Estate planning is essential in preparing for your future. However, it is equally as essential to prepare your heirs for the transitioning of your estate into their ownership. Many seniors do not make this a priority when planning for the future, and the estate subsequently collapses.
It is unfortunate, but the stress of acquiring an estate can cause siblings to feud and even sever relationships. Research shows, more often than not, heirs are not prepared to manage the vast amount of responsibility that comes with acquiring an estate.
When transferring an estate to an heir, 60 percent of post-transition collapses happen because of a lack of trust and communication between the estate holder and the heir, according to The Journal of Estate and Tax Planning.
Additionally, 25 percent of collapses occur because the estate holder does not properly prepare the heir to acquire such wealth.
Nothing can be more heartbreaking than your legacy dividing your family. The good news is that does not have to be your family’s story. Here are a few steps you can take to ensure your heirs are prepared to acquire your estate.
You must first have an estate plan
Before taking any steps, it is good to be reminded of the risk in not doing anything at all. Every state is set up with a legal system in place to handle your estate if you do not create an estate plan yourself. If you were to die without preparing for your future, your entire life’s work could end up in the hands of an unintended beneficiary. This makes it essential to create an estate plan and prepare for your future as soon as possible.
Establish your legal counsel early
It is important to establish your legal counsel early. An attorney can help coach you and your heirs through the steps of your estate plan. Feuds can occur because one sibling feels they have not been given their fair share of the estate or they have been excluded from decisions made. Almost all feuds can be avoided through clear communication and legal coaching. Legal coaching before the transition of an estate can raise an heir’s success rate anywhere from 20 to 40 percent.
Educate your heirs on your estate plan and establish a family coach
Bring your heirs into the knowledge of your estate plan and educate them on how to execute that plan when the time comes. It can be uncomfortable for siblings to discuss the dividing of assets while a parent still is alive.
However, Forbes reported a story about siblings feuding over a World War II gun collection their father had as an heirloom. Both siblings wanted claim on the items. Fortunately, the father still was alive to detail his estate plan.
Forbes reported another story where a 19-year old man inherited $750,000 from his grandfather. He spent the money foolishly, created bad habits that ended his life, and landed his wife in jail.
You can see how important it is to set safe boundaries around the estate you are passing on. There are a few key ways to ensure you have properly educated your family on your wishes and protected them from an estate collapse.
Create a family mission statement
Properly develop a family mission statement so that everyone involved in the estate plan is aware of your mission when it comes to the transfer of your estate. This mission statement should be no more than 30 words. An example of this would be, ‘Our family is dedicated to loyalty, trust, and growing together. We are not divided by things, but work together to grow our family assets for the betterment of our lives.’
Revisit your estate plan every couple years
An estate plan is not a legal document etched in stone. Many things can cause the need for a revision of the estate plan, such as a change in marital status, disability, inheritance, marginal chance in finances, state residency change, or simply just a change of mind in how you want your estate plan to be carried out. Regardless of why you revisit your estate plan, it needs to be revisited every couple of years. During those revision times, it is important to inform your heirs of the revisions, so they are properly educated for the future.
Many people never set up an estate plan or take the next step of sharing it with their heirs, because they do not know the process of accomplishing this goal. Do not let this be you.
Cordell Planning Partners is here to help you and your family, not only establish an estate plan that works for you, but to strategize the best possible options for your family that ensures your post-transition estate plan is unifying and successful. Contact Cordell Planning Partners today to set up your free one-hour consultation to begin planning for your future.