What role do relationships play in estate planning?

By Attorney Truman Scarborough

Estate planning evolves around two subjects: assets and relationships. Generally, it is the relationships that present the greatest challenges. While it is important to have our financial affairs in order, life presents demands beyond “balancing the checkbook”. An estate plan must respond to many complex relationships that may be in conflict with each other.

With most legal issues there is a logical analysis of factual information. But, the subjective nature of relationships makes estate planning more involved. Estate plans are developed from feelings and desires of the heart as well as rational thoughts of the mind. Other areas of law may focus on specific problems, but with estate planning, there is a holistic approach. A contract for the purchase of a home or a lawsuit addresses particular issues, but in estate planning, we are concerned with all the people, possessions, and values that define and bring meaning to our lives. Because each of us is unique in unseen ways, two apparently similar people may seek significantly different estate plans. Each plan is personal in its own special way.

In estate planning, the primary issue is: Who should inherit? When the first spouse dies, normally everything goes to the surviving spouse, unless there are children from prior marriages. When there are children the question will be: When both parents die, should the children be treated equally? What if the parents provided a less fortunate child with significant financial assistance over the years? Should that child receive a lesser share at the time of death to equalize the distributions? It may also seem appropriate that the less fortunate child be given a greater share at the time of death because his/her needs will continue in the future. What if one child is the parent’s primary care giver? Should the parent leave more to the child who has sacrificed to care for the parent? When should a child be completely excluded as a beneficiary? Perhaps the parents are estranged from a child or one child may not need the funds because he/she is extremely wealthy. When there are no children, there are a number of potential beneficiaries including organizations, friends, siblings, nieces and nephews.

When beneficiaries have problems like substance abuse or just cannot handle money responsibly, it may not be wise to directly distribute their inheritance to them. If a beneficiary has creditor or marital problems the inheritance could be lost in a lawsuit or divorce. For protection, should the gift be distributed to a special trust for the beneficiary? This trust can contain spendthrift provisions to prevent creditors from reaching the trust assets. Should the trustee be also given complete discretion on when and how much is distributed to the beneficiary for added protection?

The next major issue in estate planning is: Who should settle the estate? The child who has the time and is most capable would appear to be the logical choice. But, it can be more than a business matter. Could sibling conflicts make it difficult for a child to administer the estate? Is the solution to have a non-relative or a financial institution settle the estate? Alternatively, is there a need to name Co-Trustees or Co-Personal Representatives so a child would not feel excluded or so he/she can help the other child settle the estate?

 

For further information on estate planning, you may be interested in Attorney Truman Scarborough’s Booklet on Estate Planning in Florida. It is available without charge or obligation by calling (321) 267 – 4770. His office is located at 239 Harrison Street, Titusville, Florida.

 

 

 

 

 

 

 

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