Most families have difficult relationships. You might have siblings who don’t get along. The tension from childhood often carries into adulthood, making family decisions complicated.
A parent may love all her children equally and want to treat them the same in the estate plan. But is this wise? Another issue is what to do about the child who has estranged himself from everyone in the family, including the parents. Should the parents continue to include that beneficiary in the estate plan?
Handling Sibling Rivalries in Estate Planning
Let’s first examine the situation where a parent loves all her children, but they don’t get along. My clients often want to name all their children as successor trustee, personal representative (executor), and health care surrogate. When children don’t get along, this could be a huge mistake.
A parent’s critical illness or death may create an emotionally charged situation. Sibling grievances long suppressed tend to bubble to the surface. Add into the situation the many crucial decisions that must be made, and you have a recipe for disaster.
When dealing with financial issues, such as with wills and trusts, it is prudent to carefully consider who you’ll name as your successor trustee and personal representative. I’ve seen situations where one child is named as the financial trustee, diligently working many hours taking care of her parents’ affairs, only to be accused of swindling or wasting money.
The adult children who are not involved in the day-to-day financial decisions often don’t understand the burden, nor do they understand the costs of critical care, particularly nursing home care at the end of a parent’s life. What was once a large estate could dwindle in the face of those expenses.
Solutions for Managing Estate Responsibilities
One potential solution is to name a corporate trustee or co-trustee with one of the children. Having a bank or trust company serve as trustee adds assurance that the trust terms are adhered to and that no trustee is improperly taking assets for her personal benefit.
Upon the parent’s death, there are more complex administrative matters to consider. Having a corporate trustee present to help with the “heavy lifting” often takes a burden off an already stressed adult child. Another option is to engage a good estate attorney well-versed in the various duties and laws associated with administering an estate and who has the manpower to deal with daily issues that arise.
Addressing Estranged Family Members
What to do about the child who has estranged himself from the family? Clients often ask whether it would be best to disinherit that beneficiary, leave him a fixed dollar amount, or a smaller percentage of the estate.
The answer is—it depends! If you feel that the adult child should receive some portion of the estate, a fixed dollar amount is easier to deal with from an administrative standpoint than a percentage of the estate. Once the fixed dollar amount has been distributed, the beneficiary is not entitled to any accountings. A beneficiary entitled to a percentage of the estate, even a small percentage, is entitled to all the documents and accountings that a beneficiary with a significant interest is entitled to.
A bequest of a fixed dollar amount usually has priority and is paid out first before the percentage beneficiaries. For example, if you leave $100,000 to Beneficiary A, and then 50% of the remainder to Beneficiary B and 50% to Beneficiary C, if all you have left in the estate is $200,000 at your death, Beneficiary A gets his $100,000, but Beneficiary B and C will only receive $50,000 each. If you want to limit the amount of the specific bequest to a percentage of the estate, you can do so without giving that beneficiary access to the accountings and documents.
Consider Complete Disinheritance for Problematic Beneficiaries
If you feel that you would rather disinherit the estranged beneficiary, it is better to completely disinherit him rather than leave a stated dollar amount such as one dollar. It is always best to simply disinherit completely. Even bequeathing a small amount gives the beneficiary legal rights that he otherwise would not have had.
Dealing with difficult beneficiaries is never easy. Nevertheless, when they exist, it’s always a good idea to limit the damage that they can do within any administration.
