Let me tell you a story about a client I’ll call “Harold.” Harold was a meticulous planner when it came to his finances, but when it came to sharing any of that information with his children, he was tighter than a drum. He often told me, “Craig, they’ll find out what they need to know when they need to know it.” This sounded good in theory, but as you’ll see, things didn’t quite go as planned.
Harold had three adult children, all fairly successful in their careers, but they never had a clear picture of his financial situation. He refused to give them any insight into his estate plan. His reasoning? “I don’t want them expecting a windfall and getting lazy!”
One day, Harold came into the office, looking more flustered than usual. He explained that his son, David, had been calling him nonstop for weeks. Harold had been ignoring the calls, assuming it was another request for a “loan” to fund one of David’s business ventures. But this time, it wasn’t about money. David had found an old will Harold had drafted in the 1980s, leaving the bulk of his estate to his late second wife’s family. That sent David into a panic. He thought Harold was still planning to disinherit his children!
“What have we done wrong?” David asked Harold. The revelation may have caused hurt feelings. Harold felt close with his children and certainly didn’t want an old will to get in the way.
“Craig,” Harold said, exasperated, “I told him everything is up to date. That the will he found has been changed and that he and his siblings had nothing to fear. But now, he’s convinced I’m hiding something!”
Harold had put everything in order — trusts, healthcare directives, powers of attorney — but by keeping his children in the dark, he’d inadvertently caused the very thing he was trying to avoid; confusion and chaos.
It took a series of family meetings — where I had to play referee — to clear things up. The unexpected twist? By the time we finished explaining his well-thought-out plan, Harold’s kids weren’t angry or greedy; they were relieved! They had assumed the worst because they didn’t know the full picture.
The children were also unaware of Harold’s plans if he should require advanced nursing care. They didn’t know whether he had the funds to pay for in-home care, or what his situation might be. Had Harold waited until he became incompetent, they may have had even more trouble determining what he could afford. Now was the best time to relay at least some of this vital information.
With Harold’s permission I set up a family video conference meeting including Harold’s CPA and financial advisor. We reviewed Harold’s estate plan, and I discussed how the plan continued in continuing trusts for each child, to protect their inheritances from divorce or lawsuits. I explained that once the trust administration was complete, that each child would become the trustee of their own share, so that they could determine what investment vehicles they preferred. Each child was also in charge of his or her own distributions.
We discussed who would be Harold’s successor trustee to manage his affairs if he should become incompetent. I described a situation I once had a few decades ago where one of my clients started writing $10,000 checks to his housekeeper. I urged Harold and his children to contact me if Harold started to experience memory issues. The sooner that we could implement his succession plan, the less likely a repeat of that experience or something like it would occur.
Harold’s old plan was from a state that had high income taxes. We reviewed how his updated plan used Florida law not only to benefit Harold, but also his children. I also explained how we moved Harold’s family partnership to Florida so that he wouldn’t have a nexus with his former state’s taxing authority. You can find a whitepaper that I wrote on that subject at: http://floridaestateplanning.com/escape
His financial planner went into detail as to Harold’s plan if he needed in-home nursing care, and what his monthly expenses are. Contrary to Harold’s fear, his children didn’t expect any gifts or loans. Instead, they were relieved that their father had everything covered.
In the end, Harold’s secrecy about his estate created more drama than any inheritance dispute ever could have. And I think he learned his lesson — that withholding too much information might cause more harm than sharing a little trust ahead of time.
