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A recent article in the Wall Street Journal touts Warren Buffet’s philosophy for discussing an estate plan with one’s children before executing it. Mr. Buffet is worth about $150 billion. Probably your estate is a little less than that. But the principle behind the suggestion is sound however much you may have. Mature children should understand your plan and the rationale behind it.
At Estate & Elder Law Services that principle has been foundational for our estate planning process.
Several factors are in play. The first is not about transferring wealth, but teaching your agents, beneficiaries, and successors what is expected of them if you become incapacitated. Incapacity does not mean all of a sudden you have an accident or a stroke and cannot manage your finances or make medical decisions. Rarely is it that dramatic that a spouse or child is required to take over immediately. It is diminished capacity where one begins to need assistance, not have someone take over. A good plan is one in which your trusted family, friends, or professionals are there for you when you need them.
In most estate planning, the client simply gives the attorney a list of successor agents. The list usually starts with the spouse, then the oldest to youngest child, and maybe a friend or relative. Rarely has there been discussion of what the reasonability is, the duties are, and the expectations of the client.
What the inheritance is and how it is left to the family is the second major consideration. What if a parent wants to give more to one child than another because the second child is disabled? Or the first child was simply more fortunate? Or commonly in our practice, a grandchild has a severe disability, and the client wants to make provision by creating a supplemental needs trust for the grandchild when the children do not need the money? Failure to disclose may result in hurt feelings and perhaps worse: litigation among family members.
At our firm, we believe one purpose of estate planning is avoiding family discord. We all have worked hard to accumulate whatever we might have. If we can, most of us want to leave something of ourselves to our family. Although some may disagree, in a sense our property, money, wealth is a sign of our love for our families. It represents our time and effort of our lives poured out for those we love.
In our process, we like to have what we call a “Family Meeting” for our clients during the planning process. We do not necessarily talk about the money or who gets what, but what the responsibility and duties of the successors are if the client suffers diminished capacity and eventually death. How and to whom the inheritance is divided can be part of that meeting if it makes sense. An unequal division or skipping an adult child for a disabled grandchild is a common topic. You want your children to understand the logic of your decisions and what will occur after your death. You do not want unnecessary “why” questions lingering when you cannot answer. You do not want envy or bitterness to be inadvertently caused by misunderstood motives.
The Wall Street Journal article notes that “[a] no-surprises policy also avoids creating upset at a time when beneficiaries are grieving and prone to strong emotion….”
We offer and encourage our clients to have regular meetings with their family to remind them and review what might need to be changed. We have a broad definition of family, which includes trusted advisors, such as accountants and financial experts the clients rely upon.
Occasionally things go bad in families and the client needs to disinherit a family member. Or there is some significant distribution scheme that the client knows a child is likely to object to.
In Delaware there is a process which is called a “Pre-mortem Notice.” A person who may be excluded or whose share is not proportional is given formal notice of the estate plan while the client is still alive. Under the law the affected child or person has sixty days to challenge the Will or Trust. If the challenge is not made within that time, then the notified person is barred from claiming against the plan.
We can help with family harmony. Or help avoid an unpleasant challenge from a disgruntled heir. Let us know.
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