The Overlooked Key to Estate Planning Success: The Psychology of Communication

Estate planning focuses on three goals: protecting yourself and your family, passing on assets, and keeping as much of an estate away from the taxman as possible. There are essential documents, such as a medical power of attorney and a will; there are structures, such as trusts, and procedures to go through.

What often gets lost – and why estate plans fail – is the communication of intent. Why you are making certain decisions, what the goal is, and how you wish your legacy to be perceived are the true reasons to make a plan in the first place. There are many stories of estates ending up in expensive litigation, often for years. Families break apart, and formerly close bonds never recover. Whether money or property, dividing an estate puts stress on even the best family relationships because it brings to the fore long-standing, sometimes deeply hidden feelings that may have their origin in events decades before.

How can this be avoided? There are four elements of a successful estate plan communication strategy:

1 - Communicate your intentions. This is the hardest part for many people. We often don’t tell people our true motivations when present with them. Sorting out and leaving clear messages as part of an estate plan can feel overwhelming, but there are steps you can take.

2 - Money is a sensitive, difficult subject, but don't get caught in the trap of avoiding it. Whether out of a desire to keep the true extent of wealth under wraps, or a fear of disappointing someone, avoiding money conversations always makes things worse.

3 - Estate plans contain legal documents and are written in language that conveys specific legal meanings. Make sure you, or your attorney, translates these into clear, simple language.

4 - The premise of a recent movie was a family gathering to hear a will read. The name? “Knives Out.” It was a great movie – but not a successful estate plan. Have the family meeting and make sure there are no surprises.

Communicate Intentions

When we don't know a person's true intentions, we make up a story. We then convince ourselves that our story is true. The story we make up is based on our conscious and unconscious beliefs about ourselves, our family, the world, our self-esteem, our perceived position in our family system, our relationship with our parents and siblings, and any unfinished business or emotional wounds we have experienced in relation to the grantor. Unfortunately, the story we make up about a grantor's intentions is often not the one that was intended, and this miscommunication can destroy relationships, dismantle families, and cause life-long emotional wounds.

Despite the universal need to disperse one's wealth and possessions in a thoughtful manner, only 30 percent of people take the time to establish an estate plan, according to the 2003 book Preparing Heirs by Roy Williams and Vic Preisser. Of these estate plans, 70 percent fail to accomplish the client's true intentions. Strategies to minimize taxes and avoid probate are just the tip of the iceberg; however, that is where traditional estate planning starts and often ends.

Research reported in Preparing Heirs has shown that less than 2 percent of estate plan failures occur because too much tax was paid or the estate went through probate. While some of the remaining failures are related to an inability of the beneficiaries to manage their wealth properly, many failures occur because professionals, primarily estate planning attorneys and financial planners, fail to help their clients develop a plan and process to accurately communicate their true intentions.

These failures can result in confusion, deep emotional wounds, fractured relationships, and family chaos. In traditional estate planning, the client often seems to be playing the game “telephone.” In telephone, a group of players arranges themselves in a circle. The initiator whispers a message to the person next to them, who whispers it to the next person, and so on. By the end of the game, the message returns to the sender, and it is invariably and often quite humorously, completely different.

The intended message is changed significantly, often beyond recognition. Each recipient subtracts or adds to the message based on their ability to listen and their individual biases. The message is further distorted by the communication style of the next sender. In the end, the intended message is lost. This is one situation where you do not want to be “telephoning” your intentions. A financial advisor can work with you and your attorneys so that you have the opportunity to accurately and fully communicate your true intentions to your heirs.

Money Avoidance

There are many reasons people are hesitant to have a conversation with beneficiaries. It can be due to a general reluctance to talk about finances. It may be the fear that sharing true wishes with beneficiaries will cause conflict. It is an essential part of the estate plan, and a financial advisor who understands the entire estate can work with you to discuss the pros and cons of not making these intentions clear.

What you give and who you give it to will likely result in your heirs reassessing and reinterpreting their relationship with you and other beneficiaries. With the best will in the world, intentions such as protecting a sibling in a problematic marriage or who has challenges in their lives such as substance abuse can trigger reactions that are not intended.

As a result, families are often set on a path of destruction as beneficiaries are left to make up stories about what was truly intended in the absence of information. Financial planners often understand both the estate and the family dynamic and are in an ideal position to identify possible consequences of a lack of communication and recommend a remedy.

Lost In Translation

A client comes in with intentions, and the attorney, based on his or her perspective, crafts the legal documents to reflect these intentions. However, because of the unique language that attorneys use and their focus on the "what to dos" and "how to dos;' client intentions are often bleached out, leaving a black and white legal document that may fail to pass on the heart of what the client intended. For example, a plan may read that Anthony gets 100 percent of the estate and Megan gets nothing. Although this provides clear distribution instructions, it may leave out the couple's true intention of supporting Anthony, who has chosen the lower-paying career of a teacher, while Megan is a corporate executive with a high six-figure income. The couple may be merely wanting to support one child while feeling quite proud of another who, in their mind, doesn't need help.

Without explaining their rationale and intentions, the risk of misunderstanding is considerable, leaving Megan feeling hurt or left out and perhaps unintentionally causing or deepening a rift between Megan and Anthony.

Or consider the presentation of a "liquidation" clause. When beneficiaries see the word "liquidate;' while the legal meaning is clear-to sell the property, the underlying intention is not. As such, misunderstanding can result. Given the opportunity to explain that liquidation means that the clients value their children's relationship with each other above anything else and that the property has to be sold so that the relationship among the children is not at risk, can clear up any misunderstanding.

Without a formal process for passing along intent, the intentions expressed to an attorney during the client meeting can become lost in translation.

The Family Meeting

The stereotypical Hollywood "reading of the will" scene wherein the attorney reads the grantor's last wishes to a group of beneficiaries who are shocked, disappointed, and/or excited represents a failure in estate planning. Instead, clients should be asked to consider, when appropriate, inviting their family and trusted advisers to a family meeting. Ideally, a meeting with the client, family members, attorney, and financial planner can take place so the client can share their intentions.

We recommend a family meeting that begins with an expression of the "why" of the estate plan. This "why" builds the foundation for the entire estate plan. After the intentions are made clear, the beneficiaries are familiarized with the estate planning legal documentation and how it supports the "why" or the true intentions.

Family members are then able to ask questions to seek clarity. When appropriate, they may even have the opportunity to express appreciation or even frustration. These meetings can be done privately as one-on-one sessions but ensuring everyone has a voice and can express their feelings can be therapeutic beyond the estate plan.

At times it might feel uncomfortable but allowing everyone to air out differences of opinion while there is time to resolve them, can allow for a more successful transfer.

The Bottom Line

Estate planning that focuses on the distribution instruments, not the intent, is being set up to fail. Working with a trusted financial advisor who understands the entire estate and has insight into the family dynamics makes it possible to craft an estate plan that expresses true intent.