Managing Your Estate’s Legacy

Published In Finances & Insurance

We have had three clients die this year. None of their deaths were a surprise as two of them had battled cancer for several years and the third was 98 years old when she passed away. However, their heirs have all been surprised with the distribution of the estates. This is in contrast to a client (“Phil”) who passed away 27 years ago, after battling cancer for eight years. Phil’s estate continues to benefit generations of his family to this day.

The reasons people do not take the time to design and communicate their legacy wishes to their loved ones are understandable:

  • Who wants to talk about death?
  • Fear that acknowledging death while fighting a disease, like cancer, might compromise their fight.
  • Some people really do not care what happens to their family members (or assets) when they are gone.
  • Family communication is tough because there is often a long history of sore memories and people want to avoid opening old wounds.
  • Surprisingly, many people just do not want to be honest. This is more often the case than you might think.

What Did Phil Do That the Others Did Not?

The first difference is in how they accepted their fate. None of the three people who passed away this year was willing to accept that death might come sooner rather than later. Phil was willing to accept that possibility and met frequently with his attorney and CPA in deciding how to use the resources he had accumulated to the benefit of each beneficiary. He left an equal amount to his children, but he arranged that they would receive their inheritances differently. Some receive just the income from their trust asset,s whereas some have more discretion in withdrawing principal. He understood the strengths and weaknesses of each beneficiary and specified how each would receive their bequests so that they would be blessed, and not overwhelmed, by the inheritance.

We have all heard the stories of how money destroys relationships and the self-worth of people (lottery winners and athletes are known for wasting money). He was very concerned that his wealth might be a disincentive for his heirs. His effort took careful consideration, required several changes, and took the better part of a year. But 27 years later three generations (his children, grandchildren and now great-grandchildren) are benefiting from his considerate planning. His heirs were incentivized to get good educations and work in order to provide for themselves.

The next difference was Phil’s willingness to communicate to his family what arrangements he had set up. Those communications were not always easy, but he felt it was his responsibility to inform his family members and not the responsibility of his attorney, CPA, investment advisor, insurance agent, bankers or trustees that formed his estate planning team.

The families who lost loved ones this year have faced surprises, disappointment and frustration for a host of reasons.

One client had been married three times and had four children and three stepchildren. While he tried to be fair to his current wife and seven children, in the end most of them were disappointed. Not necessarily in the amount they received, but in the fact they just did not understand the consequences of his estate plan. His original and long-time attorney passed away several years ago, and the client just did not make it a priority to find a replacement.

Now the attorney who has been hired by the family to make sense of the estate is having to work through years of bank records and legal papers while getting acquainted with the family members. All it is going to take is for one of those eight beneficiaries to challenge the estate and the assets could be frozen for years in litigation. The primary reason for this problem is not greedy heirs, but rather someone who refused to accept his fate and felt that thinking about death was giving in to cancer.

The 98-year-old client only had two daughters and had no grandchildren. So one might think this estate is going to settle easily. She knew full well that one of her daughters was just an unhappy person. She could have specified clearly her bequests to keep her daughters from fighting. She refused to accept that responsibility. It only took three weeks after her passing for her disgruntled daughter to hire an attorney and freeze the estate from anything being distributed.

The deceased client lived in California near her younger daughter. The older daughter, who is challenging the estate, lives in Virginia. She is demanding that an appraiser be hired to inventory every personal item. This client had hundreds of souvenirs collected from her, and her deceased husband’s, world travels. The only ones who will benefit from taking such an inventory will be the appraisers and the attorneys. Meanwhile, both daughters will wait quite some time before receiving any of the resources their mother has left them.

The third client who passed away this year leaves behind a very large estate, an estranged husband, a live-in boyfriend (not making this up), two daughters and five grandchildren. Her estranged husband knew for years about the boyfriend (which didn’t bother him because he lives with his girlfriend). He has given the boyfriend 30 days to leave the house even though he had promised his deceased wife that he would give the boyfriend six months. Without passing judgment on the relationships or values, the problem is that the deceased client did not put her wishes in writing. She trusted people to keep their promises. Unfortunately, when it comes to money compounded by grief, a lot of people do not keep verbal agreements.

Steps to Avoid Such Problems

  • Meet with your attorney every few years. Here’s a suggestion: meet with your estate attorney every four years after the presidential election. While tax laws may change under a new president, it will allow you to focus yourself and update your attorney on the state of your family and your wishes. Once every four years is frequent enough to keep matters current but not too frequent to think about your passing.
  • Meet with your attorney in a comfortable place such as your home or restaurant. Don’t meet them at their office, which has no connection to your family. I promise you, you will have a much more productive meeting outside of their office.
  • Do not be afraid to treat each beneficiary differently. Bequests to your heirs are gifts — not obligations. You do not owe anyone anything. Consider how to give benefits (income, assets, personal property, etc.) to each person. For some heirs who are responsible with money, it may be a one-time gift of their inheritance. For the person who has difficulty managing money, it could be a long-term annuity that pays them a regular income.
  • Consider charities that hold a special place in your heart. Philanthropy benefits hundreds, even thousands, of people. Rather than bless a handful of family members, you can leverage your legacy by giving to thousands of people through charities.
  • Have the courage to be the one to communicate to your loved ones what your wishes are. Your legacy of respect and honor will remain with them, for having initiated the tough conversations, even longer than the financial impact your resources will have on them.

The old adage of “No one plans to fail, but many fail to plan” is all too true when it comes to planning the distribution of their estate.

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