American families may be less prepared than they think with regard to discussing estate plans and leaving a legacy, according to Fidelity Investments.
On Tuesday, the firm released the Fidelity Estate Planner, an online service designed to guide its customers through the process.
Fidelity noted that 90% of parents and their adult offspring in its third biennial Family & Finance Study emphasized the need for frank conversations about estate plans and wills.
However, the study found although 69% of parents believed they had had detailed conversations with their children on these matters, 52% of the latter said this was not so.
The study also showed that 67% of adult children and their parents disagreed about the appropriate time to initiate conversations about the parents’ finances — whether well before retirement, upon entering retirement or closer to when health and finances become an issue.
“When it comes to legacy planning, generally speaking, the sooner the better,” Kevin Ruth, Fidelity’s head of wealth planning and personal trust, said in a statement.
“Failing to have an estate plan in place can lead to significant family confusion once a beloved family member passes. Too often, it may result in costly mistakes or the wishes of a loved one’s estate and legacy plans going unfulfilled.”
For example, the Fidelity study found that 7 in 10 parents and their children had major misconceptions about the value of the parent’s estate, with the children underestimating the value on average by $278,000.
Moreover, 8 in 10 parents believed their children knew where to find important documents such as wills, power of attorney and health care proxies, whereas only two in three children said they knew where to look.
Add to this today’s concept of who comprises a family, and the potential for confusion increases and the need to start planning is even more urgent.
GfK Public Affairs and Corporate Communication conducted an online poll last February and March among 1,273 U.S. parents and 221 adult children. To participate, parents had to be at least 55 years old, and have an adult child older than 25 and investable assets of at least $100,000. Their children had to be at least 25, and have money saved in an IRA, a 401(k) or other investment account.
How to Get Started
Fidelity said an estate plan provides protection for those left behind, which may be especially important for family members requiring special care. Absent a will, laws in the state where one resides may determine how the property is distributed upon death, which may not be aligned with what was intended nor be appropriate for a specific situation.
Fidelity offered several guidelines to facilitate a family financial conversation around estate planning:
1. Determine what factors you need to consider in your estate plan, including children and special circumstances, such as blended families or children with disabilities.
2. Get organized, starting with a good understanding of the key topics that may arise as you address specific needs.
3. Find the best estate planning attorney for your needs.
4. Align your financial plan to your estate plan with the help of a financial consultant, and keep in mind that most estate plans evolve over time.
5. Set up a financial check-in, a time for your family to discuss your wishes, expectations and the roles you anticipate your children will play, and an opportunity for your children to ask important questions that otherwise may not come up.
The new Fidelity Estate Planner helps organize information and documents, provides information on estate planning topics and decisions families will need to make, and offers tips and guidance on how to find and work with the right estate planning attorney.
— Check out Estate Planning 101: Motivating Clients to Get Started on ThinkAdvisor.