As financial advisors specializing in estate planning, we have seen the effects of good planning and of poor planning. Most of us understand that having an estate plan is crucial, however having a poorly created plan can be just as harmful as having no plan at all. Our firm routinely advises our clients to create a plan sooner rather than later and we provide referrals to competent estate planning attorneys for them to interview.
However, having a good estate planning attorney who will guide you through the process and prepare the appropriate documents is not the only step toward a proper estate plan. One key ingredient to the process has little to do with the attorney or the documents, but with the choices the trustors make regarding who will administer the estate upon the death of the trustors, and how the estate will be distributed.
Let’s illustrate with a hypothetical example of Richard and Monica Jones. Perhaps Richard and Monica are in their early forties with three minor children, with the youngest being eight. Richard is a banker and Monica is a part-time teacher. A few years ago, Richard’s parents asked him if he would be the successor trustee for the trust they were finally creating.
His parents chose Richard primarily because he was a banker and understood financial concepts, but they also felt that he had the proper temperament to take on this important responsibility. Richard could separate the financial aspect of an estate from the personal considerations of an estate. Richard had also seen firsthand in his role as banker how having a person who struggles with the emotional part of administering an estate can create problems.
He remembered how one successor trustee refused to sell assets in order to pay estate bills and taxes because they could not detach from the emotions of selling the property. This resulted in fines, additional costs, and selling later at a lower price. The other beneficiaries became angry and lawsuits were filed.
Having successor trustees that can handle the job, from a business and emotional standpoint is necessary for any successful estate plan. Having accepted the role as successor trustee, Richard was reminded that he and Monica had not yet completed their own financial plan. They had started years back but got stuck on the most important aspect to them, which was the custodianship for their children.
Another concern was how to fairly divide their property and assets among their kids. Deciding to split the financial assets three ways was the easy part. The hard part was how to divide the personal items, the artwork, the collectibles, and the family photos. This was going to take time to decide. To complicate matters, the couple is wealthy and wants to be sure their children don’t receive a windfall until they are mature.
They found these decisions difficult to make and were unsure of how to proceed. Luckily, estate plans can be amended as needed, and are not set in stone. The couple can put a plan in place now, and change it in a few years. Or, they can create a limited plan now and create a more comprehensive plan later. In the short term, a plan that addresses the large issues including custodian of their children is more important than waiting to create a plan until they can decide which family heirlooms are given to each child.
Many families feel more confident when they made the decisions necessary to get a plan in place and review every five years to make changes as needed. If you have been putting off estate planning due to these issues, now is the time to get a plan in place and make changes when appropriate.
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If you have questions about your estate plan or seek an unbiased second opinion, we are here to help. To get started now, simply reply to this email, or call 530-273-4425. If you’re a client with our firm and you’ve enjoyed working with us, we hope you’ll refer a friend, colleague, or family member who may benefit from our services. For a no-obligation consultation, call our office at 530-273-4425.
