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March 7, 2019, 10:02 a.m. EST

Breaking the taboo: How to prepare your heirs for your death

Open communication — and preparation — can solve many problems

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By Larry E. Swedroe and Kevin Grogan


Everett Collection

Napoleon Bonaparte is widely regarded as one of the greatest commanders ever to have lived. His campaigns are studied at military academies all over the world. Yet, he developed few military innovations.

Perhaps the principal belief underlying his military success can be summed up in this quotation, which is attributed to him: “Most battles are won or lost (in the preparation stage) long before the first shot is fired.”

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This is a critical lesson when it comes to planning for your own demise and the related issue of transitioning assets to your heirs. Unfortunately, in too many cases, families treat money and the issues surrounding wealth as taboo subjects, and this may be the case even more so when it involves the (inevitable!) prospect of death.

Research has shown that the majority of estates lose assets — along with family harmony — in the wake of a transition. Why? Because heirs were unprepared. They didn’t trust each other, and communications broke down.

In all families, preparing heirs should involve making them aware of the location of all important documents (such as powers of attorney, wills, trusts, insurance policies, and so on) and financial assets. They should also be aware of all members of the financial services team (CPA, financial advisers, insurance agents) and how to contact them. And they should be aware of how the parents want to deal with end of life and incapacity issues (such as designating a physician who could determine incapacity). A worthwhile exercise is to have a rehearsal of what needs to be done and who is responsible in the event of death or incapacity.

Here are some important questions that will help you determine of your heirs are prepared:

• Do your children (and their spouses, if any) know your estate plan?

• If not, what would make you comfortable sharing this information? With your children? With their spouses?

• What steps should you take to address your concerns?

• Might there be a plan to provide certain information sooner and other information at a later date?

• Have your heirs read your will and other estate planning documents?

• If no, when do you think is an appropriate time for them to see these documents?

• Do your heirs know the family’s net worth, both yours and their own (if they have assets in their name)?

• If no, when does providing this information become advantageous to you and your heirs?

• Are your heirs in communication with your team of advisors (your attorney, accountant, insurance advisers and financial/investment advisor)?

• If not, would it be useful for family members to meet those people, even if information-sharing is limited?

• Have the children been involved in the formation of the investment policy statement, and are they familiar with the investment strategy, the goals and how to manage the assets?

• If not, when might this involvement be advantageous?

Family feuds can easily develop when members do not feel they have been given their fair share and have not been included in the process. Of course, it doesn’t have to be that way. The solution to the problem is that, while it is important to treat family wealth as a private matter, it should not be private within the family. Open communication between parents and heirs can prevent many problems.

Achieving an ideal level of knowledge-sharing and family involvement requires its own planning. Family values, as well as current and future goals, should inform the entire financial planning process. Done well, financial planning is about much more than investment management. And just as most battles are won in the preparatory stage, the success of a family wealth transition plan depends on preparing the family for the transition of not only the family’s wealth, but also the family’s values.

Adapted with permission from “Your Complete Guide to a Successful, Secure Retirement” by Larry E. Swedroe and Kevin Grogan. Published by Harriman House. © 2019. All rights reserved.

Larry E. Swedroe and Kevin Grogan are the co-authors of “Your Complete Guide to a Successful, Secure Retirement,” and directors at Buckingham Strategic Wealth and The BAM Alliance .

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