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.
What happens to Fido when you die?
Nearly four years ago, hotel heiress Leona Helmsley gave an afterlife kiss-off to some of her relatives and household help by leaving them out of her will and including a $12 million bequest to her beloved Maltese, Trouble. A judge later considered the amount excessive and reduced it, leaving the trust fund pooch to scrape by on a mere $2 million.
Although the Helmsley dog drama is the most high profile instance of pet legacies gone wild, there are reports of others. When Gail Posner died last year, the daughter of takeover magnate Victor Posner left her Chihuahua $3 million. Gene Roddenberry’s dogs collected some $4 million when the Star Trek creator’s wife passed away in 2009.
Like famous socialites, most ordinary pet owners want to provide for their pets should they become incapacitated or die. But according to the website petguardian.com, an estimated 500,000 pets are euthanized every year at shelters and at veterinarians as a result of pet owners predeceasing their pets.
“Many people outlive their pets, and they assume that relatives or friends will step in if something happens to them,” says Scottsdale, Arizona estate planning attorney and pet owner Joel Klinge. “Unfortunately, that’s not always the case.”
To provide for his golden retrievers Dobby and Stella if anything happens to him, the 49-year-old divorced attorney has arranged with a friend and his wife to take them in. The couple would also receive a set amount of money to help offset expenses associated with his dogs’ future care.
Over the years, Klinge has made a variety of arrangements in wills and trusts for clients. Several would like to have their pet’s ashes mingled with their own powdered remains and spread over a specified location. Another client, who had a 16-year-old dog in very poor health, left instructions for his pet’s euthanasia.
Whatever final note you have in mind for Fido or Fluffy, a number of planning tools are available to help ensure they will be cared for if something happens to you.
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.