Whenever I am in a group of people and they are aware of what I do, discussion very often comes around to estate planning and estate administration. Everyone seems to have a horror story regarding the administration of a relative’s or friend’s estate after a death.
This happened this past week at hunting camp. I heard a number of stories about parent’s estates that became nightmares for the family. In every one of these cases, there was at least one troublemaker beneficiary. The troublemaker beneficiary after you are gone is almost always a dipper, swooper or professional dependent during your lifetime.
The dippers are the kids who are always dipping into your financial bucket. The dippers usually have decent jobs, but they never seem to have enough money. Often times with dippers, it is not the lack of money that is the issue, it is just how their money is spent. Typically, money management skills were not one of the gifts that God has given these financial exploiters.
The swoopers usually show up when you start making financial decisions that you would not have made when you were younger. Some of the kids may start questioning your decisions and you then may start cutting off contact with those kids. Then along comes the kid or other long lost relative, who had little to do with you in the last 20, 30 or more years, who swoops in to help you out. This person is so supportive of you and your decisions and does not seem to want to control you at all. You then want to start rewarding this relative may even decide to put him or her in charge when you can no longer care for yourself or after your death. Sometimes dippers become swoopers as their parents age in order to keep the financial spigot open and flowing.
The professional dependents are a kind of combination of the dippers and the swoopers. Professional dependents are usually children or other relatives who have no visible means of support, have never been able to hold a steady job, and have always relied upon the pity, generosity and handouts from you and others to get by. These professional dependents are financial exploiters who are skilled manipulators. Like the swoopers, the professional dependents will lavish attention upon you. Like the dippers, they may not ask for money directly, but make you think that it is your idea to help them out.
You have different jobs depending upon the estate planning documents that you have and the instructions that you have in those documents. There are generally two main types of jobs that are included in estate planning documents, those jobs relating to handling finances and other property and those jobs relating to taking care of you. You may be tempted to name your spouse or the kids in birth order because you think that this is the fair thing to do. But is it the right thing to do?
Have you really thought about the skill set that is necessary for the jobs that need to be accomplished? You probably should not have the dipper, swooper or professional dependent handling any of these jobs. Choose wisely. Pick the people who have the skills to do the job that you want them to do. That is probably the fairest thing you can do for yourself and your loved ones.
Be truthful with your estate planner. Do not be embarrassed about dysfunction in your family. Admit your family’s problems. Your estate planner cannot put in proper instructions to accomplish your goals and objectives unless he or she knows the lay of the land. Tell your estate planner where everyone spends Thanksgiving and Christmas. That will tell a lot about your family. If the family fights during your lifetime, it’s a pretty sure bet they will fight after you are gone when there is money involved. With the complete facts, your estate planner can assist you in choosing the right persons for the various jobs.
And make sure you have detailed instructions for after you are gone to assure that you give what you have to whom you want when you want the way you want. The more detailed the instructions, the less likely that your decisions can be misinterpreted. If you are not treating the kids equally in your will or trust, make it clear what you want to accomplish and the reasoning behind it. Some people leave a family letter or video explaining why they did what they did.
The minimum documents that everyone should have in place is a will based estate plan which consists of financial and health care powers of attorney and a will. Some people also benefit from having a trust.
During your lifetime, your financial power of attorney allows your designated representative to handle your financial affairs in the event of your mental incapacity without the necessity of a court appointed conservator. Similarly, your health care power of attorney allows your designated representative to make medical and mental health care decisions in the event of your mental incapacity without the necessity of a court appointed guardian.
Your will provides instructions for the distribution of your property and other stuff through the probate court process when you are gone. A trust is kind of like a combination of a financial power of attorney and a will, but without the probate court involvement. Your designated agent can manage your trust property for you during your lifetime and then for your loved ones after you are gone.
And once your estate plan is completed, do not think that you are done. These are not static or permanent documents. As your life changes, so should your estate plan. At a minimum, you should have your estate plan reviewed each year and updated if necessary to make sure that it continues to meet your needs.
So why would you have a reason to do any type of updating? Well firstly, there are changes in your personal and family life such as births, deaths, marriages and divorces that can affect how you leave your stuff to your family. Illness, injury or disability of a family member can also determine how assets would be held or distributed.
There can also be changes in your financial situation. If you receive a sizeable sum of money such as an inheritance, personal injury award or lottery winnings, this can affect the type of planning that you do. The type estate plan that you set up during your working life or when the kids are younger is sometimes quite different than the estate plan you prepare after you are retired or when the kids are grown up.
Changes in the law can also affect your estate plan. The politicians in Washington D.C. and in Lansing never fail to pass some sort of law changes every year that could affect the way that you do your estate plan. There are regular major and minor tax and non-tax law changes that could trigger updates to your estate plan.
Lastly, another reason to update your plan is changes in your estate planning attorney’s experience. Although not required to do so, many attorneys regularly attend continuing professional education programs. As a result, they should always be improving.
Some people may say “I’m gone. I don’t care what happens and I’ll let my loved ones fend for themselves.” However, most people do care about their loved ones, want to make it easier for them and also wish to minimize disputes and minimize costs that may arise in the event of a disability or death. You can too by doing proper planning today.
By: Matthew M. Wallace, CPA, JD
Published edited on November 20, 2016 in The Times Herald newspaper, Port Huron, Michigan as: Minimizing conflicts after you are gone