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Wednesday, August 10, 2011

Consider options realistically to ensure harmony among beneficiary children

Like anyone who advises individuals for a living, I need to understand my clients' situation, issues and goals before I can offer any useful advice. Frequently I'll ask individuals or couples to tell me in their own words what their ideas or thoughts are for their estate planning. Usually, even if they don't realize it, they reveal their primary goals to me in their first sentence. Sure, I sometimes have to dig deeper, but the primary concern is usually close to the surface.

Some start off by telling me that they want to hand on a family business or take care of a handicapped child or preserve a family cottage. But a huge proportion of clients express a desire to ensure that their children won't quarrel or feel slighted in any way once the parents have passed away. Harmony among the children is by far the most commonly mentioned goal.

In my view, doing everything possible to ensure harmony among the children means more than simply including everyone in everything. A so-called solution that I see often is a parent who appoints all of his or her children as executors, all of the children as powers of attorney, and leaves the estate equally to the children. On the face of it, this might seem to achieve the goal of not slighting anyone, but if you look more closely you will likely find that none of this is necessarily going to achieve harmony.

First of all, naming all of your children as executors, particularly if there are more than two of them, is almost guaranteed to cause daily friction and disputes. There are simply too many decisions and judgment calls to be made for a group of individuals to be effective. Simply put, parents need to be more realistic about their children and the role they are asking them to fill. How can they expect people with different personalities, with different time constraints or family issues to agree on so many things over such a long period of time? It just doesn't work.

Those of you who think "oh but my family is different" are pretty much always wrong.

Every decision that goes into your estate planning needs to be thought out carefully, not as an academic exercise or theory, but as as practically as possible. What will happen if John works in Dubai, when the estate can't move forward without his signature on papers? Will carrying the expenses of the estate be a problem when one daughter is quite prosperous but the other is not? Will the fact that two of your kids have hardly spoken in ten years be a problem? What if one wants to claim an executor's fee but the others don't want that?

If you're trying to ensure harmony, forcing them into this position is probably a bad idea.

Let's take a look at leaving the estate equally among the children. How could that be a bad thing? Again, be realistic. Have you loaned or given one child quite a bit of financial help that wasn't given to others? Should that money be repaid to the estate and if not, how will the others feel about it? Has one child continued to live close to the parents and done the lion's share of helping out with the house, garden and finances? Should that child expect to be rewarded for that help? Has one child worked in the family business for years, helping you to increase the value of the business, where the other kids have not helped build the family fortune? Is that child entitled to receive a greater share of the business than the others?

These and other questions should be raised and discussed with your estate planning lawyer. The lawyer's role is to advise on the law, and to offer solutions and ideas for planning. Your role as an individual (or couple) is to consider your options realistically and practically in order to further your own estate planning goals.

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