Neglecting to plan for family dynamics can destroy the best estate plans. Make sure to address both difficult personalities and tax liabilities. They can be equally problematic.
Saving loved ones from a large tax bill and maximizing the transfer of wealth across generations is great, but your estate plan needs to do more than that. The plan must consider the dynamics of your family, how they may treat each other after you pass and what can be done to protect them from each other.
CNBC’s recent article, “This threat could devour thousands of dollars from your estate,” notes that even families that look like they're perfect, are not. Perfection doesn't exist. When families fail to address these types of issues in their estate plans, it can create conflict between beneficiaries.
Here are some ways your estate plan can drive a wedge between your family members, and how you can avoid that kind of trouble.
Blended families, typically couples with children from prior marriages, need some special attention during the estate planning process, to make certain the assets go to the right heirs and that nobody is accidentally disinherited.
Things are a little more complex for fractured families. That is when the children and parents are estranged. Even when the estrangements are long-standing, sometimes there's an expectation that a child will inherit from the parents.
In some cases, younger adults should know a little about money management. If they have trouble with money, ask your estate planning attorney about trust options. If a child isn’t very diplomatic or sensible, he or she may not be the best person to name as trustee. It’s common for a parent to pick family members, but they rarely have a sound rationale for doing so. An independent trustee such as a bank, an attorney or an accountant acting as a fiduciary can be a good solution. This is an independent third party that can lessen family fighting.
Be upfront and candid with your estate planning attorney. They have seen and heard all kinds of scenarios and will have useful input on how to handle a volatile situation. In some families, talking about the potential conflicts in advance can be helpful, while in others it can lead to drama. Consider working with a counselor, if the problem seems unsolvable. Getting everyone in the family closer to a healthy relationship while you are still alive, may be the best legacy you can leave your loved ones.
Reference: CNBC (June 14, 2018) “This threat could devour thousands of dollars from your estate”