Advisor Resources: BMO Wealth Institute

The family conversation you should not avoid: How to discuss your legacy

The family conversation you should not avoid: How to discuss your legacy

How do you want to be remembered? What is the lasting memory that your heirs and beneficiaries will have when you pass away? Will they remember their period of loss as one when they were comforted and supported by each other or will it be one of the most difficult interpersonal experiences of their lives?

Everyone needs to take the time to consider what they are leaving behind. What is left behind is often far more than can be measured in monetary terms. In addition to material worldly assets, a person leaves behind a legacy, that represents their values, plans, beliefs and many cherished memories.

Traditionally, estate planning has focussed on estate administration and tax considerations and having the proper legal documents in place. It is now understood that the emotional impact on those left behind calls for the concept of enhanced estate planning to be introduced. Enhanced estate planning requires having the often difficult conversations necessary to share the background and reasoning behind the estate decisions that have been made that your heirs will have to implement.

Benjamin Franklin said “By failing to prepare, you are preparing to fail.” This statement continues to hold true as many families have direct experience with the reluctance of a parent to effectively plan, prepare and communicate their estate plans. So often this unwillingness to plan is increased by a lack of information about the parent’s wishes, especially when it leads to ongoing hostility over items that represent memories beyond their monetary value.

A survey noted that almost half (44%) of the people surveyed recognized that one of the most important reasons for having a will is to prevent family disputes.1

Feelings of hurt and strained family relationships can be avoided, through the appropriate and necessary estate conversations with family members and other intended heirs and beneficiaries. Your personal legacy depends more on the effective communication of your values, plans and beliefs than on the items that can be neatly summarized in the paragraphs of your will and trust.

 

For advisors:

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Traditional estate planning

Estate planning has traditionally been seen as an exercise that is first undertaken with the assistance of accounting and legal professionals. For high net worth individuals, the primary estate planning documents that have to be prepared are a will and a trust. Powers of attorney for property (durable power of attorney) and for personal care (advance health care directive) should be prepared at the same time as the will and trust. Incorporated into these documents would be strategies that may minimize taxes, ensure that your worldly assets are distributed as you desire, and provide a means to make important decisions when you are not able. Only when the legal documents were completed would consideration then be given to letting family members know about what was planned.

The importance of having a will prepared is well understood by Americans who are in their retirement years. According to a survey, three-quarters of Americans over the age of 65 have a will. Unfortunately, overall the proportion of those with a will drops with age. Less than half of those surveyed who were age 54 or less had made a will.2

A will is important for everyone, not just for those who are at an age when they are thinking about their own estate plan. The reason is that a severe and debilitating illness or death can happen at any age. The most important reason is to be able to ensure that any assets, both financial and sentimental, are passed in accordance with your wishes.

Enhanced estate planning

Enhanced estate planning is much more than just the creation of legal documents that include considerations for accounting and tax issues – it helps to avoid family conflicts.

Distinct advantages of the enhanced estate planning process

  1. Avoid family conflicts over the division of the financial assets
  2. Avoid family conflicts over the division of the personal effects
  3. Leave a legacy that represents values, plans, beliefs, and cherished memories

Enhanced estate planning is an important way to share a real human story – the concept of a legacy. Legacy is the way in which a person is remembered by loved ones. It is how people would describe someone after they passed away. Legacy is leaving behind the essence of who you are.

One of the best ways to create a legacy is through conversations with family loved ones, heirs, and beneficiaries. When a person passes away, they leave behind much more than assets and gifts for their loved ones. Often the most important things that are left behind are cherished memories. An important way to create lasting positive memories is to share stories about personal possessions and cherished assets with loved ones as you create your estate plan so that they have an understanding of your intentions, feelings and wishes. Sharing stories about these non-financial assets with loved ones and learning about the objects’ importance to them will help to avoid family conflicts over the division of personal effects.

Many families are having conversations about the parents’ estate planning and goals. In fact almost 90% of adult children and parents agree that estate planning is an important topic to discuss.3 But only 19% of the adult children say that the discussions have been very detailed. The parents report that only one-third (33%) have had detailed discussions about their estate planning. Telling a child that a will, trust and powers of attorney have been prepared, and maybe even letting them know some of the plans for managing and distributing assets would be considered a discussion, but not a detailed discussion.

A detailed discussion would explain the reasons for the decisions that were included in the preparation of the will and powers of attorney, and be key to the process of building a legacy for those left behind. It is these enhanced estate planning conversations that would ensure a legacy that represents the values, beliefs and cherished memories remains long into the future.

 

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1 Survey from Rocket Lawyer: In a New Era of Estate Planning Rocket Lawyer™
Survey Shows That Only Half of Adults Have a Will, March 28, 2012
2 Survey from FindLaw.com: US Data: Only One in Three Americans Have a Will,
Says New FindLaw.com Survey: Only One in Six Younger Americans Have a Will, February 7, 2013
3 Survey from Fidelity: Parents and Adult Children Not in Sync as Many Families
Still Struggle with Financial Conversations, November 14, 2012

BMO Global Asset Management does not offer tax advice. Contact your tax advisor.
This information cannot be used by any taxpayer for the purpose of avoiding tax penalties that may be imposed on the taxpayer. This information is being used to support the promotion or marketing of the planning strategies discussed herein. BMO Financial Group and its affiliates do not provide legal or tax advice to clients. You should review your particular circumstances with your independent legal and tax advisors.
Estate planning requires legal assistance which BMO Financial Group and its affiliates do not provide.
BMO Wealth Institute, a unit of BMO Financial Group, provides this commentary to clients for informational purposes only. The comments included in this document are general in nature and should not be construed as legal, tax or financial advice to any party. Particular investments or financial plans should be evaluated relative to each individual, and professional advice should be obtained with respect to any circumstance.

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