Most well-crafted estate plans incorporate copious amounts of paperwork: wills, trusts, powers of attorney, health care proxies and other key documents. Yet even the best plans can quickly come undone when another essential–children–are excluded from the wealth transfer process.

“Involving children in the planning allows for a smoother and more orderly transfer of the estate,” says Mark Teitelbaum, a chartered financial consultant and vice president-advanced markets at AXA Distributors, New York. “Their participation also helps in terms of maximizing the estate.”

Connie Golleher, a principal and chief operating officer at The Holleman Companies, Chevy Chase, Md., agrees. “It’s important to include children in the process because this leads to overall better estate planning,” she says. “The children are more likely to inherit their fair share of estate, either partially or totally. Including children in the planning can also significantly ease tensions after the parents’ deaths because they have a better understanding of the reasons for the parents’ decisions.”

All too often, however, children are shunted aside. The result, sources tell National Underwriter, can be disastrous, both in terms of the children’s financial well-being and intra-family relations. Such a downward spiral is especially common in cases involving “blended” families: those in which one or both spouses have children from previous marriages. In a typical scenario, a husband who remarries and has children by the second wife leaves nothing to the children of his first marriage at death. And that can lead to animosity among the surviving children.

Even in cases where the estate was distributed equitably among beneficiaries, frictions frequently arise, observers say, because the surviving children didn’t receive a share of the estate to which they believed themselves entitled. Case in point: An adult child heavily involved in a business owned by the parents is forced after the parents die to share ownership of the firm with siblings who have no business savvy or interest in running the company.

A failure to take such factors into account can lead to inter-family squabbling or severing of relations. The lack of planning can also be disastrous for the family business and the financial stability of children who depend on the company for their income. Experts call to mind the many instances of multimillion-dollar firms that went bust because surviving children couldn’t agree on how best to manage them.

“With all children, the expectation 9 times out of 10 is that when something happens to the business owner, that the children will receive equal value in the estate,” says Golleher. “But an equal distribution of business interest generally is not viewed as fair by kids who stand to inherit the business.”

“There is nothing as unequal as the equal treatment of unequals,” adds David Straus, a certified public accountant and taxation attorney based in Las Vegas, Nev. “You can give each child an equal percentage of the estate, but how and when clients leave the assets should be based on the kids’ respective needs and circumstances.”

That usually means giving the business-savvy child ownership of the family firm and other children equal shares of the estate in cash or other assets. This can be facilitated, notes Teitelbaum, by integrating life insurance into the business succession and estate plans. Death benefits can be distributed to non-owner children at the parent’s passing. Or, if all kids are given shares in the business, then life insurance can be used to enable one child to buy out the shares of siblings.

Communicating to children plans about the estate, Teitelbaum adds, also is especially important for parents who are seeking to optimize wealth transfer through delayed tax strategies. The parents might, for example, need to explain to adult children the tax benefits of making grandchildren (rather than the children) the beneficiaries of their individual retirement accounts, or of selecting a certain minimum distribution table for their IRA.

However the parents intend to dispose of their estate, experts say it’s best to involve the children as early as practical in the planning process–even kids who are still in their teens. Golleher notes that parents can use planning discussions to educate children about the estate and to enhance their “wealth inheritance skills,” enabling them to more easily assume responsibility of the family wealth at older ages.

Involving children early in the planning serves another essential purpose: acquainting them with the locations of key estate planning documents.

“Involving the children helps to minimize the types of inadvertent mistakes that often occur during turmoil connected with the death or incapacity of a parent,” says Donna Pagano, a certified financial planner and president of Family Love Letter, LLC, Westlake Village, Calif. “Every one of us has a paper trail. The longer you live, the more you acquire and the longer that paper trail grows. Families are often left with no roadmap to follow a deceased person’s paper trail.”

During estate planning discussions, Pagano adds, parents should take care to inform the children of their wishes (as, for example, in the form of a “family love letter”); who their advisors are; and the locations of their will, trust, estate plan and other key documents, such as power of attorney. Parents should acquaint children with their assets, liabilities and benefits; review the titling (beneficiaries) of assets; and, if there is more than one child, discuss if one will serve as executor or trustee of the estate.

“Educating children about their inheritance is as important as drafting and implementing the plan,” says Straus. “Those children who are serving as trustees especially need to understand how assets are to be distributed, respect and honor the legal structure of their inheritance, and adhere to state law duties, as well as federal and state income tax filing requirements.”

How much should children know about what the estate plan stipulates? At a minimum, say experts, the advisor and parents should acquaint children with the basics of the plan, letting them know that assets have been set aside for their benefit in a will or trust, thus assuaging potential concerns among children that they won’t be treated fairly. But the dollar amounts or family possessions to be divvied up among siblings needn’t be disclosed.

The degree of the children’s involvement will depend in part on their age and maturity. Among children whose knowledge of the planning should be limited to a need-to-know-only basis are spendthrifts, those who are in bad marriages, and children who are addicted to drugs or alcoholic, says Strauss.

At the other extreme, adult children may actually guide the plan design and implementation. This is often the case, observes Straus, in situations involving family businesses where adult children are heavily involved in management; or who have through their own efforts contributed to the growth of the estate.

Children tend also to be deeply involved in the planning, sources say, in instances where parents are advanced in age and need to consider options for long term care. Gay Rowan, a certified long term care advisor and principal of LTCi Planners/Specialists in San Diego, Calif., says she strongly encourages adult children/clients over age 50 to speak with their parents about LTC planning.

Parents who fail to incorporate long term care into their planning not only put the estate at risk because of the potentially huge out-of-pocket costs they’ll have to pay, but they also could be putting an enormous strain on children who are left to care for them.

“People don’t understand what upheaval this causes in a home environment–financially, emotionally and physically,” says Rowan. “Long term care is very labor-intensive and expensive. It’s a 24 x 7 job.”

To avert this burden, Rowan adds, some client children have pooled resources to fund a LTC policy because their parents didn’t have the financial wherewithal. In other cases, parents or their children have opted for a less costly life insurance policy carrying a long term care benefit rider.

Such deep involvement of children in the estate planning often assumes a level of harmony–between parents and children or among siblings–that may not present. When high tensions exist in relationships, discord over planning goals and objectives is the likely result. And the advisor, observes Golleher, may be hard-pressed to smooth over the differences, particularly in cases where the parents favor one child over the others.

“The emotional dynamics within families can be a real challenge,” says Golleher. “When necessary, we’ll ask the attorney to talk to the parents. Or if there are really serious communication issues or differences of opinion between the parents and kids, I’ll suggest bringing in a family wealth mentor.”

When such differences can’t be bridged, a lawsuit by one or more of the children could result. And the estate planner handling the case could be the target, observers warn. One reason: the advisor failed to apprise clients as to all the available product or planning options. Or, having fulfilled his fiduciary duty to the client, the advisor didn’t adequately communicate the plan objectives to all the stakeholders.

“A good advisor will make sure the clients are executing documents so as to preclude children from second-guessing the parents’ decisions,” says Teitelbaum. “One way to do that is to make sure the children are included in the planning.”