One of the unfortunate realities of estate planning is that death and inheritance can unearth or create rifts despite parents’ and children’s best intentions, and regardless of the size of an estate. That is the bad news. The good news is that there are proactive steps that you can take now to help ensure that the gifts you make both during life and at death do not lead to lasting rifts among family members. We attempt below to outline some of those practical steps.
Have a plan in place, and update it routinely.
The most important step you can take today is to consult with an attorney and establish a plan. Most people recognize the value of good counsel in putting a plan in place. Many people overlook, however, the importance of updating estate plans on a regular basis. A simple rule of thumb is to update plans every 10 years if you are under 55, and every 5 years if you are over 55. Relatedly, it is a good idea to consider making updates if you have a significant change in assets, acquire an interest in a small business, receive a sizeable inheritance, obtain property in a different state, have children, or if someone needs to be removed from your existing plan as a result of death or divorce.
Talk about your plans and your reasoning for the plans.
Estate planning raises two issues that many families struggle to talk about: death and money. That these topics are uncomfortable does not mean they should be avoided. Put simply, communicating transparently, early, and routinely with the people who will receive gifts and bequests upon your death will improve the quality of your planning and decrease the likelihood of disputes. Adult children especially need to be informed about the basic aspects of your estate plan for their own planning purposes. Early and regular communication helps with this goal and, importantly, helps children to know what to expect so that surprises are minimized.
Beware of unintended inequality among siblings.
With some exceptions, most parents intend that their estate be split evenly among their children. For any variety of reasons, however, decisions made during life may cause problems in accomplishing this goal. For example, one common oversight is that parents will name only one child as a designated beneficiary of their retirement account, which will pass without respect to the terms of a will or other estate plan. Similarly, older parents commonly elect a trusted adult child as a “joint owner” of a checking or savings account to simplify banking and check-writing. The problem with these arrangements is that the child will take full ownership of the account upon the parent’s death, and the child’s ownership of such accounts will not be governed by the will. Where a child’s control over an account or accounts is practical and helpful, we can provide guidance on granting this control without adversely affecting your estate plan.
Have a plan for family camps and properties that will pass to the next generation.
Vacation homes can present a particularly thorny challenge without proper planning because they often carry sentimental values that are different for each sibling and have significant costs and income potential. Very often, the only way to facilitate shared ownership of vacation homes is through a trust dictating how costs (and income) are to be shared, decisions to be made, and ownership distributed among siblings.
Consider a trust for children with unique challenges.
It is the rare family in which there is not at least one child who is disabled, struggles with finances, has substance abuse problems, or otherwise presents a reason to pause before burdening the child with a large sum of money, expensive piece of property, or a share in a small business. How to deal with these transfers will depend on the unique circumstances of the child and the gift, and we can help you to establish a plan that anticipates and proactively addresses the challenges that can come with inheritance.
Choose personal representatives and trustees carefully.
An often overlooked part of estate planning is selecting a personal representative, trustee, and agents under advance directives and powers of attorney. The first consideration in making these decisions must be competence and trustworthiness. It is also critical to consider location and any other practical factors bearing on a person’s ability to perform the role. It is also worthwhile gaining input from children about the person(s) named for each role, and explaining your reasoning for selecting the people you have chosen. Regardless of the faith you may have that a particular trustee will serve the role honestly and fairly, the person will not be a good selection if they are a lightning rod for disputes among children. Although many are understandably reluctant to choose paid professionals to serve as trustees or personal representatives, this can be the most risk-appropriate option where conflict is anticipated.
As this discussion demonstrates, there is no one-size-fits-all solution that will guarantee harmony in the wake of death. However, there are two simple takeaways: have a plan in place, and communicate transparently with all counselors and stakeholders. Sharing concerns with your attorney openly is a critical first step, and communicating your plans to children an essential part of the process.