Estate Planning Strategies to Help Avoid Disaster

6 MINUTE READ

Keep the family peace and help ensure your wishes are carried out.

Over the years, Stacy Singer has witnessed her fair share of estate planning disasters. As national practice leader for Trust Services at Northern Trust, she’s seen poor estate planning lead to broken relationships, exhausted resources and wasted time.

But it doesn’t have to be that way. A few thoughtful estate planning strategies can help make sure your wishes are carried out upon your death without jeopardizing relationships among family members.

Singer shares how you can avoid some of the most common estate planning missteps.

Naming the Wrong Executor(s)

“We were involved in an estate settlement where two brothers were named as executors of their mother’s estate. They disliked each other so much that, standing over her open grave, one said to the other, ‘I hope I never have to see you again,’” Singer says. “And then they had to work together on the estate.”

Settling their mother’s estate was a nightmare. It took twice as long and cost twice as much as it should have because even the simplest decisions were painfully difficult.

The solution: Either name one child as executor or pick a neutral third party.

“Parents need to get over the idea that choosing an executor is an honor or that it means you trust that person the most,” Singer says. “It is not an honor. It is an enormous amount of largely thankless and time-consuming work.”

"Creating the plan is important. But retitling assets to carry out the plan is just as important."

Stacy Singer

National Practice Leader for Trust Services, Northern Trust

She advises choosing someone who has the time, financial know-how, patience and people skills to handle the lengthy process.

Keep Your Documents and/or Beneficiaries Updated

Singer recalls a client who created an original will and trust with an attorney. Several years later, he changed his mind and went to another attorney to create a new will and trust. Unfortunately, he never mentioned the previous will and trust to the new attorney.

When he died, some of his assets had been retitled into the new trust but others still named the old trust as owner or beneficiary — including a sizeable life insurance policy — and the old trust had a completely different list of beneficiaries under different terms than the new trust.

“Many people are hesitant to pay attorneys to retitle their trusts, so they take it upon themselves to do it and either forget to do it or miss an asset entirely,” Singer says.

The solution: When you update your estate plan — whether it’s because you change your mind or it’s because of a major life event — update your beneficiaries. Make sure all assets are titled correctly.

“Creating the plan is important,” Singer says. “But retitling assets to carry out the plan is just as important.”

Specify Who Gets Certain Valuable Items

For an entire year, a family fought over a small box that sat in Singer’s office. They spent more than $150,000 fighting over the contents of that one lonely box. So what rare, precious item did that box contain?

“A set of old, chipped Mother’s Day plates,” Singer says. “You could probably find the same plates on eBay today for $75.”

Of course it wasn’t about the plates themselves. It was about the sentimental value and who would “win” them in the end.

“People assume their children can easily work out how to divide certain items, but distributing personal items can be confusing unless specifically noted in the estate planning documents,” Singer says. “Is a collection one item? Is each one an individual item?”

The solution: For personal property, make it crystal clear who gets what, especially when it comes to items with sentimental valuable.

“If the mother had said that three plates went to son A, three plates went to son B and three plates went to the daughter, they would have hated it, but they would have accepted it,” Singer says.

If it’s unrealistic to name every single item you own, set a time limit for everything else to be divvied up. For instance, if siblings can’t agree on a particular item within 90 days, the executor will draw straws.

Consider Personal Employees in Your Estate Plan

“I worked with a family whose mother employed 15 different people to do everything from washing her car to doing her nails,” Singer says. “She paid all of them monthly, and over time they grew dependent on her financially.”

Consider including your housekeeper, personal assistant and caregivers in your estate plan, and establish a formula to determine how much severance each will get.

When the mother died, she hadn’t provided for any of them in her estate plan, so Singer was unable legally to pay the employees what the family thought they deserved.

“It was a terrible situation. But if it’s not written in the estate plan, the executor may not be able to pay what the family wants, regardless of how well these people may have taken care of Mom,” Singer says.

The solution: Consider including your housekeeper, personal assistant and caregivers in your estate plan, and establish a formula to determine how much severance each will get. For instance, severance might be a month’s pay for each year an employee has worked. Alternatively, you could create a contract for each employee that sets a severance amount based on his or her years of service.

“It’s devastating to be suddenly cut off with only a week or two of salary,” Singer says. “The family feels terrible. We feel terrible, but we have to follow the terms of the will or trust.”

Mention Your Plan to Your Beneficiaries

“In one case, a client’s estate plan required that the trustee sell his business upon his death,” Singer says. “The problem was that his kids didn’t know about the requirement to sell it, and the business had provided them a substantial amount of money for many years.”

The solution: Talk to your children about your plans. The sooner you can get comfortable discussing your estate, the better.

“If everyone knows what’s coming, it’s much easier to put it into effect,” Singer says.

Whether it’s your children, your employees, other family members or friends, thoughtful estate planning strategies can ensure you don’t put a strain on their time, resources and relationships.

Show Disclosure
This information is not intended to be and should not be treated as legal advice, investment advice or tax advice and is for informational purposes only. Readers, including professionals, should under no circumstances rely upon this information as a substitute for their own research or for obtaining specific legal or tax advice from their own counsel. All information discussed herein is current only as of the date appearing in this material and is subject to change at any time without notice.