Here’s a surprisingly common scenario: A couple decides to draw up a will. They split their estate evenly between their three kids, and name the husband’s youngest brother as Personal Representative. Then, after both have passed away, it’s discovered that the designated beneficiary forms on their bank accounts and retirement assets also point to the Personal Representative. So that money is passed directly to the brother, bypassing the terms of the will (which stated equal shares to the heirs.) When the kids approach their uncle for their share of the assets, he says that it doesn’t belong to them. Without the ability to talk to their parents, the kids are left wondering what they really wanted.
The Other Side of the Story
Now, maybe the uncle spent all the money on funeral arrangements and administrative costs of his brother’s estate. Maybe there was only $15,000 in those accounts by the time both spouses had passed away, and the uncle really is honest and would be happy to split the money between the three kids, except there isn’t any left. But the chances are, the kids don’t believe that, and they suspect him of having siphoned off some of the money for his own interests. And maybe, he actually did, because he figured that the job of Personal Representative is a big responsibility and the money his brother left him was intended to be compensation for his work. It’s possible they even verbally told him that back when they asked him to serve as Personal Representative. Maybe he remembers a conversation from 25 years ago when the couple told him that he’d always been there for them, and they were going to leave him a substantial sum as a thank you. Perhaps the couple never intended that the accounts would belong to their kids, figuring that the sale of the house would provide enough for the three of them to share. Maybe the uncle has developed an expensive medical problem or struggles to get by on social security that isn’t ever enough, and he knows that the kids are young and able to earn their own money. Maybe he feels he needs it more.
Maybe all of this is true, or none of it. It doesn’t matter, because the end result is the same: discord. Fighting. Resentment. Bad feelings. Possibly a rift that affects not only the kids and their uncle, but their cousins and other family members, too.
Good Communication Is the Key
It’s tempting to look at the situation and decide that the couple’s mistake was not updating the designated beneficiary forms. The core of the issue, though, is a lack of communication. Whatever the couple’s intentions were, they needed to make them abundantly clear to all the parties involved. They might not have all agreed, and talking through a decision doesn’t guarantee that no one will be upset about it, but at least they could have made their intentions clear.
As estate planning professionals, we often see lack of communication causing rifts in families. Usually, it comes about when a child or step-child is disinherited. No matter how obvious or necessary the choice may be, many children will still say “I thought they’d at least leave me something.” Whether or not we intend it that way, the fact is that our estate plan is the final statement we make to our heirs. How we choose to divide our money communicates our values.
Good Communication Means No Unpleasant Surprises
One couple decided they would be leaving the bulk of their several million dollar estate to charity, reserving only $250,000 for each child. This was something they communicated to their kids while their youngest was still in college, so at no point during their adult life did the kids expect a big inheritance. They were able to make decisions based on that knowledge, securing their own retirement funds and investing for their future. The couple was generous during their lifetimes, paying for family vacations, investing in their daughter’s business ventures, and giving their son the down payment on his first home. When they passed away, the $250,000 was received as the gift the couple intended it to be; and in fact, the son donated 10% of his share to charities of his own choosing. His parents’ insistence on good communication meant that a large inheritance just wasn’t something the kids expected. They also learned that helping others is one of the responsibilities that come with wealth.
Contrast this with a woman who had a very small estate, owning nothing but her home and some personal effects. When she died, her Will stated that everything should be divided equally among her three daughters. The difficulty lay in the fact that her eldest daughter, Rosie, lived with her, and had spent the bulk of her adult life caring for her mother and helping her as she aged. Rosie was, unfortunately, still dependent on her mother. When her siblings decided they wanted to sell the house, Rosie was left with no recourse but to accept the majority opinion and vacate the home she had occupied for the last 31 years. She expected her mother would leave her the house, partly because she needed it, and partly as a recognition of the close relationship they’d always shared. On paper, it seems fair that the estate was divided evenly, but Rosie certainly didn’t see it that way. It will come as no surprise that this family did not value good communication in other areas as well.
Your Final Statement
One of the easiest ways to communicate your values through estate planning is to make use of the Statement of Intent. This is an optional paragraph in the opening part of the estate planning document (either a Will or Trust) where you can state in your own words what you intend for your assets. Most people assume their family members don’t need any further explanation, and that the Will speaks for itself. In some cases, this may be true. Misunderstandings can be present in just about every human interaction, however. It’s better to be clear than assume others already know your mind.
Documents are limited, however, by their very nature: they are static, unfeeling pieces of paper. So we encourage all our clients to have face to face, honest conversations with their families about their estate plan. At the very least, those agents you choose to serve as Personal Representative, Medical Power of Attorney, or Trustee should know you have chosen them. The fiduciary professionals we recommend at our practice insist on meeting with their clients to discuss their values, their hopes for their estate, and their family situation. If good communication is something a professional considers an important component of estate planning, it’s probably a good idea to follow their example.
Whatever you choose to do with your assets, The McKenzie Law Firm can help you develop a plan to achieve it, and we can assist with difficult family conversations, too. Give us a call today!