, plan how you'll deal with discord. There may be a little back-and-forth discussion between siblings before plans can be finalized, or possibly in the most serious cases, relationships may be temporarily severed. Try to anticipate what might go right or wrong in the discussion and have a strategy in place to diffuse potential problems.
Leave a road map. If you're concerned that family members might mismanage your assets after you're gone or incapacitated, why not take steps to educate them in advance? Either work with them individually or with a qualified financial advisor so they know precise steps to take when your assets transfer. Also, encourage your adult children to work with their own qualified financial advisors to make sure they've planned for their own estate matters.
Bottom line: How will your adult children react to your estate plans? Building strong communication and trust with your family can be just as important as deciding what you're going to do with your money.
Nathaniel Sillin directs Visa's financial education programs. To follow Practical Money Skills on Twitter: www.twitter.com/PracticalMoney
This article is intended to provide general information and should not be considered legal, tax or financial advice. It's always a good idea to consult a legal, tax or financial advisor for specific information on how certain laws apply to you and about your individual financial situation.