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Transparency paves way in estate plans

Estate Plan Edge: When your estate is settled, no one should wonder whether your child talked you into something. Thoughtful planning can make all the difference.

As you reflect on the holiday gatherings of the past few weeks, it may be a good time to consider your estate plan as well. In my experience, an almost-universal goal of estate planning is long-term family harmony. Will your plan achieve the desired results?

Family get-togethers can provide you with important estate planning insights. Do your children get along with one another? Did you notice changes in their interactions this year? Have old grudges reared their ugly heads — maybe with more frequency or intensity? Does any child seem touchy about the fact that he or she isn’t involved in the family farm? Maybe a child is preoccupied with money problems?

The clues may be subtle but should not be ignored. As Ronald Reagan said, “Don't be afraid to see what you see.” Parents don’t like to admit even to themselves that their children aren’t perfect. But pretending that friction doesn’t exist, will go away, or will not adversely affect the transfer of the family farm is a classic recipe for disaster.

To the heirs, receiving an estate can be a life-changing event. Sadly, many families have been torn apart by the process. Had the parents applied clearer vision, they could have done things differently to minimize the potential for conflict. The estate settlement process could have been a peaceful, even unifying, event. Instead, small wounds were opened and salted.

The path forward
So, what are some practical ways to apply your holiday observations to your estate plan? What can you do to build bridges rather than drive wedges?

Start with a comprehensive legal plan that covers all issues in an open, transparent manner. If your living trust directs the division of your estate, all your assets should be addressed in that trust agreement, and all assets should be titled to follow that plan. Upon your death, all your heirs should be able to see clearly what you intended to do, and did, with your entire estate.

By contrast, it would be a big mistake to maintain a “side account” for one child outside of your trust. When the others discover this (and they will), you will sow suspicion: The others may think the one child in some way manipulated you and your accounts to get something extra.

Within your legal documents, who have you appointed to be responsible for the proper handling of your financial affairs if you become disabled, and then to carry out the estate division and disposition when you die? Have you made the best choices, knowing what you know about your children?

A good estate plan will appoint a Disability Trustee to manage your assets, maximize your income, and pay your bills if and while you are disabled. The Disability Trustee must oversee everything for your benefit and never for his or her own advantage. This person must be able to competently manage everything you currently manage and maintain clear records to show he or she has done so. Those records will be available to all your heirs upon your death. Have you named the right person as Disability Trustee?

Similarly, your plan will appoint a Death Trustee to assume control of everything upon death. This person must collect your income, appraise all assets, pay all creditors, account and pay taxes to the IRS, and faithfully divide your estate as you directed. This responsibility will last for many months, sometimes years. The Death Trustee must also be able to keep records and work closely with professional advisers. All heirs will be looking over his or her shoulder. Have you named the right person for the task?

Maybe you think appointing all children as co-trustees would be a solution. Unless they get along extremely well, they might have to retain separate attorneys to advise them!

What about the division of your estate? Will children with very different interests become co-owners of real estate or equipment? Try to think of ways to avoid that. If a farming heir will have the option of renting or buying land from others, are the terms clear and fair? Any restrictions on the sale or ability to spend the inheritance should be precise and understandable, and explained by you to your heirs. No one should be allowed to wonder whether another child talked you into something. 

Estate planning is not merely writing simple standard legal forms. It takes your effort and honesty about your circumstances. When your time comes, don’t have any regrets about how thoroughly you planned to leave everything you have to the people you love.

Ferguson is an attorney who owns The Estate Planning Center in Salem, Ill. Learn more at thefarmersestateplanningattorneys.com.

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