Should you tell your kids about your estate?

“Should I tell my kids about this?” is the second most common question I get after a client signs their estate planning documents. And, of course, I must give the patented lawyer answer, “It depends.”

Whether and what you tell your kids (or other beneficiaries) about your estate plan depends on a variety of factors.

How old are your kids?

If your children are minors, they don’t need to know much, if anything. Discussing the prospect of mom or dad dying can be overwhelming to even adult children, but a minor child won’t be in charge of anything, so what they need to know is minimal.

Depending on the child’s age and emotional development, you may just let them know there is a plan in place and perhaps who their guardian would be in the event of your death. The same might apply if your children are young adults.

As you age, however, it becomes more important that your children know that you have an estate plan and some of the basics of that plan. You don’t need to tell them your net worth, but they should know who your lawyer is, where your documents are kept, and who you have named to be in charge in the event of your death or incapacity.

I’ve seen several scenarios play out where a parent chose a child to serve as trustee and power of attorney—often the one they thought would do the best job, or simply the oldest or most agreeable child. But once the parent had the discussion with their children, they realize they had made the wrong choice. It’s better to fix the situation while you can, than to have your children fighting it out later.

Also, by informing your children of your choices, you can possibly prevent arguments over whether there was “undue influence” by the child named, or whether that’s what mom or dad really meant. Giving the children the opportunity to express their concerns, disagreement, or agreement, while you can make changes goes a long way to eliminating arguments in the future.

Size matters

This is an instance where size matters. As mentioned above, you don’t need to tell your children your net worth. But older adult children should have some idea of a likely inheritance, so they are prepared.

If your child believes they’re inheriting a significant amount, but you’ve decided to give it to charity, you don’t have near the estate they thought you had, or you’re including other beneficiaries that reduce a child’s share (grandchildren, for example), your child could be making bad choices currently (not funding a retirement plan, buying a larger house than they should, not saving for their own child’s college)  on the mistaken belief that they’ll have more assets later.

The reverse can also cause issues.

If your child is going to inherit a significant amount of money but has no idea how to handle that kind of wealth, you’re setting them up for disaster. You can help to educate your child about money management by talking to them about how you handle money. And you can do this without giving dollar values. Explain generally what your holdings are (real estate, stocks, bonds, etc.…), how those assets are managed and by whom. Talk about your philosophy and values surrounding money and wealth.

Your age matters, too

Regardless of your child’s age or the size of your estate, there comes a time when someone will need to know the details of your estate plan—and that time is before you die.

As people live longer, incapacity becomes a more significant concern. Which brings me to the most commonly asked question after someone signs their estate planning documents—where do you store the documents?

We put our clients’ documents in a thick binder with “Estate Planning Documents” embossed in gold lettering on the spine—not because we’re fancy (we are!), but because those documents need to be easily found when they’re needed. And they may be needed because you’ve lost capacity.

If you’ve lost capacity, you may not be able to tell anyone where your safe deposit box is, the combination to your safe at home, or even what drawer or filing cabinet you stored the binder in.

This is why it’s imperative that someone else knows where your documents are. If you do store the documents in a locked cabinet or a safe, please be sure someone else has a key or knows the combination. Sometimes, those documents need to be accessed quickly.

In addition, it’s important that the people you’ve appointed to act on your behalf know both that they’ve been appointed and what their responsibilities will be. That’s not something a person should be surprised with—even if that person is your child.

Getting your estate plan in place is a big achievement — tip of the hat to you for doing that. But, don’t let the carefully thought-out plan go sideways because no one knows about it, you’ve based it on mistaken beliefs, or your beneficiaries were wholly unprepared for what was to come. Privacy is important, but your legacy is more important.

Teresa J. Rhyne is an attorney practicing in estate planning and trust administration in Riverside and Paso Robles, CA. She is also the #1 New York Times bestselling author of “The Dog Lived (and So Will I)” and “Poppy in The Wild.”  Contact her at Teresa@trlawgroup.net