1. Don't let perfection be the enemy of good. Don't stop yourself from protecting your family and assets with a living trust estate plan because you need more time to perfect it.
Not having an estate plan is bad. Having a good, but not perfect, estate plan is very good.
A perfect estate plan does not exist because, in your quest for perfection, you will never complete it.
2. Most fights in a trust administration are about worthless personal property. Very few fights are over real property or investment accounts. The fights break out over how to divide up the family photos, or the dear dead uncle's fruit bowl, or the deceased sister's dog.
Lately, we've seen so many petty and protracted quarrels between beneficiaries and the trustee over worthless items that we have begun advising our living trust estate planning clients on how to prevent them.
Here are a few suggestions on how to avoid fights over personal property:
- Designate in the living trust who will receive the valuable items or the items that the beneficiaries will fight over. And include a provision that the trustee has full authority to sell, donate, or dispose of everything else.
- Consider giving all the personal property to one person. After the trust administration is completed, that person can distribute the items if she wants to. However, because the trust administration is completed, she will be under no legal obligation to do so. She can choose who to give items to—she can give away items to the nice and kind beneficiaries. She can also sell the items, donate them, or dispose of them at her sole discretion.
- Bottom line: Don't include provisions in your living trust to give unhappy people the right to fight over your trinkets - or anything.
3. If you have children, you will most likely leave your estate to them. But if you don't have children, you have full discretion to choose your beneficiaries. Why choose selfish, ungrateful family members as beneficiaries? Instead, why not choose kind, appreciative, and generous people as your beneficiaries - friends, coworkers, charity? They will be thankful and make your trustee's job easier. And you will know your assets will make a positive impact.
4. Life is a game of compounding - in every aspect, not just investments.
5. One of the goals of estate planning is to anticipate problems and plan around them.
- Probate. If you own a home, your estate will go through probate. Probate is bad because it is expensive, takes about one year in court, and is a big hassle. Probate is not a surprise. It's the law. It's how most states, including California, administer estates. But you can avoid probate with a living trust.
- Fighting Children. If you know your children will fight over your estate, then set up your living trust and name your tough brother, not your children, as your successor trustee. Don't get them the opportunity to fight over your estate. Your brother, their uncle, will be in charge.
- No Children and Loser Relatives. As I've written before, if you don't have children, you are not obligated to leave your estate to distant relatives, especially if they are ungrateful losers. Pick your favorites and give the rest to loyal friends or to a charity.
- Help with Your Bills. If you are getting older and you need your children to help pay your bills, traditionally, the solution was a durable power of attorney, which authorizes your chosen agent to act on your behalf. Although banks by law must honor and accept durable powers of attorney, they don't like to. Often, our clients have to get us involved to make a phone call or write a letter to the bank to explain the law and, if needed, threaten them with damage claims for not accepting the durable power of attorney. If you know your children may need access to your bank account, then you could add your children to your account. Then you won't need your bank to approve your durable power of attorney.
- Trust Protector. When we help our clients design their living trust estate plan, we like them to name at least two successor trustees. But sometimes, they only have one family member or friend to fill the role, and even then, the person may be advanced in years. If they don't have a successor trustee when they pass away, the trust beneficiaries must petition the probate court to name a trustee. This can be complicated and expensive. In these cases, we suggest that our clients add a "trust protector" to their living trust and give the trust protector the authority to appoint a trustee if there is a vacancy. This avoids the expense of a court proceeding. The trust protector could be a friend or even our law firm. A trust protector is a position defined in the living trust that authorizes a third party to act in a limited scope on behalf of the trust. Adding a trust protector adds flexibility to your living trust.
- Pets. Who will care for your pets? If you have a friend or family member who is good with pets, have your estate planning attorney include instructions in your living trust to leave your pet with that person and include a cash distribution to show your thanks and to cover care costs. This will ensure your pet will be loved and cared for. You should certainly consider this for your dogs. Ok, fine - cats too.
6. Estate planning is not one-and-done. Your relationships, family dynamics, assets, and tax laws always change. Your estate plan must be reviewed regularly and updated as needed to keep up with those changes.
7. Book Recommendations
Troubled, by Rob Henderson. This is a memoir about the author's journey through the foster care system in Northern California. It wasn't easy. And his telling is poignant, engaging, and very descriptive of the problems facing children without capable parents. However, his story has a happy ending. He started life with a drug addict mother and a father he never knew. Then he was shuffled through many foster homes, and he was adopted into two different families. After high school, he served in the military and eventually realized he was a good student. He got into Yale, earned a degree, and followed that up with a PhD from Cambridge.
One of Henderson's main takeaways is that there is no privilege greater than being raised by a two-parent family. He says he would trade his status education in a heartbeat to have had a loving father and mother.
The Count of Monte Christo, by Alexandre Dumas. This is one of the greatest novels of all time. It's a long read, over one thousand pages, but it's worth it. It's fun. It reads as if Charles Dickens and Mario Puzo (Godfather) joined forces to write an adventure, romance, and revenge story set in post-Napoleonic France. The novel is rife with sea voyages, betrayals, a treasure hunt, bandits, corrupt judges, murder, vengeance, and of course - estate planning.
Dumas ends his masterpiece with this famous line:
"Has the count not just told us that all human wisdom was contained in these two words—wait and hope."