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.