Creating a plan to bequeath assets to your loved ones can be a difficult and emotional process, especially when there are complicated family dynamics at play.<\/p>\n
Take Caitlyn, for example. Caitlyn, who lives in Texas, called in to The Ramsey Show seeking advice on a situation that\u2019s left her upset. As she explained to hosts Ken Coleman and George Kamel, Caitlyn’s husband wants to bequeath 80% of the assets in his 401(k)<\/a> to her, while leaving 20% for his daughter from his first marriage (1).<\/p>\n \u201cHe was a drug addict at one point, but he got sober,\u201d said Caitlyn. \u201cNow he’s been sober for 13 years and he has rebuilt his relationship with his daughter. And I think that the money is trying to make up for lost time and that he doesn’t want her to feel like he left her behind without thinking about her.\u201d<\/p>\n Caitlyn claims the reason she\u2019s so upset is because their 7-year-old son has autism and will require care in the future. Caitlyn also revealed that she and her husband have a special needs trust set up for their son.<\/p>\n While Coleman and Kamel acknowledged Caitlyn\u2019s son\u2019s condition, the hosts couldn\u2019t help but notice that Caitlyn\u2019s reaction to her husband\u2019s plan seemed to be based on emotions and not a practical financial need.<\/p>\n \u201cAre you going to be okay if something were to happen to him (Caitlyn\u2019s husband)?\u201d asked Kamel, to which Caitlyn admitted that yes, she and her son would be fine, financially speaking, with 80% of her husband\u2019s 401(k). This prompted the hosts to try to get to the root of Caitlyn\u2019s issue.<\/p>\n \u201cThere\u2019s really no, \u2018if I get 80% I\u2019m not going to be doing OK versus 100%,\u2019\u201d said Kamel. \u201cSo, it\u2019s really just the idea that he\u2019s valuing and prioritizing his daughter over giving you the entire share.\u201d<\/p>\n This situation shines a light on how money and emotional family dynamics can complicate the process of naming beneficiaries, and why you need to ensure that you make smart decisions with your assets before it\u2019s too late.<\/p>\n With a 401(k), you can name a primary beneficiary as well as a contingent beneficiary in case the primary predeceases you, declines the inheritance or cannot be located.<\/p>\n If you\u2019re married, most 401(k) plans will automatically designate your spouse as the primary beneficiary. In this case, to name someone else as the primary, you must get your spouse\u2019s permission in writing.<\/p>\n Naming a beneficiary for your 401(k) is important because it ensures the account\u2019s contents will not get tied up in probate<\/a> court. Parents, however, should note that children who are minors cannot inherit a 401(k) unless the funds are placed in a trust<\/a> that is managed by a trustee.<\/p>\n While retirement plans cannot be included in a will, naming beneficiaries for a 401(k) is a lot like creating a will, which can be an emotional and complicated process.<\/p>\n Online services can help with creating a basic will for a fee, but it may be helpful to consult with a lawyer if dividing your estate proves to be complicated, if your estate is larger than average, if you want to open a trust, or if you\u2019re having trouble deciding how to allocate your assets.<\/p>\n Trending: Warren Buffett used 8 simple money rules to turn $9,800 into a stunning $150B<\/a> \u2014 start using them today to get rich (and then stay rich)<\/p>\n When you\u2019re in the process of creating a will or naming beneficiaries for bank accounts, having a frank and honest discussion with your family \u2014 whether they\u2019re named a beneficiary or not \u2014 is a good idea. This will allow you to explain your decisions while you can, which may prevent your family from being blindsided by whatever you choose to do with your assets.<\/p>\n In Caitlyn\u2019s situation, it looks like she and her husband have already had this awkward conversation and it left Caitlyn feeling disappointed. But in having that conversation, Caitlyn\u2019s husband was able to explain why he decided to name his daughter as a beneficiary to his 401(k), a decision that Coleman believes Caitlyn should be willing to accept.<\/p>\n \u201cI hope you can mend this resentment and go, \u2018Hey, this is what I felt,\u2019 because I\u2019m sure he felt some of this coming at him,\u201d said Coleman. \u201cAnd I think you\u2019ve got to support him in this move.\u201d<\/p>\n Here are a few things to keep in mind when creating an estate plan and sharing it with your family:<\/p>\n Don\u2019t be afraid to have a tough conversation with your family about how your assets will be divided<\/p>\n Try to be empathetic and listen to your family\u2019s concerns, making space for hurt feelings<\/p>\n If you\u2019re met with consternation, be willing to give your reasons and stand your ground<\/p>\n If you know the conversation with your family will get heated, consider bringing an estate planning professional into the meeting for objective guidance<\/p>\n Inform the person you\u2019ve named as executor of the will of their status, and let them know where your will is stored, or give them a copy for safe keeping<\/p>\n Make a plan for your possessions that aren\u2019t specifically named in the will<\/p>\n We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines<\/a>.<\/p>\n