Reuters Money
How to avoid an inheritance battle
We’ve all read about huge family fortunes squandered in legal battles between siblings after the patriarch or matriarch dies. While most of us wouldn’t make national headlines regarding our estate planning matters, the pain and destruction of inheritance feuds can be minimized if not totally avoided.
Interestingly, most of these fights aren’t about money. “What causes inheritance feuds are a few other things — lack of communication mostly by the parents — and [other emotional] stuff,” says Theresa Malmstrom, vice president and senior wealth planner at PNC Wealth Management.
That other emotional stuff includes longstanding sibling rivalry. Indeed, “if parents can somehow eliminate jealousy among and between siblings, disputes could disappear,” says Michael Dribin, an estate planning attorney at Harper Meyer Perez Hagen O’Connor Albert & Dribin LLP. “These disputes are often the result of deep-seated issues that go back many years and only reach their climax when mom and dad are no longer around.”
While establishing a sense of family harmony that is stronger than a need for financial gain, many families fall short of it. Still, there are steps to take that can at least facilitate a more harmonious transfer of assets between family members. Note the foundation of this entire process is ongoing communication — both verbal and written.
Create a plan Sit down with a trusted professional adviser who can help you plan your estate. Identify and document all your assets and then get down in the weeds and talk about all the family dynamics. Are there issues and circumstances that would lead you to leave more of your assets to one child? Does one child out-earn another or have special needs? Ask yourself the hard questions. Aside from a seasoned estate planning attorney and financial adviser, you may want to consider a family psychologist if necessary.
Engage in family discussions A lot of inheritance feuds can be avoided if parents communicate their desires with the beneficiaries while the parents are still alive. Tell them what you are doing and then “explain to them what you are trying to accomplish in your will and estate planning, says Allison Shipley, a principal at PWC. Unfortunately, the “why” of asset distribution is often not communicated and that is where problems often arise.
Notarize a Letter of Instruction In addition to the will, consider writing a Letter of Instruction to the family that outlines, in your own words and without the legalese, how you want your estate divided. Think of it as an operating manual. “You have all-in-one book who will run the company, the trusts, what goes to charity, to the grandchildren, what happens at the first death, second death, etc.,” says Rebecca Pavese, the manager of Palisades Hudson Financial Group’s national tax practice. This letter will be read along with the will after your death.
Will(ing) or not: 3 reasons to revisit your estate planning
My husband, Neil, and I recently planned a trip for the two of us to celebrate his 50th birthday in Anguilla. Because we were leaving our two sons at home, he mentioned that it would probably be a good idea to look over our wills. It made sense given the last time we looked them over was 12 ½ years ago when our youngest son was born.
It is a good thing we did. Both of us had a vague recollection of whom we had chosen as our executor, trustee and guardians. When we took a look at the document, it was totally out of date. I wasn’t comfortable with either couple we had chosen as my children’s guardians: one we barely spoke to anymore and the other couple wasn’t one my children knew well. But, perhaps most importantly, our executor and trustee was my brother-in-law who was in the process of becoming an ex-brother-in-law as a result of a divorce from my sister.
I know attorneys tell us all the time that when we have a life event we need to change our legal documents. Of course, that makes sense. But most of us think of the life events only when they happen to us — our own divorce, the death of our own spouse, etc. When life events happen to others, like my sister’s divorce, we are less inclined to think about how it affects our estate planning. “A lot of people put their estate planning on a shelf, they don’t look at it for years and the people they have named in there — executors, trustees, beneficiaries, have died or move away,” says Beti Bergman, principal and founder of Peninsula Law, a probate firm in Torrence, Calif.
That certainly described my situation. Unfortunately, “there is no [prescribed] time period to ever revisit a will so you have to do it on your own [time schedule], “ says Bergman. To that end, Bergman recommends a review every three years, at a minimum. There are some experts who recommend annual check-ups. “We roll a whole bunch of things into the yearly review, and it allows us to have contact with the client,” says David Okrent, a CPA attorney and ex-IRS agent. And while you’re at it, make sure you add living wills and powers of attorney to the mix.
Aside from the ongoing musical chairs of the people stated in the will and whether you still want them to represent your interests, there are a number of other things that can drive the opportunity to look at your will — even in between the predetermined three-year check up.
Moves to another state This most certainly affects your will. “Many people think a will travels from state to state,” says Heidi Schmidt, a certified financial planner at USAA in San Antonio. “There is a federal estate law, however, states are the ones…(that) determine the distribution, especially if you have property,” she says.
Increases (or decreases) in assets Anytime you’re re-thinking where you want your money to go, you can review who gets what from a distribution standpoint. Significant changes in your assets — either up or down – should be a catalyst for you to take a look at your will and make sure the distribution plan you’ve written into it still fits your intentions.
Great article. This story is more common than not – most people fail to update their wills and estate planning documents for years or even decades. Other reasons to revisit your will in addition to changing laws, moving states, and change in assets include: birth of children or grandchildren, marriage, divorce, death and illnesses.
This is one of the reasons we created AfterSteps – an online end-of-life planning services. In addition to guiding users through creating a complete end-of-life plan, we also make sure that their plan remains up-to-date with reminders, alerts & notifications as changes occur in their own lives and the legal environment. We encourage everyone to visit http://www.aftersteps.com to learn more and create your plan today.
The allure of dying broke
With the economy still struggling, unemployment still lofty, and retirement savings lacking, more Americans than ever are terrified of the idea of dying penniless.
Financial adviser and author Stephen Pollan wants to remind you: That’s the whole idea. Not the prospect of outliving your cash; no one wants that. But the idea of using up all of your savings while you’re still here to enjoy it? That’s the mark of a well-lived life. Says Pollan, always outspoken: “You’re a jerk if you leave a single penny.”
First published almost 15 years ago, Pollan’s book Die Broke seemed like pure heresy at the time, overturning just about every accepted tenet of personal finance. The old model of success: Work yourself to the bone, and scrimp and save every nickel in order to leave a vast estate to your heirs.
Poppycock, says Pollan. The new model: Use your money to build a great life while you’re still around. Whether you’re Paul Allen collecting sports teams and Jimi Hendrix memorabilia, or Bill Gates trying to cure malaria — put your money to work while you’re still above ground.
“You’re stupid to die with any money left over, because the amount of your estate is not the measure of your worth,” says Pollan. “People have realized that there’s nothing shameful about not having anything when you leave the Earth. The message of Die Broke used to be counter cultural – but now it’s become mainstream.”
That message appeals to people like Bonnie Russell. The Del Mar, California-based owner of Personal Public Relations grew up in tony Marin County, and she developed her own die-broke philosophy after seeing the corrosive effects of inherited wealth. “I met so many trust-fund babies who were so screwed up because they never had to earn a living,” says Russell. “That’s why if I plan it right, the last check I ever write will bounce. And I’ll leave behind nothing but a great tan.”
But that doesn’t mean Russell is selfish — far from it. In fact she donates much of her time and money to her favorite charitable causes, so she can enjoy that fulfillment while she’s still around, instead of just bequeathing a dollar amount in a will. Russell doesn’t plan to pass on a bundle to her children and has no designs on her parents’ wealth, either. “I don’t expect any largesse, and I’m so cool with that,” she says. “It’s their money and they can do whatever they want with it.”
Someone once said that dying broke means you consumed more during your lifetime (moneywise) than you paid out. I find this concept to be very true, albeit repugnant.
The smartest thing to do would be to spend it all on yourself and what you want while your are alive. (I suggest actively doing that in front of your heirs should give you some idea of whether your heirs are interested in you or your money, and that should give you the answer your need as to what to do now.) Also, anyone living in the paradigm shift speed of the present times, who still thinks like the English landed-gentry, should seek different personal advice than a financial adviser.