Last month, LearnVest author Kristin Appenbrink wrote about estate planning and family friction in For the Love of Family: 6 Tales of Estate Planning Gone Wrong. It’s a good read, and it brings up the question of how we can plan estates to help minimize family tensions when a family member dies. Of course, we can’t plan away family conflicts, but we can take some steps to help things go smoothly.
Let’s take a look at the problems pointed out in the original article and see how planning can help reduce conflicts.
1. Naming an Executor Who Doesn’t Play Fair
2. Failing to Maintain a Valid Will
3. Making Heirs Duke It Out Over Coveted Items
4. Neglecting to Update Your Beneficiaries Following Big Life Changes
5. Forgetting About Valuable Personal Effects
6. Gifting Money to Minors With No Rules
This are important concerns to address in an estate plan. How can we do our estate planning better?
Selecting the right personal representative
Every estate plan has a “management team,” the people that you select to take care of your life and property when you can’t do it yourself. Selecting your management team, which includes the personal representative (the term for an executor that you commonly see in Missouri), is a key decision. Here’s what to look for:
- Skill. Does the person have the ability to do what needs to be done?
- Commitment. Can the person take on the responsibility? Does he or she have too many other commitments?
- Emotional management. Decisions that are made at or near the end of a loved one’s life can be heart-wrenching, and some people handle that more easily than others.
- Relationships. Does this person have good relationships with your family and other beneficiaries of your estate?
- Honest, fair, and trustworthy. Does this person, as the LearnVest article says, “play fair?” Do they have integrity?
The original article emphasized honesty and fairness, and I think that makes sense, but don’t forget the other attributes: without those, even the most honest person may struggle.
Don’t forget that you are not required to appoint a child or some other family member to this position. If there’s too much tension between family members (rival siblings, for instance), you can appoint someone outside the family to handle the job.
If you’re trying to decide who should serve as your personal representative, let your attorney know! The attorney probably doesn’t know the candidates personally, but can guide you through the decision-making process.
Creating and keeping an effective plan
There are two problems here: having an effective estate plan drawn up, and then making sure it’s useful even as your life changes.
It’s tempting to go without an estate plan. However, going without a will or other estate planning documents can cause results you’d rather avoid, like losing control over who inherits your property or losing a say over who takes care of your minor children. One of the tricky things about estate planning is that you don’t know when you’ll need the plan, and when you know, it’s probably too late. I definitely don’t wish unpleasant surprises on anyone, but they can–and sometimes do–happen. It’s better to be prepared.
Another temptation is the “do-it-yourself” (DIY) estate plan. Online DIY services have gotten a lot of attention in the past few years, but fill-in-the-blank legal forms are nothing new. Good news: They’re cheaper. Bad news: A DIY plan runs the risk of being incorrectly drafted and executed, which may leave it open to challenges. In some cases, like this case in Florida, poor drafting caused an estate to be divided in a way that was obviously not what the person writing the will wanted. In that case, the woman who got a DIY will saved some money, but didn’t get the outcome she wanted while causing a legal fight that probably cost a lot more than the amount of money she originally saved.
Of course, the most carefully considered estate plan may not fit down the road as your life and the laws change. From time to time, you should review your estate plan.
Handling specific items
I’m combining #3 (Making Heirs Duke It Out Over Coveted Items) and #5 (Forgetting About Valuable Personal Effects), because they fit together pretty well.
Dealing with specific items can cause conflicts for a couple of reasons. Sometimes, it’s the value of the items in your estate–if you own something particularly valuable, and all of the beneficiaries of the estate want it, you’re going to end up with a fight. Other times, though, it’s not so much the value of the item, but the memories and emotions attached to it. A while back, I wrote about dealing with specific items.
A few key things to remember about handling specific items:
- Don’t assume what people want. You might be surprised at what items hold sentimental value to the people in your life. Your assumption might be correct, but it might be worth it to make sure.
- Communicate with your beneficiaries. The surest way to uncover what items people want is to talk to them about it. In my original post, I pointed out that there are a variety of different ways to do this. No matter how you do it, give people the opportunity to express those preferences.
- Make a list of property and who gets it. In Missouri, you can make a separate list of personal property and who gets what. Make sure to let your estate planning attorney know if you’re going to do this, though, because the list has to be referenced in the will.
- Keep the list updated. The great thing about a separate personal property list is that when you need to make a change, you can without having to amend your will. That saves time and money, but it also makes it easier to forget.
Keeping your beneficiaries updated
If you get nothing else out of this post, you should learn that it’s important to keep things updated! That applies to your beneficiary designations as well. If you have a retirement plan or any account with a transfer-on-death (or payable-on-death) registration, you’ve probably made a beneficiary designation.
But sometimes your life changes. A while back, I wrote about a case involving a man who named his wife as the beneficiary of his retirement plan, but then they got divorced. He didn’t change his beneficiary designation, and his ex-wife was awarded the account. Maybe that was what he wanted, maybe not (there was debate about this), but if it wasn’t, he could have taken 5 minutes (and not a dime in legal fees) to fill out a new beneficiary form, and it wouldn’t have been a problem.
Helping minors and young adults manage an inheritance
In many cases, when someone inherits property, that person just gets the property outright–no strings, no conditions. That works fine sometimes, but what about a young person who gets a large inheritance? That can be difficult for a young person to handle, and you might be concerned that he or she would end up going through the inheritance quickly. It happens.
As the original article says, passing the money through a trust is a good method to solve that problem. It’s required for minors, but can also help young adults, like the young lady who wrote the article I linked to in the last paragraph. Having a trustee guide and direct the use of the funds can protect a young person from making irreversible mistakes and blowing through an inheritance. Of course, the trust should terminate eventually, allowing your beneficiary full access in time.