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Survey: Sharing Estate Plan with Family Helps Heirs Cope

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Posted on Sep 26, 2014 | Share this post: Like Us on Facebook Join Us on Google Follow Us on Twitter

A common question from clients is, “How much of my estate plan should I share with my kids?” This is a highly personal question, and no one can really answer it but the client, evaluating the dynamics of his or her own family situation.

The latest quarterly survey by UBS Wealth Management http://www.ubs.com/content/dam/WealthManagementAmericas/documents/investor-watch-3Q2014.pdf suggests that discussing your plan with beneficiaries can increase their satisfaction with the process after you are gone. (A separate survey from Fidelity indicates similar issues with regard to plans for retirement.)

The UBS survey of 2,882 American affluent investors (with at least $250,000 in investable assets) found that when children know about the estate plan in advance, they report high levels of satisfaction. But when the heirs have no knowledge of the details, satisfaction levels decrease dramatically: 89% of those who knew the estate plan details report that they were very or extremely satisfied with the process of distribution, vs. 65% of those who did not know.
Resolving important issues (such as who inherits the family home) also boost satisfaction levels: 85% in families with no unresolved issues reported being very or extremely satisfied, vs. 37% in families with unresolved issues.

Satisfaction in families with second marriages tended to be lower, indicating that clarity with blended families may be even more important.

Still, discussing estate planning with children is not common; although 83% in the survey reported having an updated Will, only 54% had discussed the plan with their children, and even fewer (34%) shared details about assets.

The reasons elders gave for not having such a discussion included: it doesn’t feel like a pressing issue (43%), I don’t want my offspring to count on the inheritance (32%), and I don’t want my children to feel entitled to wealth (27%). Parents who worry that they could outlive their assets were less likely to have had a discussion: 56% of those not concerned about running out of money had discussed their plan with beneficiaries, but only 36% of those who were highly concerned about their money lasting had discussed it.

For potential heirs, barriers included: the family doesn’t talk openly about financial issues (46%), it does not feel like a pressing issue (31%), and I do not want to appear greedy (23%).
The inheritance discussion is no more likely to occur among the very wealthy (55% among those with $1 million or more, and $53% among those with $250,000-$1 million), though the wealthy are more likely to have an up-to-date will (87% to 78%).

Interestingly, Baby Boomers who are potential heirs are confident they know how much wealth their parents have (85%), where their parents assets are located (77%), and that they have seen a current Will (68%). But among Baby Boomers who have received an inheritance, this confidence is lower (amount of wealth, 62%; location of assets, 67%; current Will, 58%), indicating that for some there were surprises when they ultimately received their inheritances.

For those who have received an inheritance, the vast majority are grateful and reluctant to criticize how their parents handled their estate planning: only 1 in 3 (34%) say they wish their parents had done anything differently. Yet 72% intend to handle their own planning differently.
Among the top things that heirs said they would change for their own plans: Keep will updated (47%), disclose the whereabouts of all financial accounts (43%), take steps to minimize taxes (34%), discuss wealth transfer plans openly with heirs (34%), and plan ahead for aging or mental capacity issues (29%). Just 10% would change the actual distribution of assets; for the most part, it’s the process they’re aiming to improve.

A strong majority (84%) indicated that smooth transition was very or extremely important to them. If that is your desire as well, you may wish to include your heirs in the conversation.