How to Stress Test Your Estate Plan
I don’t know about you but I hate being stresssed. I guess it’s because I’m a control freak. I know I’m not alone here. But, one thing I, and you, too, can control is alleviating stress when you die. How? By learning how to stress test your estate plan.
Now what do I mean by stress testing your estate plan? Essentially, we want to make sure that your will is not going to cause any unnecessary grief amongst your family members. I tell my clients we cannot one hundred percent prevent stress when we die. But, we can carve out ways to alleviate some of that stress.
So, let’s discuss some key areas where we may need to stress test our estate plan.
Disinheriting a Loved One
I would wager that very few of you out there would be happy to learn your parents disinherited you in their will. What do I mean about disinheriting you? Your parents would simply state in their wills that they are not leaving you anything. If done correctly, you are out of luck.
So let’s visit the typical scenario. Often a client will come to me and tell me that they want to disinherit a child. Perhaps the child has not spoken to their parent in years. Or, perhaps the child committed some wrongdoing within the family. Whatever the reason, disinheriting a loved one can obviously cause issues when you die. I mean who wants to learn that his or her parent decided not to leave them anything when his or her parent dies?
So, if you are intending on disinheriting a child, you have to be very careful when writing your will.. Yes, you have the right to state that someone is not to receive any inheritance from you. However, you have to be careful that you are not leaving your wishes up for challenge. So how do you accomplish this feat?
Well, years ago, you used to have to leave that person $1.00. You do not have to do that anymore. It is okay to not leave a child or another loved one anything at all. You can simply state in your will that “for reasons known to him or her, your child is not going to inherit from you.”
The key here is to keep it short and simple. The more detail you provide, the more room you are leaving your child to challenge that provision. We do not want that to happen.
Will contest are very costly and expensive. Plus, will contests also prolong the grief of your loved ones and add additional stress. The reason we are doing our Estate Planning is because we want to alleviate stress amongst our loved ones, not cause stress. So if you are going to disinherit someone, just simply acknowledge the person’s existence and then give a brief very vague statement that you are disinheriting them. Providing written explanations when you were preparing a will and you know that some of your provisions might cause issues amongst your family members.
Do You Have Written Explanations?
Read through your will carefully. Is there anything written in your will that may cause hurt feelings amonst your loved ones? For instance are you treating one child more favorably than another? If so, you may want to consider including a written explanation as to why you are doing those things in your will.
You could include an explanation letter. Or, you could actually state your reasons in your will.
Let’s demonstrate some examples where such a written explanation may be appropriate.
Client has two children. One child is doint very well financiallly. The other child has had a lot of unfortunate circumstances and has not done very well in life. So the parents leave child #2 more money than child #1. They sincerely believe they are doing the right thing because ub their eyes, #2 needs the money more than child #1 does. How many of you think child #1 is not going to have hurt feelings?
Parents have two children. During their lifetimes, parents give child #1 lots of money. Perhaps they gave child #1 a sizable downpayment on a home. Or, child #1 needed a siizable lump sum for starting a business.
So when they die, they want to equal the playing field with child #2. Consequently, they leave child #2 the bulk of their inheritance. Why? Because in their eyes, child #1 has already received their inheritance in advance. They feel they are doing the right thing and their children will understand.
But will they? Do you really want to take that chance? Or, would your prefer to leave a written explanation to hopefully keep peace in the family after you die?
Who Will Be Your Child’s Guardian?
If you have minor children, you are going to want to appoint a guardian to care for your children if you and your spouse die before your children are adults. Naming a guardian is a very important decision.
Parents agonize over choosing the right person who will raise their children in the event that they are not able to do so themselves. Sometimes the people who are not named as a guardian may have hurt feelings. They may wonder why wasn’t I good enough to be so and so’s guardian? These decisions may spark arguments amongst family members. Arguments may cause hurt feelings. Hurt feelings and arguments lead to stress when you did. Not good, right?
So one way to alleviate stress and the naming of Guardians is to again provide a written explanation as to why you chose that particular person to be your child’s guardian. You don’t have to bad mouth anybody in the letter. You don’t have to explain why you did not choose other people. You can simply state that you feel the person you chose to be guardian is the best person for that position for the following reasons, then state your reasons.
You may even wish to speak to your loved ones about your guardianship choice before you die. Let them know who you are choosing and why. Address any hurt feelings and let those you did not choose that your decision does not mean you think any less of them.
Do Your Loved Ones Know Where Your Important Papers Are?
Do your loved ones know where all of your important documents are located? Do you have a list of all of your assets, including digital accounts and passwords? Do your loved ones know who is your executor and or power of attorney? What about investments, bank accounts and life insurance? Do your loved ones know where these documents are located?
If your loved ones do not know the whereabut of your important documents, then you need to fix that now. Trust me, when someone dies or becomes ill, you do not want to add any unnecssary extra stress on that person. Make sure your loved ones are prepared for a mishap.
How about your funeral wishes? Do your loved ones know whether you want to be buried or cremated?
What about a funeral service? Do you want one? Or do you prefer to just have a graveside service?
Not knowing these types of matters can cause a lot of stress amongst your loved ones when you either die or become incapacitated. Your loved ones are already going to be under a tremendous amount of stress, trying to deal with your death or incapacitation. Let your loved ones know where your important documents and information are stored. That way, you are alleviating potential stress for your loved ones.
The easier you can make it for your loved ones, the less stress you will cause when you die. So, make sure you stress test your own estate plan.