Don't be Selfish or Irresponsible

[SDHNTR]

Your intent is definitely correct D Lee. The perfect estate plan would be to die the day you spend your last dollar, lol. I feel your pain. I see it way too often.

I had a conversation just today with a client of many years. I remember when he and his two brothers came to meet with me after their mom died. They all got along well, their kids all played together, their wives were all friends and all was hunky dory. They were the picture of a happy extended family. The three of them even owned a vacation home together which was a reunion place that they always spoke of fondly and with great pride. After Mom died, Oldest brother became the Trustee and when he had to explain to his bros why they weren't getting the big checks they were expecting (because mom and dad didn't want it that way and laid out other plans in their trust) he became the bad guy. Now he has absolutely zero relationship with one brother and a strained one with the other. They both question his every move as trustee even though he has done exactly as instructed. Worse yet, they all fight over who gets to spend time at the vacation home because none of them want to be there at the same time as another brother. The whole family did a 180 and has been torn apart. It made me so sad to hear this. Something so easily avoided, had a corporate trustee been put in place instead and had the mom and dad sat down with their kids and openly discussed why they were writing the trust the way they did. Don't be this family!

 

[D Lee]

What a great forum that allows a diversity of discussions such as this one. Kudos to the staff and members.

 

[2ski]

The problem with that D Lee is giving things away while alive has serious tax implications. Gift tax for the grantor and loss of the stepped up cost basis that heirs would otherwise benefit from. That can mean big capital gains tax on appreciated assets (real estate, stocks, art, collectibles, etc).

A better plan is to be VERY specific in the will and trust documents. For example, rather than being generic about anything, list the exact asset and who gets it. Not furniture, but specific pieces. Not artwork, or jewelry as a blanket statement, but list specific pieces again. Not a gun collection, but list the individual guns. Furthermore, the trust doc can state HOW each person is to receive things, such as on the 25 th birthday, in increments, etc. To make these documents iron clad you must be as specific and descriptive as possible. Leave nothing to interpretation. Easier said than done, yes, but this should be the goal. Most estate disputes I see wouldn't have happened in the first place had there been more open communication among the family before/as these docs are drafted and more specific language within the finalized draft.

Also, if we are talking some significant assets to go around, I cannot stress this point enough... Do not burden a family member with the job of Successor Trustee or Executor. I've seen wonderful, loving families torn apart by this when its time to divvy up the dough. With good intent, mom and dad make the eldest son (for example) the Trustee. He then becomes the gatekeeper. He must be the one to distribute assets according to the trust document. He is now the bad guy if someone doesnt get what they wanted. He's just trying to legally do his job but now he is under scrutiny, and we get back to that interpretation thing again. It never ends well. Instead, nominate an impartial, 3rd party, corporate trustee - a CPA, an attorney or professional trust company. It's worth the money they charge to keep peace in your family after you're gone.

This is complicated stuff with serious and costly implications. If you don't understand all the nuances, don't try to go it alone. Hire a professional.

Spot on. Consult an lawyer with specific expertise in this area. I know in some cases, it is more beneficial to gift assets in small amounts each year before passing. It can save the family from having to sell property to pay the IRS. Or better yet, a living trust. Again, if you have enough assets, a living trust can save everyone a big headache. I've even seen it used to stipulate that certain siblings get access to assets and can pass them down to their kids, but a different offspring can have use of said assets, but cannot pass them on to their kids. Spouses of kids can or cannot have claim on assets in the event of the kid passing. They are a valuable tool. If you don't have a safe, store important documents in your freezer. Put them at the bottom of your chest freezer if need be. Its better than nothing.

As a kid, my parents were always upfront with me that they were forward thinking with their estate planning. It freaked me out a little then, but it makes me feel more comfortable as an adult with estate planning.