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It’s a classic scene out of countless movies: The bereaved family sits in
silent expectation around the attorney’s desk, anxiously waiting for the
reading of the dearly departed’s Will. As the attorney reads from the
document, some learn to their delight and surprise that they’ve inherited it
all, while the disgruntled rest learn to their dismay that they’ve been
disinherited without a cent.
While the scene may make for a good movies, it can make for terrible family
relations. When clients keep their estate plan up-to-date and their family
well-informed, major crises can be mastered without unneeded trauma and
emotional distress. Although nothing can soften the blow of the loss of a
loved one, you can certainly go a long way toward minimizing the unnecessary
suffering they must endure during difficult times. Let me give you some
recent examples.
A few years ago, we prepared an estate plan for a couple in their early
eighties. Both were in good health but knew their good fortune wouldn't last
forever. So, they planned for every contingency. Over time, they came in for
regular reviews of their estate plan, kept it properly funded, and, most
importantly, told their family about the plans they had made for the future.
As time went on, the wife developed a serious medical condition that left
her in a coma. Fortunately, they had made provision in their estate plan for
long-term care, and with her health care proxy empowering him to make
medical decisions on her behalf, the husband was able to ensure she was
taken care of in the manner she wished. Then, one day on his way to visit
her, the husband - now in his late eighties - slipped and fell, striking his
head. He died in the hospital later that day. Exactly three days later, his
wife died, too, never realizing that he'd already gone.
Although bereaved at losing both their parents in such a short time, the
couple’s adult children knew exactly what to do. They brought their parents'
Living Trust binder and all the necessary documents into our office one
afternoon, and we settled the clients' $800,000 in less than four hours at a
cost of just $800 - just one/one-thousandth of the estate's value! There was
no probate, so the parents' estate was settled quickly and privately.
Although they didn’t live to see it, the good news for our clients and their
loved ones is that their estate plan worked exactly as we'd designed it to,
making a difficult time in their loved ones' lives a little easier to bear.
In much the same way, we were able to help a client whose husband recently
died. Both had come to us a few years before for an estate plan, and had
become one of our Trust Keeper clients. As a result, their trust had been
kept properly up-to-date and was fully funded. The wife and her financial
advisor - who played a vital role in helping the couple fund their living
trust - came into our office together to settle the husband's estate. The
wife knew exactly what she needed to do, and working together, we settled
her husband's affairs is just a couple of hours. She told us she was
grateful that of all the things she needed to worry about after her
husband's death, settling her husband's estate or ensuring her financial
security weren’t among them.
Unfortunately, not every client is so open with his or her heirs. A recent
client's story is one such example. A few years ago, we helped an elderly
widower with two adult sons plan for the disposition of his $1.2 million
estate. Like most loving parents, he was very concerned about doing the
right thing for his family. And with good reason. One son had a serious
physical disability that will require lifelong care. The other son's only
disability was his irresponsibility, demonstrated by his inability to hold
down a steady job or keep out of debt.
Our client naturally wanted to make sure his disabled son was well cared for
throughout his lifetime. At the same time, he felt strongly that he must
protect his other son from himself and his spendthrift ways, because he had
no doubt that if his eldest son got his hands on his father's inheritance,
it would be gone with the wind in no time at all. Our client also had strong
philanthropic feelings toward a nonprofit agency that had served his
disabled son so well over the years. He wanted to express his gratitude by
setting up a foundation that would fund the good works of this charity for
years to come.
We helped our client achieve these goals by creating a special needs trust
for the disabled son. We created a foundation that would support the charity
our client admired so much. And to protect the eldest son from his
profligate ways, he had us set up a living trust that upon his death gave
complete control over the son's distributions to the trustees of the trust.
When the client died this past August, the two sons were in for a complete
-- and as it turned out, unwelcomed -- surprise, as their father never
shared with them his intentions for his estate.
As you might imagine, the eldest son was thoroughly enraged to discover that
he couldn't get his hands on his father's money. He didn't know the trustees
his dad had appointed, and they didn't know him. Needless to say, their
relationship got off to a rocky start, as he made constant demands for money
and they tried to honor the father's wishes without giving in the son's
incessant requests.
But even the younger son wasn't happy with his father's estate plan.
Although he would be generously cared for throughout the rest of his life,
he had a sentimental attachment to his father's home and wanted to move into
it after his father's death. His father, not realizing how his son felt
about the home, requested that his trustees sell it and use the proceeds to
fund the son's special needs trust. Unhappy with that outcome, the disabled
son is now suing the trustees in an attempt to keep the home.
Complicating matters even more, the sons also had to deal with corporate
fiduciaries their father selected. Unfortunately, the sons not only didn't
know these professionals, they also had no idea of what was expected of
them, and they didn't know what to do. Adding insult to injury, both sons
watched as $700,000 of their dad's estate was used to fund a foundation over
which neither have any control or influence.
The moral of the story: our client had his heart in the right place and
wanted to do the very best for both of his boys. The plan we created for him
achieved his objectives, at least on paper. But because our client failed to
communicate his plans with his sons, he missed out on some important
opportunities. First, he lost out on the chance to grant his disabled son's
wish to keep the family home - a place that resonated with loving memories
for him. He also deprived both his sons the opportunity for personal growth
by failing to create a role for them in his foundation. Lastly, his
strings-attached bequest to his oldest son wasn't perceived as the act of
love he intended, nor was his son given the chance to hear from his father's
own lips the concerns he had about the son's irresponsibility. Instead, the
son perceived his father's restrictions as a from-the-grave insult that will
taint the son's feelings about his father for years to come.
No doubt there are easier things to discuss with your family than what will
happen after you’re gone. But we hope we’ve demonstrated that the only thing
more difficult than talking about it now is passing out of this world
without having talked about it at all. That’s one of the important reasons
we’re pleased to host our Family Seminar. It covers the challenges that
estate planning seeks to solve, covers the basics of your estate plan
design, and reviews what happens next. Of all the seminars we present during
the year, our Family Seminar is consistently ranked among our clients’
favorites. We hope you’ll plan to attend -- and most importantly, bring your
loved ones as well as your financial advisor, if you so desire. It’s a fun
and entertaining way to accomplish the important task of keeping your family
informed of your estate planning goals.
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