Happy Father’s Day

In one of my Walter Mitty daydreams, I imagine having an essay broadcast on NPR or appearing on the Op-Ed pages of the Wall Street Journal. Here’s a piece I wrote for a local fiction writing group that sometimes has me as a member. Funnily enough, neither All Things Considered nor the Journal were interested. It’s not about estate planning or estate administration. I hope you’ll enjoy it.

My father died of cancer in 1978. He was just 60. I was only 21, with a man’s body but still a child’s mind. I so wish he could have known the adult me.

I wonder sometimes what would most surprise my Dad about America in 2014. So Dad, if this webpage is accessible on your side of the great divide, here are ten things you might not have seen coming.

First, the internet and cell phones are to this generation what the electrification of homes must have been for Nana and Grampa. I use this technology every day, yet don’t understand how even half of it works. Arthur C. Clarke’s Third Law remains true – any sufficiently advanced technology is indistinguishable from magic.

Second, cars are markedly more reliable and long lasting than in your day. My minivan has 332,000 miles and still has its original engine.  The next new car I buy might be the last one I ever buy.

Next, the Red Sox. They waited until the 21st century to win the World Series, but they’ve done it not once, not twice, but three times now. I am not making this up.

Fourth, we’ve never been back to the moon. We’ve never even tried. We built this glorious space station in the 1990’s that orbits the earth, but we can only get there now if the Russians agree to take us on one of their space rockets.

And speaking of the Russians, we won the Cold War. Containment worked. The Soviet Union collapsed of its own sclerosis in the ten years after your earthly death. But that doesn’t mean peace reigneth. There’s a real sense in 2014 of a world spinning out of control.

Sixth, we have a black President. No, really. Well, to be precise, he’s our first mixed-race President. His mother was white, but his father was a black Marxist from Kenya. Yeah, it’s a long story.

Next, handwriting and penmanship are lost arts. About as important as Morse code or scrimshaw carving in your day. We type everything. The only thing I can write in script any more is my signature.

Eighth, gay marriage is now legal in many places and it looks like it will soon be legal in every state. It all happened with the speed of summer lightning through unelected judges.

Ninth, we’ve basically achieved energy independence. Another one of those things that happened practically overnight. Some new technology called fracking. We’re awash in oil and gas after decades of thinking we were running out.

You’d probably be surprised at how I’ve turned out. I own a small business and I married a woman who inherited a house on Nantucket. I know, unbelievable. You would love her. We have two great kids. One named after you. I would give anything if you could meet them.

But, sometimes, when I look in the mirror, I could swear it’s you looking back at me. So, maybe you have met them. I’m not sure of many things, but I am sure of this – there is an eternity and it is both stranger and more glorious than I can imagine.

Happy Father’s Day Dad.  God bless. I sure miss you.

Avoiding Family Conflict – Part 2

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.

Avoiding Family Conflict

Our law firm logo includes the words Guiding You to Family Harmony in Estate Planning. Those words summarize much of what I strive to do as an estate planning attorney. Sure, I help people reduce their potential estate tax exposure, and I help them plan around the more unpleasant aspects of Virginia probate. But I am just as focused on those personal dynamics that might lead to family conflict when a person dies. Here are situations the require special attention.

Should You Pick a Child as Executor? You are paying an implicit compliment to the person you select to serve as Executor under your will. That is the person who will administer and settle your estate upon your death. It shows you trust the person named to do the right thing, in the right way.

An Executor has an important job. It is often a thankless job. People usually choose a close family member. Most of the time, that is the best selection. But keep this in mind: while an executorship is a post of honor, it is not an honorary post. Don’t name your oldest child just because he or she is the oldest child. Ask yourself whether he or she has the traits of a good executor or trustee. Is he organized? Is she trustworthy? Will he see a job through to completion? Is she diplomatic and fair-minded? Might he abuse the position to settle old scores and wounds that are sometimes 30 years in the making? Is she sensible … will she know when she is over her head and needs professional help? In short, given all your available choices, is that the best person for the job?

Sometimes, people want to name more than one executor, so that no child will feel left out. The administration of an estate is not a therapeutic exercise that will ameliorate 20 years of bad feelings between siblings. A Co-Executorship can be a good thing, but ask yourself first if you have selected two persons who can work well together. Never put two scorpions in the same bottle.

A Common Estate Planning Mistake in Second Marriages. If you are in a second marriage, it may be difficult to be fair to your spouse and fair to the children of your first marriage. Think of creative ways to be fair to both at your death. Try to avoid setting up a situation where your children are waiting for their stepparent to die before they get their inheritance. I had a 50 year old man come to see me recently about his father’s will. The father left virtually everything in trust for his second wife. A trust like this commonly provides limited amounts of income and principal to the spouse during the surviving spouse’s lifetime. When she dies, then the assets will pass to his children by his first marriage. What’s the problem? In this case, the stepmother was the same age as the father’s children, and was just as likely to outlive those children as vice-versa. The father had, perhaps unknowingly, disinherited his children, although in all likelihood, his grandchildren would receive the inheritance some day.

Should Multiple Children Inherit the Family Residence? Here’s another common situation that often leads to family conflict – leaving real estate equally to all your children. In larger families, it is wise to provide an enforceable mechanism permitting either (i) one child to buy out his or her siblings at a fair price, or (ii) the executor to sell the real estate and divide the net proceeds up among the children. In Virginia, real estate usually “drops like a rock” under a decedent’s will directly into the hands of the beneficiaries of the will. The Executor has no control over the real estate unless the decedent’s will gives the Executor explicit authority to sell the real estate. If the beneficiaries cannot unanimously agree on what to do with the real estate, the law provides no satisfactory remedy. As a last resort, one of the owners of the land may file what is known as a partition suit and ask a court to divide the land or, if that is not practical, sell the land and divide the proceeds. Don’t set up your children in a situation where a partition suit is their only remedy.

Picking a Child as Trustee of Another Child’s Trust. Another common problem comes up when a testator has recognized the need to leave one child’s inheritance in trust, where other children are to receive their inheritances outright and free of trust. This might be done for many reasons, including the following: (i) the child has significant creditor problems, including perhaps the IRS, (ii) the child suffers from a physical or mental disability, or from serious financial impulsiveness, (iii) the child is in a particularly bad marriage, or (iv) the child has never grown into the type of person who can be trusted to handle his or her own inheritance.

Suppose that child resents the arrangement, which is quite possible. Who should the testator name as Trustee of that child’s trust? Should he name a sibling as the Trustee of the less-able sibling’s inheritance? What will that do to the sibling relationship following the testator’s death? What if the testator names a professional trustee, such as a bank or trust company or law firm. Are you putting your child at the mercy of that professional trustee? What if they provide lousy service after you die ? Or raise their fees after you die?

All those problems go away if you give someone you trust – such as the child that you were thinking about naming as Trustee – the unilateral power to fire the professional trustee and appoint a new professional trustee in place of the fired trustee. In my documents, I call this person “the Trust Protector.” You would be surprised how much more responsive a professional trustee will be when the trustee knows it can be fired at any time for no reason. Actually, you wouldn’t be surprised at all.

In my next post, I will share some more thoughts on Avoiding Family Conflict.