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.

Well, that didn't work

This new blog post from http://www.allaboutestates.ca/ talks about the challenges of the very rich when trying to hand down large legacies without sparking family fights. The failures are often spectacular and make the headlines. Click here to read the article.

The author, Elaine Blades, touches on a concept that is very important in estate planning. That concept is that the children equate equal treatment under the will as meaning the parents loved them equally. Money equals love when it comes to wills and estates.

You might be surprised to know how much planning, discussing and special drafting go into making sure that in a parent's will, the children don't believe themselves to be less loved than a sibling. This doesn't only apply to rich people; the same concept applies where an estate is more modest.

I don't believe this forces a parent to leave equal amounts to all of the children where, for example, the parent has already helped one child financially. In those cases, I often recommend to clients that they have a clause in their will giving a brief explanation for the different treatment (e.g. "Johnny is getting less than the others because I gave him a down payment for a house that I didn't give to the other children"). Including this explanation should help ensure that Johnny's feelings aren't hurt.

I've noticed that when this type of clause is used, many clients prefer the wording to start with "...I love my children equally but have treated them differently under this will because...". That certainly spells things out.

Don't leave your "real" wishes separately from your will

Annie made a will leaving her estate to her five children in equal shares. When Annie died, the child who was named as executor began the process of probating the will.

The family fighting began almost immediately after Annie's death. Why? Because Annie had told her family that what she "really" wanted done with her estate was different from what was in her will. Verbally, she directed that specific assets be divided among certain people, some of whom were not her children.  She then made matters even more complicated by transferring her home into joint names with two of the children even though the will directed that the home be sold and the money divided among all five children.

This kind of thing happens more often than it should, to the detriment of the children left coping with the mess. I've seen two examples of it just this week alone. Parents leave their children verbal instructions that are different from the will, placing the executor in an impossible situation. The executor is legally bound to follow the will, but morally wants to follow what they believe to be the parent's "real" wishes. The will is legally valid; the verbal instructions are not, but carry moral weight.

The siblings then take sides. Accusations are made. Chaos ensues. The estate is delayed and often ends up in court.

If you change your mind about what's in your will, then change your will. This is a must. It is simply unfair and unreasonable (not to mention illogical) to leave a valid will and at the same time leave contradictory verbal instructions. You might as well toss your lighted cigarette into a barrel of gunpowder.

I believe people do this because they have faith that their children will figure it out and do what the parent "really" wants. But even children who want to follow the parent's "real" wishes can't usually do so because they are bound by the will. The children can't ignore the law, or a valid will.

I don't believe parents have any idea of the pain and inconvenience they put upon their children when they contradict their own wills with verbal instructions.

Fight over autographed baseballs leaves Pogofsky family battered

This story from the Chicago Tribune illustrates what can happen when an estate contains an unusual, valuable item such as a collection of autographed baseballs. In this case, the autographs were collected over 30 years and included those of Babe Ruth and Lou Gehrig. The owner of the collection passed away, and now his children are fighting - in court - over who should get the baseballs. My heart goes out to this family, who will likely never really recover from this fight. If only the father had given clear instructions in his will for his collection. Perhaps, like millions of other parents, he felt that the kids would "work it out" without a problem. Click here to read this story.

The attached photo is from Zbigniew Bzdak, Chicago Tribune, July 5, 2011.

Ringling Brothers heirs give new meaning to family feud

Looking at the goings-on in famous families is just like looking at our own families, just with less money and less publicity. The issues are the same. Click here to read this story about the children of the late Irvin Feld, who owned the Ringling Brothers Circus and other similar assets.

Naming all your children as executors? Bad idea.

Whenever clients tell me they want all of their children to work together as executors, I cringe. I have to tell them that I strongly disapprove of their choice, and explain why. It's not a message that everyone wants to hear.

Recently I spoke to a group of people about protecting their estates from known trouble spots - one of which is expecting children to work together as executors. As I talked, one woman in the group scowled at me, then began muttering under her breath to her husband. She crossed her arms, then her legs. She turned her head and refused to look at me. You don't have to be a body language expert to realize that she was telling me to shut up and stop saying negative things about her children.

I wasn't specifically talking about her children of course, as I've never met them. But I have worked on enough estates, and talked to enough families and seen enough litigation to know that appointing multiple children as executors rarely works out.

Why is that? Part of the reason is that all of the people involved in the estate are grieving, shocked and upset. This isn't a setting for ideal communications. They aren't functioning at their best. Emotions are close to the surface. Small things set people off. Big things seem insurmountable.

Another factor is that most people haven't been executors before. They may move too slowly, or make mistakes, or appear to be heavy-handed. This makes other people impatient or suspicious.

One of the biggest monkey wrenches in the estate is simply that the people are related. They have a history, not all of which is friendly. Old resentments take on new importance. Old rivalries flare up. And let's face it, the parents usually don't know the half of what has transpired between the kids over the years (I have four siblings - I speak from experience). Any suspicion of favour by the parent who just passed away is resisted, examined and challenged. And have you ever noticed that relatives will say things to each other that they'd never be rude enough to say to a stranger?

Another important problem is the fact that the parent may have taken estate planning a little too casually and not left extensive enough legal documents. Was that joint account with all of Mom's GICs really meant to be given to Betsy? Didn't Mom say once that she just set up that account so Betsy could help her? And what about that loan to John? Joey paid back his loan so doesn't that mean that John has to pay his back too? Sandy has been living in the house to help Mom, but now she is saying that Mom said she could have the house! And Mom didn't say anything about funeral wishes. Betsy and John want cremation for their Mom, while Joey and Sandy want a traditional burial. Each of the four children believes they honestly know what Mom wanted. And on and on. With nobody in charge, the questions never seem to get answered.

When I ask parents why they insist on such a foolish idea as appointing all of the children as joint executors, the answer is usually something about not offending anyone or not wanting to choose between them. This is just silly. If you're a parent, you have the moral right to decide which of your children best suits any given role, task, or situation.

Failing to exercise your decision-making ability while you're alive just means that you're leaving them to fight it out among themselves once you've passed away. Is that how you deal with your children now? Would you deliberately turn your back on a huge dispute between them if you had the power to resolve it?  Most parents would prefer to help them settle it, so do that by picking an executor from among them, or if you absolutely cannot choose, name a trust company.

Five ways to punish your beneficiaries

Want to create the most confusion possible when you pass away? Do you want your kids to have to fight each other for their inheritance? Are you interested in losing chunks of your assets to lawyers and the CRA? If so, you're not alone. Plenty of people set things up in a way that makes things tough on their kids and other beneficiaries. Read on for a list of the most popular things you should do if you want your estate to be truly memorable for its disputes and delays.

1.  Lend one of your kids a big chunk of money during your lifetime, and tell him he doesn't have to pay it back. But don't tell this to the other kids, and definitely don't mention it in your will. Let them figure out whether it's to be paid back or not. Your children will all have a chance either to gang up on the one who received the loan, or to take sides and duke it out. Fun!

2.  Name ALL of your children together to represent you on your will, your Power of Attorney and your Health Care Directive. That way nobody gets to decide anything and it will take ten times as long for things to be wound up, prolonging the agony. If a couple of your children don't get along that well, they'll have to deal with each other every single day. Everyone will be upset all the time. There are few things as satsifyingly contentious.

3.  Leave the title to your house or cottage to all of your children as joint tenants. While you're at it, place a bet on how long it will take this arrangement to fall apart. To make absolutely sure that this is as problematic as possible, leave no funds in trust to pay for maintenance of the building. This idea is great because it not only messes up the kids as beneficiaries, it spoils their relationship with each other - a double whammy.

4.  Put  a bank account or investment in joint names with one of your children. Be coy with the kids about whether the child is supposed to own the account after you die, or whether the arrangement is just for convenience. Definitely don't leave any instructions in writing! It will be fun knowing that the children will be busy for a year or two fighting over the account and won't have time to get bored.

5.  I've saved the best for last. If you really want to punish your children, don't put any documents in place at all! Let them compete over who gets to be in charge. Let them argue over who gets what and how things are to be done. That'll show 'em.

Mom makes one child beneficiary, hoping he'll share, but...

A mother made a will, leaving her estate to her oldest child. She tells her children that she has done this with the intention that the oldest child will pay the bills then share the estate with his siblings. But what if he doesn't share? This is the situation one of my readers is dealing with right now.

Now, I don't know why the mother in this case made such a disastrous will. Perhaps she was ill and in a hurry to get something - anything - onto paper. Perhaps she was trying to save a few dollars on the cost of a professionally prepared will, not realizing she was putting her children into a situation where they might have to endure costly estate litigation. Perhaps she was just overly trusting of her oldest son. Very few parents are able to admit that one of their children would ever behave badly to his siblings.

I also don't know why the oldest child is refusing to share. Maybe the mother told him something about the distribution that she didn't tell the others and he feels he really is carrying out her wishes. Maybe he feels that since he's looked after her during her lifetime he's entitled to more. He certainly wouldn't be the first executor to start legal fireworks by re-writing the will he was supposed to be following. Or maybe he just feels that he is going to rely on the letter of the law that says the inheritance is his.

There are both legal responsibilities and moral responsibilities in play here.

The siblings say that their mother intended the estate to be shared among them. Let's take a purely legal look at this. What record exists of her intention? Her will actually says the opposite - that she is leaving the entire estate to one child. A will is supposed to record the last wishes of the testator, isn't it? So on the face of it, the will should stand as an accurate record of what she wanted. She didn't set up a trust and put the oldest child in charge. She didn't divide up the estate among the children herself. She simply left it all to one child. The only proof of her intention of splitting the estate comes from those people who would benefit financially from the split.

The other side of the equation is the moral obligation of the oldest child to carry out the mother's intention, if she did in fact tell him that she expected him to divide the estate. This is an area that is changing thanks to recent cases, many from British Columbia, in which a moral obligation is relied upon to change the division of the estate. The likelihood of success will rely in large part on the provincial or territorial laws of estates that are in place.

But if the other children take the oldest child to court to force him to divide the estate, haven't all of them  - the oldest child included - already lost? Just the fact that they are spending money of their own and are partially depleting the estate reduces the value of the prize they are fighting over. And this doesn't even take into account the damage to the family relationships that will likely never recover from a lengthy, costly, nasty court battle.

The initial mistake was made by the mother, who left a will that any lawyer worth his or her salt would have told her straight up was a disaster in the making. Your will should reflect your actual intentions. No parent should leave everything to one child, assuming or intending for the child to decide what is right. That's the job of the testator, not the executor. Why pit one of your children against the others?

Family dynamics and the older driver

I'm attaching a link here to an article about a service called Keeping Us Safe, which helps older drivers and their families deal with the transition from driving to non-driving. What I found particularly useful about this article was the way that the family members, who were fighting with each other about what was "best for Dad", responded to a neutral third party that stepped in to help.

This article really demonstrates what a wonderful outcome there can be when all of the kids really are concerned about an aging parent but need a bit of help reaching a consensus. It is possible to resolve issues with the help of a third party without having to go to court.

I also took specific note of the fact that the dad in this story was so upset that his children were fighting over what to do about him. The fear of pitting his children against each other made his own decision-making almost impossible.

Fighting at the funeral

This link goes to a question-and-answer forum at the Losing our Parents website. The site deals with various issues relating to parents aging and passing away. This particular question has to do with whether someone should go to a funeral when they are "fighting with" one of the deceased's kids. Click here to read it.