What and When to Tell Your Heirs

I was having dinner with my "Kitchen Cabinet" the other night when one of them asked me how to go about telling his heirs about his estate. It is an important question, and having seen or heard little on that niche aspect of estate planning I immediately put my crack staff to work on it.

I was having dinner with my “Kitchen Cabinet” the other night when one of them asked me how to go about telling his heirs about his estate. It is an important question, and having seen or heard little on that niche aspect of estate planning I immediately put my crack staff to work on it.

We do have to recognize that each estate and family situation is unique and nuanced, so specific advice will have to be established with each person's estate attorney and spouse, if there is one. But lawyers who deal with estates, and their aftermaths, say there are some commonalities. Although they make a good living at sorting out estate fights and suits, most lawyers would much rather be involved at the front end, where things are more orderly, rational and ... quiet. (And still lucrative, of course.)

It is a widely observed trait of human nature that most prospective heirs — generally adult children -- have a sense of entitlement, assuming that they will be treated fairly and equally in the eventual division of assets. Because people often equate love with disbursed assets in this circumstance, emotions play an enormous role both prospectively and retroactively. It's easy to see how unresolved, simmering conflicts, rivalries and real or perceived slights, will be much exacerbated by the death of a parent. And as we all know, money is an accelerant to emotion.

Ideally, each person would like his/her primary bequest to be a legacy of family unity and love to trail their earthly existence. Though we do realize that you probably can't please all of your heirs always, we can try. We begin by acknowledging that trust and communication are the keys to the successful realization of one's estate planning. You can start the process by an honest, transparent and clear statement of your intentions -- to yourself, perhaps on paper, to your spouse or partner, and to your lawyer. This may not be easy, and it may not be permanent; people and circumstances change.

There are also myriad variations that may apply: blended families; pre-nuptial agreements; special-needs children; addicted and/or estranged children; family businesses with their endless issues and decisions; out-of-family bequests, whether to people, endowments or charities; valuations of assets and possessions; requests; variances in children's individual financial circumstances; pre-estate obligations, such as debt; existing and threatened litigation; and a possible desire on your part to control some circumstances after you've gone. If it took a lifetime to get your situation to get where it is now, it is probably not going to be easy to wind up all your affairs in a timely, smooth way that does you credit without some heavy lifting beforehand.

So what are the traits of individuals who succeed, according to estate-planning lawyers? The best outcomes are the ones that involve all of the family (over the age of 16) to establish a formalized vision of family goals and values. I know some will choke on that, but it's probably a sign that you're the one who can benefit the most from this kind of professional advice. Silence is the worst planning behavior you can engage in; it guarantees a lot of trouble.

You also don’t want to have your lawyer communicate this information for you. They will tell you that they represent your interests, not your beneficiaries. And your family doesn't need legal jargon, they need you.

The risk that you assume if you do not undertake this approach is the turmoil that results from inadequate communication. This makes for bad relations, sometimes permanent, and a long, drawn-out process that can get very expensive, as well as ugly. Families have been known to spend their entire inheritances on lawyers; freudenschaft in action.

Of course, this all goes back to the attitude about money and financial affairs that you manifest while raising your children and what they internalize from observation. I do not have the space here to get into what is known to be helpful and hurtful, but we all grudgingly admit that we will reap what we have sown. Yet, no matter what our stage of life, and whatever our history and proclivities, we must keep trying to improve our situations. Whatever else we are, we are all works in progress.

Whenever you have your estate in some order, be you 40 or 90, sit down with your heirs and spell out your intentions clearly, along with the reasons behind your decisions. You do not have to get into specifics at this point and you should allow to them that things may change, given unforeseen changing circumstances.

We need to be careful here, because your heirs may attempt to manipulate you once your decisions are made clear. People will respond powerfully to incentives, stated or implied, so tread softly. I have seen such behavior, you may have seen such behavior, and it takes a lot of maturity and integrity to both avoid leading someone down that path through your estate and being led down someone else's path baited with promises.

I had a wealthy uncle once who told me, "I'll leave you money if you are nice to me." I smiled and replied, "I try to be nice to everyone." I wasn’t included in his will, but I never lost a night's sleep over it. He had his reasons, but if I had altered my behavior to suit him it would have become the most-expensive inheritance I (might!) ever have received.

Lastly, and at least, draft a letter of instruction to all involved with any last thoughts; include what to do first in the event of an unexpected death, who to call and list all assets, accounts, numbers, codes and passwords if you wish them to have direct access instead of through your lawyer/accountant/executor. Finally, keep the letter in a secure place, such as a safe deposit box or home safe, and tell your closest family member, friend or executor where you keep it and how to access it.