Estate planning is an important matter. Unfortunately, the importance of proper planning is highlighted most when someone passes away without any plan, leaving relatives or friends to figure things out. This does not mean, however, that estate planning should be delayed in an attempt to formulate the “perfect” plan. Let’s look at some issues that cause clients to delay planning and offer some simple solutions.
It’s common that clients have trouble deciding who should take things over after they have passed away. Perhaps they don’t want to put a child in the position of having to mediate what they know will be a difficult family dynamic. It’s also possible that they just don’t want to make one or more children feel that they trust one child more than the others. Or maybe there are no children and there really are limited options for who will serve.
We generally advise clients that it’s a good idea to sit down with their children and be open about their decisions. We even offer to meet with clients and their children to ensure that everyone has an understanding of the plan. This will mitigate any hurt feelings or shock at the surprise of finding out the plan only after the client has died. Additionally, a discussion with the children can be a forum for everyone to express their feelings and sometimes clients will find out that the children are all on the same page as to who will be the best person to serve. Finally, in the event that there are limited options of who can serve, there is always the possibility of naming a law firm or other entity to fulfill the role.
Then there is the situation where the clients are unsure of how to distribute their assets, perhaps because they have provided more financial assistance to one child than the other children or because they simply don’t have any good options for beneficiaries. While unequal distributions to children can cause problems within the family, a clear statement within the estate planning documents as to why there is an unequal distribution can help. For example, if one child was given a sum of money for a down payment on a home or to help with a financial problem, an acknowledgment of this within the estate planning document can explain an uneven distribution pattern.
One other issue that we always discuss with clients is the possibility of one of their beneficiaries or fiduciaries predeceasing them. While it’s a morbid topic, it’s extremely important to include provisions within an estate plan to account for the death of a beneficiary. In the situation where children are named as beneficiaries, clients sometimes want to have the child’s share go to grandchildren if the child dies, but in other cases want the assets to only be split amongst surviving children. It’s also possible to have assets held in trust only to be used for a grandchild’s education or support until they reach a certain age or achieve a certain goal.
While these issues may seem complicated, failing to address them will make things far more complicated for heirs. The “perfect” estate plan does not exist because predicting the future is impossible. But having a plan, however simple or complicated it may be, will avoid delay and unnecessary costs in the administration of an estate.