Three-fourths of older Americans say they plan to hand down money, real estate or other assets to their heirs, but few have taken the time to discuss it with their family. Such secrecy can lead to an explosive combination of grief and resentment among adult children long after parents are gone and unable to explain their intentions.

An Estate Is More Than Money

An important part of estate planing is figuring out what money and material possessions mean to you and to your children-and realizing that they may not mean the same things to each of you. "Money and death remain taboo conversation topics that can lead to sibling squabbles, unnecessary legal expenses, unpleasant surprises and missed opportunities," says Lin Coughlin, chairwoman of the AARP Investment Program from Scudder, which recently conducted a survey about estate-planning trends and attitudes. "As the population grays, we believe legacy planning and greater communication among family members will become imperative," he adds.

David Gage, a clinical psychologist who heads a team of lawyers, financial experts and business consultants at BMC Associates in Washington, D.C., spends his time mediating estate-planning disputes involving partnerships and family businesses. "Passing money to children means different things to different parents,'" he says. For some it's a way of expressing love; for others it's a way of being loved. And for still others, it's a way to keep their children beholden to them."

"Sitting down and talking openly makes a family feel like they're on the same team," Gage says. "It's also important for parents to realize that talking openly with their adult children doesn't mean the children can dictate what they do. It's the parents' money and they can do what they want to with it, but they will be able to decide in a more informed way."

Surprising Your Heirs Can Backfire

Gage has witnessed firsthand how secret estate plans can go awry. "I know of two siblings who have not talked to each other for about 15 years," he says. "After the father's death, the daughter convinced her mother that she should receive the bulk of the family inheritance because her brother didn't need any financial help. The mother agreed to leave everything to her daughter, which the brother didn't discover until after his mother's death. If they had talked openly about it, he may well have agreed to the whole idea, but because it was done behind his back he felt cut out and mistreated. He hasn't spoken to his sister since."

Will It Your Way

Whether your estate is modest or large and complicated, the first step is to put your intentions in writing, either in a simple will or a will plus the trust documents that will be needed to carry out your wishes. Unfortunately, many people haven't taken this important first step.

In fact, more than 40% of people 35 and older do not have a will or other legal document to determine how their assets will be distributed after their death, according to a new survey by U.S. Bancorp Piper Jaffray, a Minneapolis-0based investment company. If you die without a will, which is known as dying "intestate," a court will decide, based on state law, who will inherit your property. In some cases, the result might be contrary to your wishes.

Estate planning is a process, not a one-time event. "Situations change and your will needs to reflect these changes," says Patty Peterson, vice-president of business, retirement and estate planning a U.S. Bancorp Piper Jaffray. "I recently heard of a man who had divorced and remarried but hadn't updated his will for some time. If he had died, he might have had one very unhappy wife."

Peterson suggests that you look at your will at least every five years, and definitely after any major changes in your life such as divorce, remarriage, death of one of your heirs or a change in your financial situation.

Blended Families Complicate Estate Planning

Not all families are created equal, so make sure you get the best advice and use the right estate-planning tools for your family's needs, says Alan Orlowsky, a lawyer and accountant in Northbrook, Ill., who has been advising clients on estate-planning issues for more than 20 years.

"A lot of what we do involves divorce and the children from first and second marriages," he says. Typically a client has teenage children or adult children from a first marriage and young children from a second marriage. The challenge is to find a way to provide for all of them after the client's death.

One estate-planning tool that Orlowsky uses is to fund an insurance trust (see KRR, Nov. '99 for more information) and direct the trustee to divide the proceeds equally among all of the children. That allows the client to provide for his children while keeping the money out of the hands of a former spouse.

Orlowsky has also observed that some clients prefer to bequeath the money to their children in lump sums, while others go to great lengths to protect their heirs from creditors, divorce settlements or their own bad money management habits by channeling their wealth through trusts that dictate how and when the heir receive the assets.

Orlowsky's advice to those who haven't yet taken the estate-planning plunge: "Determine the value of your estate and think through how you want your money to be distributed to your children. Then talk to an adviser who can walk you through the minefield of estate-planning rules and give you the information you need to make informed decisions and at the same time reduce estate taxes."

Keep Your Plans Safe. . . Not Hidden

Why spend a lifetime accumulating wealth and wisdom to pass on to your heirs and then send them on a scavenger hunt after your death? A well-organized estate and a file of information instructing your heirs whom to contact after your death will assure that you won't be remembers for the awful mess you left behind.

Once you have your estate plan in place, make sure your loved ones know where to find important documents, such as your medical directive, power of attorney, will and any instructions about what you want done at the end of your life and after your death. It's also good to leave a list of important contacts and their phone numbers.

A little extra time and effort can also spare them from having to make hard decisions that you are in the best position to make. Depending on your situation, this may include determining who you want to receive your personal possessions and cherished keepsakes and the type of funeral arrangements you would prefer.