Estate planning: it's ok to be charitable

Christopher W. Yugo, Times Business Columnist answers a frequent question in estate planning:

Q: I intend to leave all of my money to two charities but I'm concerned that my children will object. I'm worried they will challenge the will. Is there anything I can do to make sure that my wishes are carried out? Should I name someone other than a child executor?

A: First off, you can leave your property to whomever you want. If you want to leave it to a charity or the neighbor, you can do it. Now don't get me wrong, I understand why a child might be upset they are excluded. However, that doesn't mean that you can't or shouldn't do it.

As I've written before, will challenges are rare and successful will challenges are even rarer than that. There really needs to be a compelling reason to set aside a will. For example, a will can be set aside if it can be shown that the testator was subject to undue influence or if he wasn't competent to execute a valid will in the first place.

I wish there was a magic bullet to prevent a will challenge, but there isn't. If your kids want to challenge your will, they can do it. Fortunately, or unfortunately if you are the child, will challenges are expensive. That in itself could be enough to discourage a challenge.

I suggest you discuss your options with your attorney. He or she will be able to help you plan for trouble. Your attorney may suggest you obtain a letter from your doctor demonstrating your competency or perhaps suggest a video recording of the will signing be made. The attorney will almost certainly want to meet with you alone so the chances of a successful undue influence claim are greatly reduced. The key is bringing your concerns to your attorney's attention.

As for naming someone other than a child personal representative, I'm kind of torn. On one hand, naming a child personal representative may help your family understand why you were so charitable. On the other hand, it seems a little twisted to request a child you disinherited to administer your estate. If you decide to name someone other than a family member, you could contact your bank's trust department and inquire about it serving as personal representative. The bank will do its best to assure your instructions are carried out.

Finally, you might consider discussing it with your family ahead of time so they aren't surprised when you pass. Maybe explaining to them why you are leaving your property to the charity will help them understand and perhaps avoid hard feelings, and possible litigation.

Protecting your future: Inheritance can come with unintended consequences

Some people might want to avoid difficult conversations about inheritances by keeping silent and allowing family members to find out facts only when the estate is settled. However, waiting until the end opens the door to potential feuding and costly legal challenges.

The goal of proper planning is to make transfers as seamless and efficient as possible. Meeting that goal requires others to know what to expect when the time comes.

The article titled “Protecting your future: Inheritance can come with unintended consequences” by Bonnie Kraham, an elder law estate planning attorney in Wallkill, NY talks about how sometimes an inheritance can be unwelcomed, in which case the recipient can file a legal “disclaimer” (a legal form of saying “no” to avoid or reduce state estate taxes.

Failing to follow the rules properly can lead to many complications. If you are concerned that someone may want to disclaim their inheritance from you, or if you need to disclaim an inheritance, I’m available to answer questions and to meet with you.

Who are the biggest estate planning procrastinators?

One-in-five investors have yet to create an estate plan. Adrian Reyneri writes in her March 19^th  article in Spectrum’s Millionaire Corner  who’s most likely to put off this important aspect of personal financial planning:

1. Young investors
2. Main Street investors
3. Investors with little or no knowledge
4. Women

Do you fall into any of these estate plan procrastinator groups? If so, give me a call to set up a meeting to discuss your plan.

Plan a family meeting

Estate planning is vital to ensuring your family is properly taken care of after your passing, but almost equally important is communicating that plan to your family in advance. The below commentary was written by Estate planning columnist Curtis Kaiser.

Last year, I met with a prospective client whose wife had passed away a decade or so ago. He wanted to check in to make sure his estate plan was on track – as it hadn’t been reviewed or updated since his wife’s passing.

He was a delightful and extremely organized person. His plan – which had been drafted by an attorney who had since retired - was in reasonably good shape – the assets were properly funded and the trust accurately reflected his wishes: a simple division of assets upon his death to his three adult children. I suggested that he make some minor changes to his plan, but reported that otherwise he appeared to be on track.

Earlier this year, I received a frantic call from one of that client’s beloved daughters – her father had unexpectedly developed a serious illness and was unable to manage his financial and health affairs. She had no idea where her father’s estate planning documents were, what they said, or what they meant. Instead of being able to focus on supporting her father during his illness, she was consumed by an additional layer of worry.

It appears that my client didn’t want to “burden” his children with having to think about the possibility of him falling ill or passing away – he just told them that things were “taken care of” if anything should happen to him.

I arranged a time with his daughter to visit my client and his family to discuss how his estate planning documents were designed to make sure that his family could properly assist with his financial and medical affairs – like paying his bills and talking with his doctors. Unfortunately, shortly before the meeting, my client’s illness took a turn for the worse and he required hospitalization. The family needed to focus on him — they didn’t have time to meet with me to go over the documents.

My client was a conscientious, loving and thoughtful father – he already had done so much for his children in terms of preparing an estate plan and having his affairs in order – what else could he have done? The ideal solution here would have been a “family meeting.”

Coordinated with either his financial advisor or his estate planning attorney (or ideally, both), this family could have sat down for an hour to allow my client to explain his wishes and allow the estate planning attorney to discuss with the children how the plan would work in the event of his illness or passing. Through the family meeting, family members could ask appropriate questions and reach an appropriate level of understanding so that when the time came, they would be ready to help – and not burdened with an extra layer of complexity.

I’ve done a number of family meetings for clients. Both the clients and their loved ones often approach the meeting with a bit of anxiety, but in every single case that I’ve been involved with, the experience has had a positive end result. Even when there are controversial issues discussed – for example, if the parents don’t feel that a certain child is financially ready to manage an inheritance – putting that issue out in the open eventually leads to an increased level of understanding.

Another benefit of the family meeting is that it builds a relationship between the client’s advisors and family members so that when the time comes, the surviving family members feel comfortable.

Call if you need help setting up such a meeting with your family.

Downton Abbey: Real Life Lessons for Trust and Estate Advisors

The following commentary is extracted from an article written by Joshua Baron and Devin Bird  published in Trusts and Estates

In real life, far from the TV world of post-Edwardian England, business families can find themselves in the same circumstances as those of the beleaguered Crawley family.  Consider estate planning.  In the TV series, the Earl doesn’t leave the estate to his eldest daughter but, having no son, passes it on to Matthew, an unknown relative.  He’s forced to do so because English laws at the time required a male heir.

Although primogeniture is no longer in effect in most countries today, it’s not uncommon for families to choose to operate under similar restrictions.  For example, some business families only allow male family members to be owners.  This arrangement is usually established with the intention of reducing future conflict in the family.  Unfortunately, it can have the unintended consequence of excluding some of the talented leaders in the next generation who are female.

Understandably, family business owners often wish to keep the business, and sometimes management, in the family, and so they try to restrict future ownership to bloodline relatives.  To endure and remain competitive, however, each generation requires at least one talented and driven leader.  There’s no guarantee that blood relatives will have the necessary vitality and energy.  Sometimes, the passion and ideas can come from the outside, for example, from in-laws. That’s what happened in the Canadian company Bombardier Inc. and its recreational BRP division, which has subsequently been spun off.  When the founder died in his 50s, it was the founder’s son-in-law who transformed the business from a pioneering, small snowmobile company into a global airplane, locomotive and recreational company, with combined revenues of some $20 billion. 

Even in a make believe world, succession isn’t easy. Downton Abbey reminds owners of assets, and the advisors who counsel them, that caution should be exercised in placing too many restrictions on who can be owners in the future.  There may be good reasons for the restrictions, but full understanding of what could happen is crucial.

Trust and estate advisors like themselves can serve our clients well by doing scenario planning with you about how such rules/restrictions could ultimately play out in ways that hadn’t originally been intended.

Special Needs Children Benefit from Special Needs Estate Planning

The following commentary is extracted from an article written by Laura Shumaker - writer and Autism Advocate - and mother of a special needs child.  It appeared in SFGate.com of the San Francisco Chronicle.  Feb. 14, 2013.

1) Most parents of children with special needs worry about what will happen to their child when they are gone, and they worry so much that they put off planning. How do you talk to parents about their fears?

It is difficult sometimes for parents to discuss who is responsible to take care of their children if they are no longer there to do it. This is even more true for parents of children with disabilities who oftentimes must provide a much higher level of care. The benefits of planning are so enormous in these situations that our clients tend to come to us at a much earlier age. A proper estate plan will include planning for the money that is left for the child with a disability, along with a detailed plan that addresses residential, caregiving, advocacy, and other issues that arise for a child with a disability. Once the benefits of planning are provided, parents are relieved to know that something productive can be accomplished to preserve and enhance their child’s life, even when they are not able to do it themselves.

2) What is the first thing parents should do to prepare for the future?

Prepare their own estate plan and write out their instructions for how to best manage their child and their finances. If that is too much, they should at least prepare a Power of Attorney and Advance Health Care Directive to appoint someone to make these important decisions if they are unable to do so.

3) Parents tell me that they are spending so much on treatment now that it is hard to save for later. Your thoughts?

This is a common problem. One solution is to purchase a life insurance policy. It is one additional bill throughout the parents lifetime, but it will provide cash for the care of their loved one with special needs after they are gone. It is important that they select the right kind of policy, because term life insurance usually is not beneficial because they so rarely pay out a death benefit.

4) What is a Special Needs Trust?

A Special Needs Trust (SNT) is a type of trust where people can leave assets to a loved one with special needs that will not interfere with their eligibility for public benefits like SSI or Medi-Cal. In addition, the SNT is a legal way for a person to leave instructions on how best to enhance the quality of life of a loved one with special needs. This often includes plans on where the person shall live, what caregiving will be required, what type of distributions should be made that enhance that person’s quality of life, and any other benefit the person would like to see accomplished.

5) Will trust income affect SSI Eligibility?

No, any assets held inside a special needs trust and any income generated from a special needs trust will not jeopardize eligibility for SSI or Medi-Cal. These trusts are expressly authorized by the federal and state government to hold assets for persons with disabilities and not interfere with public benefits. However, improper administration of an SNT can still cause a loss (or reduction) in benefits, so it is also important to name a trustee (the person responsible for managing the trust assets) who understands SSI rules, Medi-Cal rules, and the typical rules of managing a trust.

6)Why is it important to hire an attorney who specializes in special needs trusts?

Special needs trusts work to preserve eligibility for public benefits, but only if all of the rules are followed. Many estate planners who do not do a lot of planning for persons with disabilities do not understand all the wonderful things a special needs trust can do to enhance the quality of life of a person with a disability. Thus, it is important that the proper special needs planning attorney is used to make sure all of the legal technical rules are followed along with providing advice on all the options that can be used as part of the special needs planning.

Solid legal planning is highly recommended for individuals with developmental disabilities.  I am available to meet to talk about all types of estate planning needs.  The key words are "estate planning".  Let's get you started now.

Estate planning can be a jungle, and a guide can be invaluable.

There comes a time for a business owner to plan transition of ownership.  Before selling or giving a business to family members, the owner must devote thought to the outcome that he or she wants to accomplish. Regardless of the intended family recipient(s), all parents have to ponder and answer the following questions to determine their exit objectives:

• How much wealth do we want to keep?
• How much wealth do we want the kids to have?
• How much is too much?
• And finally what tools should we use to minimize the estate and gift tax consequences?

It's key that business owners define their financial exit objective, then they can become effective in the designs for the optimum transfer mechanisms for passing the wealth to their children with minimal tax impact. It's the first part that is daunting -- Figuring out one’s wealth transfer objectives.  The transfer of wealth tends to be difficult, as family relationships and business objectives become part of the same equation. For example, if an owner wants to transfer the business to a child but still retain control and authority over all business decisions, it is doubtful the child will be ready to run the business once the transition is complete.


These are a few of the subjects that we can discuss when we meet.  I will take the role of "estate planning guide" most seriously.  So please call me, and let's take on the "jungle" one step at a time to insure your success.