Whether it’s feelings of anxiety, shame or fear, money is still seen as a taboo topic amongst many families. However, if money issues are ignored for too long, sadly, it can create even more heartache at a time when families are already reeling emotionally.
Recent studies show that only about a quarter of adults have a will, and even fewer have a trust or another advanced document. An estate plan isn’t just about who gets what when you pass away. It’s also about the financial peace of mind it provides families during a challenging time.
It can be an uncomfortable conversation regardless of the amount of money you may or may not have, but we’re here to tell you why having the “money talk” is a must for your family.
Why is it important to discuss financial issues as a family?
Kids learn from their parents, both good and bad. If they see it modeled and learn about it in real time, chances are they will have a better understanding and solid foundation for when they are adults.
Life is unpredictable, and people need to be on the same page in case the worst happens. Having a plan and understanding can alleviate stress. This can also ensure your family follows your wishes. Americans are very independent and feel their value revolves around their money. Yet money means nothing if you’re gone and have nobody to share it with.
The worst-case scenario
The most precious thing we have in life is time, and we often don’t realize it until it’s taken away from us. If you think you have time on your side, take care of your estate today, not tomorrow.
I say this because we’ve seen the unfortunate side of poor planning. We had many meetings over several years with a client, where we asked them about adding beneficiaries to their accounts, and when a family member came down with an illness, with little time left to live, they finally wanted to add them. Unfortunately, the paperwork could not be processed fast enough, and the beneficiaries are now left dealing with lengthy court proceedings to distribute assets for the estate. Not only will this cause additional expenses, but also unnecessary taxation and delay the distribution of the funds.
On the other side of the coin, we had a client pass away suddenly. Their spouse was much younger and unable to work. However, because the client had taken extra precautions ahead of time and we had discussed what would happen if a tragedy struck, the proactive planning allowed the younger spouse to remain retired and live comfortably.
When things are done correctly, the paperwork and financial transition can actually be very easy and not as time-consuming as some think. This is especially important at a time when most families are struggling to pick up the pieces.
What topics need to be covered?
No topic should be off limits! Depending on the season of life, everything from budgeting to estate planning should be discussed. Keep the lines of communication open because once they’re closed, opening them again is next to impossible.
What is an estate plan?
An estate plan is the preparation of tasks that manage an individual’s financial situation in the event of their incapacitation or death. It is important to note that estate plans need to be flexible since life changes, and they should be updated and reviewed regularly.
Does everyone need an estate plan?
The short answer is yes! The long answer is that it depends on your situation. The more complex the assets, the more planning you may need. Every family should know about the plan regardless of their financial standing. Remember, estate planning can only be done before an event happens, not after.
What are the estate planning basics?
There are a few key steps everyone should take when creating an estate plan. At a minimum, everyone should have a written will. A will simply lays out how you want your estate to be divided after you pass away. In it, you will name an executor whose job it is to carry out your wishes. Make sure you pick someone responsible and trustworthy. You can also use this document to name guardians for your children. Should something happen, naming guardians will ensure your kids are cared for by someone you trust.
You’ll also want to name beneficiaries on all of your accounts, including investment and bank accounts. This can be done by setting up a Transfer on death (TOD) or a Payable on death (POD) account. Unlike a will, a TOD or POD allows you to pass on assets immediately to beneficiaries without having to go through any legal hurdles. Avoiding probate can help save families unnecessary time and money.
Additionally, naming a financial or healthcare power of attorney can help ensure your wishes are carried out should you become incapacitated and unable to make medical decisions on your own.
Are there different things business owners need to think about or be aware of when creating an estate plan?
A succession plan is the first step toward ensuring that the business can continue and stay within the family. Even if liquidation occurs, business owners should be thinking about the continuation of their business. A working business is worth a lot more than a failing one. All of the personal estate planning steps also apply when deciding to pass along a business to the next generation.
Does it take a long time to set up an estate plan?
It really depends on the type of business and the specific situation. For example, I own Zephyrus and am also a partner in another company. Both are treated differently due to the business structure, and each took a few weeks of planning and time with attorneys to complete. I can’t stress enough just how important it is to take the time to create and maintain your estate plan. A few weeks is nothing compared to the time and pain that you could incur if you do nothing and tragedy strikes. We once worked with a couple that when one spouse died, it took 10 years for the surviving spouse to gain access to the decedent's 401(k), all because a beneficiary was not named. Estate plans are for the people you leave behind.
What advice do you have for people who are unsure about how to get the conversation started or where to start the estate planning process?
The best way to get the conversation started is to simply have it. Don’t let fear, ego or emotions get in the way of protecting your family’s legacy.
Crafting an estate plan can be a process that involves complex legal and financial documentation. If you’re not sure where to start, talk to a financial professional you trust. They can help you navigate any red tape and make sure that your family’s wishes are preserved by coordinating with your legal professional.
There is no cookie-cutter advice when it comes to estate planning. Because of that, and the time, paperwork and fees involved, it’s important to have a plan that resonates with you on a personal level. At Zephyrus, we pride ourselves on going the extra mile for our clients and have many families who have been with us through multiple generations. Financial decisions, particularly ones that are so personal, can be confusing and overwhelming. Clients have confidence in us because we make sure they understand everything we are doing.
Whether you want to leave a legacy to the next generation or not, the most important part is that you have an estate plan that resonates with you and your desires.
Cetera Investment Services LLC exclusively provides investment products and services through its representatives. Although Cetera does not provide tax or legal advice, or supervise tax, accounting or legal services, Cetera representatives may offer these services through their independent outside business. This information is not intended as tax or legal advice.