There is an increasing amount of litigation at worst and family disharmony at best when it comes to carrying out the estate planning directions of parents.
- There are fights over the division of personal property
- There are fights over the division of the money
- Family cottages become a matter of conflict instead of joy
- Family businesses disintegrate becoming worthless
- There is bickering over running the family farm
Why is there so much discord? It really boils down to one central issue – the parents do not have “the conversation” with their family concerning the division of their estate and their outlook on the future use of their assets.
This is a difficult subject because there are many who were raised in an era when these were not issues that were discussed with the family. They may not believe that their estate plan is any of their children’s business. While the right of parents’ privacy is important – this approach leads to the problems outlined above.
Personal Property. If you do not ask your children what they want, you may be unaware that several desire the same items. Therefore, when you state in your Will or Trust that the personal property is to be divided equally among the children, it is a recipe for disaster.
The flip side of this coin is that items you treasure may not be wanted by your children, grandchildren or other family members. Leaving them items they don’t desire will only make them feel guilty or resentful.
Money. If you are not dividing your monetary assets equally, let your family know in advance. If your children are not saving for their retirement because they believe that they will inherit substantial sums, but you are not leaving them substantial sums, they should be put on notice now.
If you have made loans to one of your children, commit this to writing and address it in your estate plan. Will the loan be forgiven at your death if it remains unpaid? Or will it become an advance upon that child’s share?
Family Cottages. Your memories of all the happy times you spent at the cottage with your children may not be shared by them. You want them to keep the cottage so that it will provide wonderful summer memories for them and their children. Have “the conversation” – ask them if they want to keep it.
It may be that some do not want the cost and responsibility of a vacation property far from their home. They may not be able to afford their fair share of the cost. They might not want to take their annual family vacation at the same place every year, yet if their share of the cost and upkeep consumes their vacation budget, they may not have any choice.
Family Businesses. Have you made a plan for your retirement from the business? Who will continue to operate your business? You may assume that since your children have worked there in the past that they would be happy to come home and run the business. This may not be a part of their plan.
If one of them is working in the business, have you put together a plan for them taking over the management and operation? Have you taught them all they need to know by giving them more and more responsibility? If you haven’t, they may be ill prepared to operate the business. It is possible that they are happy to work there but don’t want the responsibility of owning and managing the company. Again, you don’t know if you don’t ask – have “the conversation”.
If you have more than one child, how will passing on the business work? Are they all to be equal owners? If some work the business and other do not, this will be another recipe for disaster. Alternatively, if one child is given the business to own, are there sufficient assets for the others?
Family Farm. Many of the same observations concerning the family business apply to the family farm. Additionally, remember that the children living in proximity to the family farm may assist you on weekends and at critical times each year, not because they love the farm, but because they love you. They know that it has become more difficult to get all of the work done as you have gotten older so they frequently give you assistance.
It important to have “the conversation” with them. Do they really want the farm? Is it a part of their plan to operate it?
Finally, when having “the conversation” try to be open to your children’s opinions and feelings. Allow them a guilt-free environment to really tell you how they feel about these issues. Try to be non-judgmental if they do not want certain assets or businesses. By knowing where your family stands on these issues, you can craft an estate plan that will peaceably and smoothly transfer your wealth and property to your family when you pass away.
Avoid the litigation, the family squabbles and the possible splintering of your future generations over your estate – have “the conversation”.
By now, you have heard your friends and neighbors talk about Lady Bird Deeds. You are wondering if this is something you need to investigate.
First, many individuals think it is a simple easy way to do estate planning by executing a Quit Claim Deed putting other family members on their property. It may be quick and easy, but it isn’t a good idea.
If you make others joint owners of your property, you are giving them valuable property rights. They become a co-owner with you. So, what is the downside?
As a co-owner, their creditors could pursue your property. For instance, if your co-owner (usually a family member) got into an automobile accident which exceeded his or her insurance, the injured parties could come after your property.
Next, once an individual is a co-owner, you need their permission to sell your property. This can become a genuine problem for parents who desire to sell vacation property. The kids who are co-owners decide that they do not want to sell the family cottage. This stops the sale.
The better approach is a Lady Bird Deed. This transfers real property from the owners to themselves and others as joint tenants; however, they retain a life estate and the right to sell. This fills the gaps outlined above. The owners still have control over the property and the right to sell it until their deaths. Since they have the right to sell, a co-owner’s creditor is unable to force a sale of the property.
The execution of this document also eliminates the need for the property to go through Probate Court. When the original owners of the property pass away, the property is owned by the other joint tenants by operation of law, immediately upon the owners’ deaths.
This may be an important tool that you need in your estate plan
Estate Planning is on your “to do” list – you know that the cold days of winter are the right time to get this done. But, its zero outside with a wind chill that is below zero and the roads are icy – you don’t think it’s wise to make that appointment because the driving is too dangerous.
Should you just leave this matter to the spring when the travel is easier?
No. We live in an age of really great technology and there is always the U.S. Mail and the telephone. Make an appointment for a telephone interview or skype if you like – we can discuss all of the issues that are important to you and make some important decisions. You can fill out a questionnaire and return it, or discuss the information over the telephone. You might email or fax documents to me.
You can receive your draft documents via email or U.S. mail. After your review, we can discuss them via telephone.
Finally we will meet face to face for signing the documents – selecting a good day to come in. One trip – not three.
There are ways around this freezing weather. Don’t put off your important decisions to another day. Use these days to get your estate planning done. When spring comes, you can use it for other important matters – like enjoying the warmer weather.
Give us a call! (231) 933-4419
This is a difficult family topic. When there is a family business or farm and one or more of the children are going to participate and take over – there are difficulties which are usually due to miscommunication.
The children would like to do more – really get involved in operating and managing the operation. They know they need more skills and need to learn more about the customers, the vendors and marketing. The problem from the kids’ perspective is that dad and mom don’t seem to want to teach them and bring them in on the big decisions. The kids feel awkward. They don’t want to appear to be too pushy – if their parents thought that it was the right time, they would be including them in the decision making. The kids don’t want to offend their parents – they don’t want it to appear as if they are trying to push their parents out of the way.
The parents wish that the children would do more. They don’t seem as if they are really stepping up and learning all they need to know in order to run the business. Maybe they really aren’t that interested or committed? The children are adults so the parents don’t want to harp or tell them what to do.
The big problem here is not that the children are not committed. It also isn’t that the parents are reluctant to let go of some of the responsibility. The real issue is communication. Everyone is being too careful not to offend.
What is needed is a guided discussion to get a plan together on the transition of the family farm or business.
- Find out what everyone’s goals are. When and how are the parents planning on retirement? When do they want to let go of the reins? When were the children planning on taking over?
- Find out what is needed. What skills do the children believe that they need prior to assuming leadership? What do the parents think the children need to learn?
- Put together a plan to implement the goals. When will new skills be taught or acquired? How will this be done? What is the time table?
- The Transition. When and how will the parents start to let go of the management and decision making? What will their role be then? If the children want to make changes in the business, will that be done with or without the acquiescence of the parents?
These steps are necessary prior to changing your financial and estate plan. Once these steps have been taken with the goals and plans in place, the estate and financially planning steps will be much easier.
Do you know who your beneficiaries are? How your assets are titled?
Most people assume that their accounts are titled properly and that their beneficiary designations are correct. Not necessarily so. You may have opened accounts or purchased insurance years ago. The designations and titling of these assets is vitally important.
Lots of former spouses are still named as a beneficiary on accounts. This could lead to a really unfortunate distribution upon your death.
If your spouse has passed away, it is important to change the beneficiary designations on your retirement assets, bank accounts and life insurance policies. It matters. If you have not named secondary or contingent beneficiaries, your heirs could have to open an estate for your deceased spouse in order to receive the distribution of retirement benefits or life insurance proceeds.
Next, it is important to understand that beneficiary designations and transfer on death provisions trump what you have stated in your Will or Trust. This could lead to unwanted results. You may want your estate to go equally to all of your children. If you have listed one child as the beneficiary on your life insurance or IRA, or if you have made them joint on your checking and savings account, the money will not be divided equally. He or she will receive the distribution from the IRA and/or life insurance and then will divide the rest of the estate equally with his or her other siblings.
You may believe that the one child will “do the right thing” because they “know what you want.” Maybe. But maybe not. All it takes is a serious disagreement among your children to change this.
Make certain that your beneficiary designations are up to date and correct. Don’t leave it to chance – check it out.
Make certain that your division of assets is not altered by your beneficiary designations – make certain that your Will or Trust distribution match your beneficiary designations and visa versa.
If you are caring for a family member that has a disability, you worry about the future. What happens when you aren’t there anymore to care for him or her?
Have you done the right kind of planning? Or, have you put it off?
Now is the time to start planning for your disabled family member’s future. You and your family should consider the following issues:
- Where will my loved one live when I’m no longer here to care for him or her?
- What financial needs will he or she have in the future?
- How can we assure that our loved one will have the same quality of life as he or she does now?
- Who will administer his or her funds? How do we assure that the funds are managed and used to the best advantage?
- How do we make sure that Social Security and Medicaid benefits won’t be affected?
- If we leave an inheritance, what impact will it have on his or her benefits?
The way to make certain that your loved one is well cared for when you are no longer here is to establish a Special Needs Trust.
This trust can provide for the “extras” that are not available when an individual relies totally upon public benefits. While the funds cannot be used for food or rent, there is so much more that you want your loved one to have. These funds can bridge the gap between the basic, bare bones existence that is possible on public benefits and maintaining the current standard of living. It will provide funding for dental and eye care that is not covered by Medicaid. It can also provide funds for entertainment and travel expenses.
A Special Needs Trust can provide the right future for your loved one, while providing you with peace of mind. You will be assured that the life of your loved one will be enhanced and enriched, in the way that you would do, but when you are no longer here.
You are in your 20’s or early 30’s. Why would you need to think about estate planning? You have more debt than assets. If you have a house or car, the bank owns more than you do.
Well, you do need to think about estate planning. Any assets that you do own need to be planned for. If something untimely happened to you, who would receive these assets? If you are unmarried and do not have any children and If you were to die without a Will, your parents would in all likelihood receive all of your assets. If they are not alive, your assets would be divided equally among your siblings.
If you have children but are not legally married, who would handle the money for your children? If you and your children’s mother were both to die, who would care for your children? If you want to have any input into this circumstance, you need to execute a will. You can name your beneficiaries and the persons who would be in charge of your estate. If you have children, you could name the guardians and conservators for those children.
So, is that all you need? No. You need also to plan for a disability. If you were ill or injured and unable to make decisions for yourself, who would do that for you? Without anything in place, your family would be forced to go to Probate Court to gain Guardianship and Conservatorship over you. This is costly and time consuming.
The better plan is to execute a Durable Power of Attorney and Patient Advocate Designation (Durable Power of Attorney for Health Care). This would enable the individuals who you trust to step in and pay your bills while you were disabled. They also could make medical decisions to permit you to receive the best medical care.
When should you do this? Now. You may not need these documents for years to come – or – you might need them tomorrow.
There is little good to say about our current icy spell. The single digit temperatures with below zero wind chills, combined with plenty of snow make getting out difficult and undesirable.
Why not use this time as a planning opportunity?
This is the perfect time to get your finances and documents organized and up to date! What should you look at?
- Life Insurance – do you know where the policies are? Do you know who your beneficiaries are? Check each policy to make certain that these are correct.
- Retirement Funds (IRAs, 401Ks) – again, have you named the correct beneficiaries? Double-check to make sure that these are up to date and correct.
- Estate Plan – do you have one? If not, it is time to get started.
- Will or Trust – if you do have one, take it out and re-read it. Does it accurately reflect your desires and relationships today? Are the agents you selected in the past the ones that you want today? Are the beneficiaries correct? Are the amounts for each still right?
- Disability – do you have a Durable Power of Attorney? A Patient Advocate Designation (Power of Attorney for Health Care)? Do these reflect your current thinking?
- Where is all your paperwork? Is all of this information scattered around in different drawers and locations? Do you even know where it is?
Once the information is all accumulated – organize it. Put it all together in one location. Include life insurance policies, all retirement plans, retirement fund statements (year-end), bank account statements (year-end), investment account statements (year-end), deeds, trusts, wills, durable power of attorneys and health care directives.
If you don’t have an estate plan – start one now. Determine, with the assistance of an attorney, what will meet your needs. Then take the steps to get it done.
By the time the balmy breezes of spring arrive, your task will be complete. You will have real peace of mind knowing that all of your affairs are in good order.
This is an issue that really gets shoved to the back burner at the holidays. After all, it does not sound very merry to think of the issues that surround estate planning when what we want to do is be happy and joyous. Additionally, holidays bring enough bills, right?
The holidays are a time when we purchase lots of gifts for our family – toys for the kids, things for our parents, siblings and spouses. How many of these items really get used and treasured? How many toys are played with for a few days and then are tossed to the side? How many of the sweaters and ties are pushed to the back of the closet – seldom used.
The bottom line is that many of our holiday purchases are not items with real value.
Consider that if some of your holiday gifting budget were to be spent on something with real, sound value for your family – something that would protect your children and spouse. Then estate planning at this time of the year makes a lot of sense.
Get a jump on your New Year’s Resolutions. Move estate planning to the top of the list. For a real value – for true peace of mind – for protection and security for your loved ones.
This is a very difficult topic. Some families discuss financial and medical issues with ease. Many don’t. If your parents are the ones that don’t, it is still important to get the ball rolling.
First of all, if there is more than one child, this should be done in a family context. It is not a good idea for one child to approach his or her parents alone. It can be perceived by other siblings as lobbying for favors. It can be seen by parents as one child being greedy. The best way to do this is by all of the siblings being present during discussions such as these.
It might be good to start with the topic of medical directives, since this does not deal with money. Ask your parents if they have medical directives or power of attorneys in place. If they don’t, you might want to encourage them to do so by letting them know that if they were to get sick and unable to speak for themselves, the current regulations would not permit the hospital to speak with the children concerning any medical information. Since it is a good idea for every member of the family to do this, it could be a good family project for all members to take the time to do medical directives and appoint patient advocates. In that way, your parents may not feel as if they are the target of an unpleasant conversation.
Next, gently approach them about the issue of Wills and Trusts. If one of the children has already taken that step, it might be a good idea for him or her to lead off the discussion by pointing out that he/she had already taken care of that. Talk about what a relief it is to know that all your affairs are in order. Additionally, you might want to raise the issue of how much difficulty a friend had when his or her parents did not have any planning in place.
Once you get the ball rolling, try to make sure that your parents address all of the following issues and discuss them with all of you.
- Should they prepare a Will or a Trust? What would best meet their needs?
- Have they checked their beneficiary designations on all of their life insurance and IRA’s or 401K’s? Are they correct?
- Who should they chose as agents under their documents? Are some of you less willing than others to assume that responsibility?
- How should their personal property be distributed? Perhaps it would be appropriate for each of you to list several things that you really would like to have. That would give them a starting point for a distribution list.
- How would they like to spend their golden years? What are their goals? What are their concerns? Do they worry about having the financial assets available to live out the rest of their lives in comfort?
- Do they have long term care insurance? If they don’t, what would a plan be if they were to need skilled nursing care? They may believe that they can take care of one another, yet that may not be a practical plan. Who will care for the survivor when he or she is not able to care for him or herself?
- When do they plan on downsizing their living? Would they consider selling their home and moving into something smaller and easier to care for? Would they object to assisted living when the time comes?
- How would they feel comfortable deciding when they could no longer handle their own financial affairs? Would it be upon the recommendation of a doctor? Or two doctors?
- Where are all of the documents kept? Are they all in one place? This is important not only at the end of life, but in the event of a medical emergency.
If this is approached in an open and friendly manner, the discussion can benefit not only your parents, but all of the children as well. You will learn about your parents’ goals and wishes. They will be comfortable knowing that you understand these goals and desires.