Budgeting Financial Planning Estate Planning Why It’s Never Too Early To Talk About Estate Planning Start family conversations early to help preserve wealth and reduce stress By Terri Huggins Terri Huggins Twitter Website Terri Huggins is an award-winning journalist, researcher, and speaker with more than 10 years of experience. In all of her written pieces, Terri strives to hone in on the intersection of topics with race and culture. Her work writing about personal finance, parenting, and emotional well-being has been featured in publications such as The Balance, The New York Times, Washington Post, and Real Simple. learn about our editorial policies Published on August 15, 2022 Fact checked by Jess Feldman Fact checked by Jess Feldman Website Jess Feldman has been writing and editing for over five years, and currently focuses on financial topics. As an associate editor on the special projects team, she writes, edits, and develops tentpole brand projects across a variety of platforms. Since joining the financial space, she's developed an interest in finding ways to make the complex topic of finance relatable to younger generations, specifically via TikTok. Jess has a journalism degree from the University of Maryland Philip Merrill College of Journalism. learn about our editorial policies Share Tweet Pin Email In This Article View All In This Article Why To Start Estate Planning Early How To Start Early Conversations The Bottom Line Photo: The Balance / Madelyn Goodnight As you get older, you often start making plans for your future and setting financial goals to reach—both with and for loved ones. One financial milestone that often gets left behind, though, is estate planning, which is the scary yet necessary process of arranging the transfer of assets in anticipation of death. While 56% of Americans think having an estate plan is important, only 1 in 3 actually have at least one estate planning document, according to Caring.com’s 2022 wills and estate planning study. And when it comes to the very first step—having a conversation about a loved one’s end-of-life plans—20% of individuals have done so. For parents with adult children, the idea of talking about their personal finances can be daunting, but there are ways to make the estate planning process easier. In many ways, discussing estate planning is akin to passing through the stages of grief for everyone involved, said Amy Morin, psychotherapist and editor-in-chief of VeryWell Mind. “It's normal to experience denial, anger, sadness, and even bargaining,” Morin said. “It may take a while before everyone accepts that estate planning is really what you should be doing now.” In this article, learn why and how early estate planning with your parents can protect the transfer of wealth, reduce stress, and preserve a family legacy. Key Takeaways One in 5 individuals reported having a conversation about a loved one’s end-of-life plans, according to Caring.com’s 2022 wills and estate planning study.Estate planning early can reduce stress for family members, avoid formal and lengthy court proceedings, preserve wealth, and help close the racial wealth gap.To start talking about estate planning with your parents, stay open-minded, use relatable examples, and focus on their legacy.By financially planning ahead with your parents, you can ensure that when they pass away, you’re ready to focus on what matters most during a difficult time: grieving and being with loved ones. Why You and Your Parents Should Start Estate Planning Early Understanding the wishes of your parents can be a heavily involved process. As life cycles change, there’s often a reliance on family members to step up and take care of one another. That unspoken reliance can lead to avoiding discussions about expectations, said Christopher Drew, founder and president of Drew Capital Management. The older your parents are, the more likely they are to have some cognitive decline or issues with mobility, said Ramona Ortega, financial educator and CEO of My Money My FutureDepending on their ailments and mental capacity, your parents’ “legal competency” may come into question by the courts, according to nonprofit the BrightFocus Foundation. As a result, a court-appointed surrogate may be chosen to act on behalf of your parents. If a plan isn’t put in place ahead of time, this could alienate you from the process and deter your parents’ initial wishes for their financial future. Note Ortega, who runs an organization that educates Black and Hispanic families about estate planning and the transfer of wealth, advised you start thinking about your own plans for old age around 30, and discuss plans for your parents when they are at least 55 years of age. By financially planning ahead with your parents, you can ensure that when they die, you’re ready to focus on what matters most during a difficult time: grieving and being with loved ones. Below are some reasons why estate planning early with your parents is a good idea. Reduce Stress Waiting to start planning until intense and highly emotional life events happen is more likely to lead to stress, anxiety, and mishaps when getting affairs in order. Without proper documentation or arrangements such as a living will with medical instructions or someone with power of attorney responsible for final affairs, the surviving family will likely spend more time and money trying to figure out the person’s wishes. “It’s a reality that can make financial futures more complicated, which is why it's ideal to start discussing financial matters and wishes for after death early,” Drew said. The lack of a properly executed estate plan can result in lengthy and costly court proceedings, as the courts are left to divide assets in a way that may not align with familial wishes and values. If a divorced couple fails to update beneficiaries for IRA accounts, the ex-spouse may receive money that was verbally promised to children. Simplify a Complicated Process Without having financial-planning conversations, families open themselves up to possible mismanagement of the transfer of wealth, excessive tax debts, and the risk of wishes not being honored during end-of-life decisions. “I knew of a couple who were never married, been together for 40 years and living together,” Ortega said. “They lived in Oakland Hills in a house that the guy’s mother supposedly passed down to him. The guy died and girlfriend wasn’t on the deed.” In that situation, lawyers and state courts got involved because another relative claimed the house, forcing the partner of 40 years to leave. Note If a parent or loved one does not leave a will when they die, specifying how assets should be distributed, then the estate could go through a lengthy court process called probate. If that happens, a state administrator will be the representative managing your parents’ financial affairs after death. “Luckily, she ended up getting money to leave, but all of this could have been avoided if they discussed his wishes and had affairs in order,” Ortega said. “But instead, we avoid these discussions because it’s uncomfortable, and we’re left in emergency mode, scrambling and spending even more money trying to work it all out.” Preserve Wealth Without knowing your parents expectations, your own retirement, wealth building, and financial wishes could be impacted. With a detailed estate plan, the large potential costs of locating assets and proving relationships of assumed beneficiaries, especially in the case of distant relatives, can be mitigated. An estate plan can also maximize the transfer of wealth through generations, according to Marc Scudillo, certified financial planner and managing officer of EisnerAmper Wealth Management. “By having even a simple will, many of these costs can be eliminated or reduced, and assets will be going to the persons and causes the deceased desired, and not what a state decides,” Scudillo said. Close the Racial Wealth Gap The term “estate planning” can be exclusive, and can sound like a process solely for high-net-worth individuals. "The discussion and proper planning of passing on estates is for everyone. It’s how we close the wealth gap; especially in communities of color,” Ortega said. “The intergenerational wealth can be huge for communities, and it’s important that it’s discussed so it can be protected.” Note Every adult should think about what they’re leaving behind financially—whether it’s property or debt—at some point in their life, no matter their age or number of assets. However, for some families of color, it’s not uncommon to avoid discussions about money and estate planning in fear of judgment about how they’ve handled money through the years, said Ortega. “Money is personal. There can be a lot of shame involved if there’s not much to pass down, especially in communities of color,” she said. “In some cases, this generation will be the first to have any wealth passed down. My mom didn’t get anything, but I will be the first to receive any intergenerational wealth.” Black and Hispanic families are historically paid less, have fewer opportunities to invest, and lack access to resources that provide upward mobility. As a result, the wealth accumulated in their lifetimes are often far lower than that of their white counterparts. Note According to a study published by the National Library of Medicine, white participants were almost four times as likely to have wills or trusts than Black participants. When controlled for demographics, health, financial, and estate planning variables, white participants were more likely to discuss end-of-life preferences. How To Start Early Conversations About Estate Planning Nearly 65% of respondents to a 2020 Wells Fargo survey reported speaking little or not at all to family about estate plans, while 57% admit they could discuss more. But before you sit down with your parents to have these conversations, it helps to discuss it with siblings first, if you have them. Often, honest conversations about what will serve your parents best financially can mitigate any contentious situations later on. While the equitable division of assets and responsibilities is ideal, those things can vary based on the needs of the parents, as well as the lifestyles of the siblings. Plus, having siblings on board with a plan may make it easier to broach the subject with parents. Note If you have siblings who will not or cannot help manage your parents’ estate, there are other resources. Consider calling an attorney, financial advisor, or tax professional for advice prior to speaking with your parents about their wishes. When you’re ready to talk about estate planning with your parents, here are some ways to start the discussion without making it uncomfortable or hurting their feelings. Start With Small Questions For some parents, having a thorough discussion about their own finances with their kids can be intimidating. To avoid feelings of anxiety or stress for all parties, consider starting slow. You can start by asking preliminary questions in passing rather than having a formal, sit-down conversation on the subject matter, Ortega said. For example, you may ask, “Who’s on the deed of the house? I just want to make sure everything is protected.” Or “Can you show me exactly where you keep all the important documents for the family in case I need them for an emergency?” Note As you have more and more estate planning conversations with your parents, it’s a good idea to keep a checklist with all of the answers you receive. That way, you’ll be prepared when the time comes. Focus on Their Legacy When talking about financial matters with your parents, remember that it’s about them and their needs rather than your own. In addition to the discomfort associated with discussing death, 52% of the Wells Fargo survey respondents feared discussing money with their parents would make it seem like they cared solely about a potential inheritance. However, for those who want to talk openly about estate planning with their parents, 86% are more interested in inheriting their parents’ values than money, and open dialogue can help with that. “By shifting the conversation to what happens after death, in a way, we leap-frog over the main source of discomfort, which is the actual passing,” said Carlos Legaspy, wealth manager and author of “Going for Broke: How One of Latin America's Largest Financial Frauds Became a Blessing in Disguise.” “It gives the opportunity to discuss a future and how it can be made better both emotionally and financially,” Legaspy said. Note You can help your parents see the silver lining by discussing the potential of a scholarship fund for family members, investing for grandkids, or donating to a cause they’re passionate about. Use Relatable Examples To Start the Conversation It can be hard to get through to your parents about the realities of estate planning, but using situations they can relate to can help them open up, suggested Scudillo. Share a relatable story you’ve heard of, perhaps in your own life or in pop culture, and share it with your parents. This can lead to a segue to “This makes me wonder if I’m the beneficiary of your policy. Am I, Mom?” Focus on Tax Benefits If nothing else gets through to your parents about the need for talking about their estate, any mention of taxes can often lead to a change in opinion, Ortega said. Estate planning can be used as a tax strategy, mitigating costly liabilities depending on the method you choose. The estate tax specifically may qualify your parents for certain deductions that would serve as a benefit. Without proper planning, their estate could face higher rates of gift, federal, and state taxes depending on the assets they have. Certain qualified deductions include mortgages and other debts, estate administration expenses, property that passes to surviving spouses, and qualified charities. The Bottom Line Discussing estate planning with your parents can be overwhelming to all those involved. However, accepting the need for it will provide peace of mind, knowing that money and associated values will be preserved. Want to read more content like this? Sign up for The Balance’s newsletter for daily insights, analysis, and financial tips, all delivered straight to your inbox every morning! Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. Caring.com. “2022 Wills and Estate Planning Study.” BrightFocus Foundation. “Legal & Financial Planning for Alzheimer's Patients.” Indiana State Government. “Wills, Trusts, and Estate Planning Basics.” California Courts. “Wills, Estates, and Probate.” Center for American Progress. “Systematic Inequality: How America's Structural Racism Helped Create the Black-White Wealth Gap.” National Library of Medicine. “Where There's a Will: The Link Between Estate Planning and Disparities in Advance Care Planning by White and Black Older Adults.” Business Wire. “Wells Fargo: Pandemic Brings Heightened Awareness to Need for Planning.” Wells Fargo Newsroom. “People Want To Talk About Money.” IRS. "Estate Tax"