Beginning in 2020 a new topic entered the estate planning world based on studies done at Cornell University. Cornell started what they call a “Family Reconciliation Project” and in 2021 they published data indicating that in 25% of American families, there is estrangement. That’s a euphemism for “not getting along.” https://news.cornell.edu/stories/2020/09/pillemer-family-estrangement-problem-hiding-plain-sight
You’re sitting down to plan your estate. You can picture the obit. “Surrounded by loving family and friends…….” Well, it’s a little more complicated than that. Today, the “family” is often two families and, perhaps, three. You want to make certain that the surviving spouse is taken care of and the government says there is no limit to what you can leave to him/her without tax. But then what? The easy answer is to divide everything equally and bank on the fact that your widow/er will not spend it all or give to the local animal shelter in her last will and testament.
But, this is 60 years of wealth accumulation. You have kids with Spouse #1. Those kids went to public school because, back then, private school wasn’t in the cards. Those kids never liked Spouse #2. They call her the “Greedy One.” But when you married the second time, you had money. Those kids went to private school. One kid from the second marriage inherited your genius so she went to college on full scholarship, saving you $200,000. Her brother made up for it by dropping out of culinary school and then struggling with addiction. You spent the $200,000 you saved on one kid’s college for the other kid’s rehab. Then there’s another son from Spouse #1 who guilted you into loaning him $100,000 to start a restaurant in Harrisburg which failed after nine months; a total loss for you. Meanwhile his sister borrowed $100,000 to buy her first house and repaid you every dime with interest and never missed a payment. Finally, there’s the matter of who has what net worth as they gather around you in their role as “loving family.” Some of these kids are as wealthy as you. Others are essentially insolvent and technically, they owe you money.
This is your problem, bud. I can’t solve it for you. But there are two things in this world that decedents hate more than death. The first is taxes. Your estate lawyer is all limbered up for that. She has put assets in trust and others in joint names and then there is life insurance to fund the estate taxes that will fall due. But what about the “inequality.” The money you paid for rehab or to start the restaurant. Some of your grandkids are in tony private schools. Others are in schools you would be ashamed of.
What’s worse than estate taxes? Legal fees. They can eat your estate while those loving families you created and nurtured profess that you lost your marbles or that the “Greedy One” exercised undue influence over you in your final days of planning your estate.
How do you mitigate the risk that your family does not have a brawl over your estate? You probably need to prepare a roadmap to your thinking. You could put it in your will, but your estate lawyer will advise otherwise. Yet, your estate plan needs to show that you remember the good (free college; mortgage paid in full); the bad (restaurant failed) and the ugly ($200K for rehab) and that your estate plan was premised on reasoned method and not testamentary madness.
Such a document could actually, prevent a contest over your estate. If anything, a reasoned plan, stated in your own words, effectively shows that you had the capacity and desire to evaluate what goes into planning an estate. I wouldn’t encourage the reader to publish this document before you die. It will just cause a bunch of your family members to argue with you that you misunderstood what they did or meant. If there is to be a fight, let it begin after you have been elevated to life’s penthouse suite. But, a well described plan explaining why you planned your estate as you did could avoid conflict in court because you will demonstrate that you thought about what you were doing and you remembered the events that caused you to plan the estate as you did.
If you have been married more than once with children, and even if you haven’t; don’t think that all will be peaceful as you shuffle off that mortal coil.* A good first step in an estate planning process is to write out (a) what you have (b) how you think it should be allocated and (c) why.
* Hamlet, Act III; Scene 1