How Do Family Relationships Mess Up Estate Planning?
“Relationships-of all kinds-are like sand held in your hand. Held loosely, with an open hand, the sand remains where it is.
The minute you close your hand and squeeze tightly to hold on, the sand trickles through your fingers. You may hold onto some of it, but most will be spilled.
A relationship is like that. Held loosely, with respect and freedom for the other person, it is likely to remain intact. But hold too tightly, too possessively, and the relationship slips away and is lost.” Kaleel Jamison
“When dealing with people, remember you are not dealing with creatures of logic, but creatures of emotion.” Dale Carnegie
Do Family Relationships Mess Up Estate Planning? According to a recent Key Private Bank poll of financial advisors, 80% said that working through family issues is the most difficult aspect of estate planning.
With more and more blended families, the issues of equitable distributions among family members becomes even more complex. The interaction between parents, children, step-parents, and step-children can be tense in the estate-planning process—especially when a plan is put into action after a parent or step-parent’s death or disability.
Although these family dramas get in the way in many cases, there’s something you can do about it.
Having open family conversations about estate plans and wishes is the key. This can be hard because parents are afraid that sharing their wishes will cause conflict.
However, discussing your goals and how you’d like to share your wealth with your heirs, is only part of the story. You also have to update your documents to reflect your wishes. Review how your assets are titled and understand who is inheriting your wealth. From an estate planning perspective, you want to avoid probate and maintain control over the disbursement of your assets.
Probate is the process that states use to settle the estates of a deceased persons, who have not made arrangements to avoid probate. These proceedings are made a matter of public record, so there is no family privacy. It can also be expensive and time-consuming, and in some states can take a while, until beneficiaries get their shares.
Remember that retirement accounts like IRAs, 401(k)s and pension plans have named beneficiaries, so those assets pass directly outside of the probate process. The same is true for life insurance and annuities. These specific beneficiary designations—whether through “payable on death” or “transfer on death” accounts—will supersede any provisions in a will or trust. That’s why account holders and insurance policy owners should look at their beneficiary designations to be certain that the assets will transfer, according to their wishes.
Reference: CNBC (March 18, 2019) “This is the No. 1 issue keeping you from inheriting that windfall”