Don't give inheritance planning short shrift

Whatever choices you make in your estate plan, open and honest dialogue is key to taking care of your family

By Jeff Burke

Jul 8, 2015 @ 11:00 am EST

The tragic death of Dave Goldberg, CEO of SurveyMonkey and the husband of Facebook chief operating officer Sheryl Sandberg, shook Silicon Valley in a way likely not felt since the loss of Steve Jobs several years ago. Mr. Goldberg, an affable, hardworking family man and an inspiring business leader, died in a freak exercising accident while vacationing with his family in Mexico. He was just 47.

Mr. Goldberg leaves behind a legacy of goodwill and humor, and his memory won't easily fade from those lucky enough to have known him well. His sudden death serves as a reminder that life takes sharp turns sometimes and that, as parents and business leaders, we need to expect the unexpected and prepare ahead of time to the extent possible.

Many people feel uncomfortable talking about end-of-life planning, particularly in families that traditionally don't discuss financial issues openly. But with the accumulation of wealth comes a responsibility to ensure that your passing does not become a burden on loved ones.

Families with children and a large number of potential beneficiaries are particularly vulnerable to inheritance disputes that could leave lasting scars on all involved. Unaddressed issues - the question of who gets the family home, for instance - can lead to hurt feelings and family rifts.

The key is making sure your inheritance wishes are understood well ahead of time. Indeed, respectful open dialogue is important if your family is to avoid long-term and divisive inheritance issues.

The 2014 UBS Investor Watch survey of wealthy individuals found that family members who deal with inheritance issues frankly and far in advance are far happier with the outcome.

The same survey found generational differences in how the inheritance process is perceived and executed. While baby boomers are often depicted as having a more open and peer-like relationship with their millennial children, fewer than half of the heirs in the younger millennial generation have had discussions with their parents about inheritance plans. Only one-third of this segment know where their parents' wealth is held, and only a quarter have seen their parents' will at all. Leaving children in the dark about the scope and timing of their inheritance could lead to unnecessary surprises and disappointment.

There are a number of core elements to a good estate plan. First and foremost is a last will and testament, which enables you to plan for the management and distribution of assets and appoint executors and trustees. A will is a living document, meaning that you need to review it periodically and update it to reflect major life changes.

It is also wise to prepare a medical power of attorney in the event your health fails and you are unable to express your wishes, as well as a financial power of attorney that names someone to act on your behalf in the event you become incapacitated.

Individuals with significant wealth often rely on trusts that take effect upon their death to help minimize estate taxes, which must be paid within nine months of a death. Taxes can greatly diminish the size of the estate and must be given careful consideration.

A trust is considered more private than a will since it doesn't have to go through probate and is not considered a public document. In the event of death, the distribution of assets is much faster than if the legal proceedings had to go through probate. Trusts provide other benefits as well, such as shielding beneficiaries against bad business decisions and family conflicts.

Whatever choices you make in your estate plan, open and honest dialogue is key to ensuring your family is taken care of in the event life takes an unexpected turn.

Jeff Burke is a financial adviser at UBS Financial Services Inc.

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