In a recent post I discussed some common scenarios that often lead to family conflict in the settlement of a decedent’s estate. Most people who plan their estates pay attention to such things as probate and estate tax avoidance. But the best estate plans are also drafted with family harmony in mind. I’d like to continue that post with a few more examples.
There are no simple estate plans. I love so many passages from C.S. Lewis. Here is perhaps my favorite: “There are no ordinary people. You have never talked to a mere mortal. Nations, cultures, arts, civilizations–these are mortal, and their life is to ours as the life of a gnat. But it is immortals whom we joke with, work with, marry, snub, and exploit–immortal horrors or everlasting splendors.”
Similarly, I have never drafted a “simple” estate plan. Each person has unique circumstances that his or her estate plan must address. A new client often begins a meeting with me by declaring that he (or she) just needs a “simple” estate plan. Here are two interesting examples.
A man came into my office a few years ago and asked me to prepare a simple estate plan for him and his wife. In the first 15 minutes, I learned that (i) he was not an American citizen, (ii) his 16 year old daughter was disabled, and (iii) it was not actually his daughter, although he and his wife (the daughter’s mother) had been married for 19 years.
Another man came to see me recently asking me to prepare a simple estate plan for him and his wife. He was a wealthy man, in a second marriage, with 3 children from his first marriage, and 3 stepchildren from his second marriage. And by the way, one of his children had Down’s Syndrome.
Admittedly, these are extreme examples. But there is no one-size-fits-all estate planning template. Your will and other documents should be carefully crafted to address your specific needs and circumstances. The more tailored your plan, the less room there is for family disagreements.
Are your estate planning documents up-to-date? Changes in the law occur frequently. Will Rogers once said death and taxes may be the only sure things in life, but death doesn’t get worse each time a new Congress is elected. Billionaire Yankee owner George Steinbrenner died in 2010 and his estate escaped estate tax entirely. If he had died 8 months earlier or 5 months later, his family would have had to pay perhaps $500 million dollars in estate taxes. Something tells me Mr. Steinbrenner died with an up-to-date estate plan.
Not only do the laws change, individual circumstances change. The persons you selected as your executors, trustees, and the guardians of your children 10 years ago are almost certainly not the same persons you would choose today.
Be careful not to inadvertently change your estate plan. Sometimes people make what seem like inconsequential adjustments in their financial arrangements that unknowingly have enormous consequences upon their deaths. These adjustments can result in the assets of an estate being distributed differently than was probably intended. They can also lead to family feuds or adverse tax consequences.
For example, suppose you have a will that provides for your estate to be distributed equally to your three children at your death. You have named your daughter Susan as your executor. To make it easy for Susan to access your bank accounts and investment accounts in the event of an emergency, you have added Susan’s name to all of them as a co-owner. Under Virginia law, those bank accounts will belong to Susan at your death. They will not be shared with your two other children, unless Susan decides it was not your intention to make a gift to of those accounts solely to her at your death.
The lesson here is a simple one. Before doing any “self-help” planning — even something as simple as adding a child’s name on a bank account — check with your legal advisor to see how it effects your estate plan.
Your Executor needs help. Make sure he or she gets it. The actions of your executor under your will or even your agent under a power of attorney are subject to a rigid and sometimes unforgiving legal standard. It is easy to inadvertently run afoul of those standards. If you name a child to serve in these capacities, perhaps you should introduce him or her to your legal adviser. Furthermore, make it clear in your legal documents that your executor or trustee or agent under your power of attorney should seek professional help and is entitled to pay for that help from your estate.
Consider telling your family in advance what arrangements you have made. Explaining the disposition of your estate and your selection of an executor to your family in advance gives you the opportunity to address any concerns, answer questions, and clear up misunderstandings. Once you lose capacity or die, it is too late. Many family fights could have been avoided, with an open and frank discussion so that everyone is best prepared to handle a loved one’s loss of health or life. Eliminating surprises helps eliminate family fights.