by Ira Bower~
In preparing to write my first article for FamilyAffaires.com I decided to look at Advanced Mediation Solutions website. In there I found this section on Estate Settlement Mediation and quickly it brought to mind a few of our client situations.
Grieving the loss of a loved one is difficult enough. Family fighting is even more difficult. When a will is not in place, it can be a recipe for family fights. Families can disintegrate when relatives spar over a loved one’s assets. Don’t allow it to happen — family relationships are too precious. Mediation is a great tool for families who are having difficulty dividing estates. We will bring relatives together, open the dialogue, work toward an agreement that will please everyone and — most important — preserve the family bond.
Since moving to New Jersey in the early 1970’s I have worked as a Trust Professional in Ocean County. For those of you that do not know, Ocean County is home to one of the largest concentrations of retirees outside of Arizona and Florida. Today we have over 90 Retirement Communities in the County. I share this with you because since the early 70’s I have been involved with the planning and settlement of hundreds and hundreds of estates.
I view planning an estate in two parts. The first part is to try and minimize as much as possible the cost of estate administration and taxation. More often than not this becomes the easiest part of planning the estate. The second and most difficult part is planning for the ultimate distribution of the estate assets. Without question this part of estate planning creates the most angst for individuals.
Let’s look at a married couple that has two grown children. During the interview process they both share with me that one child has been fiscally responsible their entire life while the other child has been a spendthrift since graduating from college. When I ask this couple how they want their estates distributed after their death they tell me they want their estates distributed to the children outright in equal shares even after telling me one is a spendthrift.
I then suggest that the child who is fiscally responsible should in fact receive their share outright while the spendthrift child should receive a small amount of the estate outright with the balance continuing in trust for this child’s benefit. I further suggest that for the spendthrift child that the named trustee of this trust distributes a certain percentage of the trust assets outright at certain intervals to this child. The first distribution would be 25% of the trust assets occurring on the 5th anniversary of the death of the surviving parent; a 50% distribution on the 10th anniversary and the balance of the trust assets on the 15th anniversary. Why? Because this gives the spendthrift child three opportunities to become more responsible before all the monies are gone forever.
After discussing this concept mom and dad look at each other (this is where the angst comes into play) and say we love our children equally and we have to treat them equally. They know each of their children and realize they would be providing at least 15 years of security for the spendthrift child. Some people acquiesce and choose the Trust route while others cannot get over the thought of leaving their estates differently to their children and let their heart overrule what they know to be a sensible approach to distributing their estate.
Now let’s look at another example. No matter how large your estate is one of the most difficult decisions is how to distribute upon death your antiques, jewelry, furnishings, collections, etc. You know your “stuff”. Even though they know who they want to receive their “stuff” after they are gone they can’t bring themselves to make a list naming who is to receive certain items. This list which can be incorporated into your will by reference makes it so much easier on those that ultimately receive your personal property. Some of the biggest fights I have witnessed over the years among family members are over the personal effects. Making this list today may not be comfortable but it will certainly minimize the family strife caused after you are gone without direction from you.
When you cannot bring yourself to make these decisions on your own, turn to a professional that can help you to put these decisions in proper perspective.