After spending their lives building wealth, most parents hope that their legacy will provide security and enjoyment to their heirs—not family strife. But unfortunately, it doesn't always work out that way.
“People say things like, 'The children get along great; there's never been a problem,'" said Paul DeLauro, manager of wealth planning at City National Bank. “But money has a way of making old wounds come back and creating new ones."
Cyndy Ranzau, a wealth strategist at RBC Wealth Management-U.S., agreed.
"No parent wants to think about their grown children fighting over their inheritance, but it happens all too often," she said.
If you want to preserve relationships among your family members after you die, and ensure that your estate will be managed according to your wishes, consider these five steps.
Much of the emotional turmoil that professionals see while handling estates comes down to long-simmering conflicts that boil over.
"A lot of the fighting devolves into, 'You got the best clothes when we were kids and I got the hand-me-downs - mom loved you more than me!'" Ranzau said.
If you know this kind of resentment exists, anticipate that it will come to the surface after you're gone and deal with it now, or build in safeguards to minimize it later.
It is helpful for your loved ones to have relationships with your bankers, attorneys and financial advisors. Introduce them to your children and explain why you have confidence in them, DeLauro said.
Those advisors should have up-to-date versions of your estate plan and legal documents on file and instructions on how to contact your loved ones after you pass away.
It's also important to leave clear instructions for your relatives about what documents exist and where to find them. Too often, people spend weeks hunting through attics or trying to get access to safety deposit boxes before they discover their parents' estate plans.
Many disagreements revolve around one heir who wants to sell the family home and another who wants to keep it in the family. Make it clear what should be done with your major assets, including property.
Personal items that hold sentimental or historical value often cause fighting and hurt feelings if one family member claims he has been "promised" it, but the estate documents are not clear about that.
"Talk to your kids about what pieces in particular they would like to have," Ranzau said. "When my mom died, all four of her daughters wanted a particular necklace. But we couldn't timeshare it."
Take pictures of special items - such as jewelry, heirlooms or furniture - and list who should inherit them, either in your will or in an addendum. Making those wishes known in writing helps eliminate room for misinterpretation.
It's fairly standard for individuals to appoint one child as the fiduciary or executor of their estate.
But DeLauro said that is usually a mistake. He recommends appointing an objective professional with no legal or family interest in the estate to serve as executor.
“When any one child steps into the chair of handling your estate, that automatically creates the type of conflict every parent would want to avoid," he said. “This type of dysfunction is not the legacy you spent a lifetime building."
An objective third party who is paid to deal with an estate is better positioned than an adult child, Ranzau said. "Hire and pay for professionals to handle your affairs, rather than putting a relative or family friend in the middle who now has to not only deal with a loss in the family but also explain why they were left in charge."
The last people to find out the details of the estate plan are often the beneficiaries - a situation that is not ideal.
“You just can't spring the plan on a family at the funeral," DeLauro said. He recommends holding a family meeting and discussing your estate plans along with your reasoning.
If you're leaving a large sum to charity, for instance, your heirs could be confused or resentful about that if the first they hear of it is after your death. But if you explain in advance that the charitable gift is your heart's desire, they are more likely to be on board.
“There's a point where the primary breadwinner has to let go of the secrecy, even though it may feel unnatural to disclose the fruits of your labor," DeLauro said. “Secrecy could be your undoing. It doesn't matter what your plan is if you don't have buy-in."
Ranzau often has clients schedule the meeting around a family reunion, holiday or vacation when they will all be gathered. "The Fourth of July is a good time for a lot of families," she said. "Invite your trusted advisors to join you so the kids meet them, see your interactions with them and know who they can go to for answers."
You can't plan for every single family conflict that might arise after you're gone, but by taking the time to explain your wealth transfer plans and share your financial wisdom with your children in advance, at least that may help avoid future conflict.
This article is for general information and education only. It is provided as a courtesy to the clients and friends of City National Bank (City National). City National does not warrant that it is accurate or complete. Opinions expressed and estimates or projections given are those of the authors or persons quoted as of the date of the article with no obligation to update or notify of inaccuracy or change. This article may not be reproduced, distributed or further published by any person without the written consent of City National. Please cite source when quoting.