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There are few things more certain in life than death and taxes, yet both subjects tend to be a very private subject for the lion share of my clients. Too often when attempting to broach the subject of wealth transfer or plans for one’s Estate I am told things such as:
- Not worried about it, will be dead.
- My son/daughter is a smart cookie. They’ll deal with it.
- I think my kids know where everything is going.
After eight years of practice in the area of Estate and Trust planning and compliance, I can tell you that the Estates with no communication to the beneficiaries are rarely the Estate Plans that are carried out flawlessly.
There are many pitfalls that lead to stalled, contentious and inequitable Estate Plans with or without communication to the beneficiaries about one’s plan. I would like to cover two in this article, and share some thoughts on why they lead to poorly executed Estate Plans.
Co-Trustees
Co-trustees often arise when there are siblings as beneficiaries. The grantors of the Estate (Mom and Dad), can’t choose one over the other sibling to be in charge, or they believe Sue and Timmy will have no problem working together. It’s unclear how parents forget how their kids acted towards each other when they were home, in grade school. The best of siblings squabble and the average siblings can hardly get through a Thanksgiving visit, yet Mom and Dad think they’ll be able to get along for six to 18 months to administer the plan. Successfully administering a plan requires timely decisions, signatures and thoughtful action. Every party added to this process requires more time for review and agreement regarding what is to be done next.
What to do?
Discuss with your children who is to be the Trustee. Check for willingness and interest for Co-trustees. Take the time to explain that Sue and Timmy will need to agree on each step before it can be taken, and that it will add time to settling the Estate. The mere conversation with Mom and Dad will lead to a better understanding when Sue and Timmy have to settle things because they knew it was what you wished and why you wished it.
Uneven Bequests and Distributions
Often Mom and/or Dad have reasons to leave something special for someone special. Common items are wedding rings, guns or an old mixing bowl used to make Sunday-morning biscuits. Other items include beach houses, rental houses or specific tradable securities. My experience is the larger the difference in value of one’s inheritance the more likely litigation and/or stalled Estate Administration is to occur.
What to do?
Tell your children what you are doing. This one is pretty short and sweet. If you don’t have the conversation, you allow for you children to come up with their own reasons of why you preferred one sibling over the other. Two common beliefs arise for the slighted sibling:
- Mom and Dad liked the other sibling more, or
- My other sibling convinced Mom and Dad to leave them more.
Both thoughts are bad situations to put your beneficiaries in after you are gone.
At the root of most Estate Planning problems you will find poor communication. We love our children and beneficiaries, so we should tell them our wishes enough times they will remember them. Simply communicating will help lead to your family’s continued cooperation after you pass on.
Neil Langlois, CPA is a Senior Manager at Jones and Roth CPAs and Business Advisors. He specializes in working with family businesses providing Estate and Trust services. He also provides a broad range of services in tax planning and business consulting to his clients. Langlois is also experienced in 1041 Trust and Estate preparation, as well as Federal and OR 706 preparation. Langlois can be contacted at nlanglois@jrcpa.com and 833-798-5689.
