By Stuart C. Bear and Ryan M. Prochaska
“I just want the children to get along,” say Mom and Dad in virtual unison. The ability of the children and grandchildren to get along is a direct result of the family’s functionality. Unfortunate as it may be, dysfunctionality is not an uncommon state of affairs for the estate planning lawyer. Certain steps can be taken, however, to manage family dynamics during the estate planning process and estate settlement process after death to ensure a higher likelihood of family harmony.
I. Estate Planning
Ideally, the fostering of family harmony begins during the estate planning process. This can be accomplished by selecting proper fiduciaries and conducting a family meeting after the planning is complete.
A. Fiduciary Selection
Selecting the proper fiduciary is a critical step towards promoting family harmony that is often overlooked. If you simply ask an individual who they wish to appoint as their fiduciaries, they would typically appoint their spouse, if married, followed by their children, who would serve either jointly or through an established hierarchy. Instead of brushing past this topic, one should ask probing questions and have a thoughtful conversation to determine whether an independent or corporate fiduciary would better promote family harmony. Probing questions include:
Do your children get along?
Do your children get along with each other’s spouses?
Do your children’s spouses get along?
Are your children able to work together?
Do your children communicate regularly?
How would each child react to his or her sibling administering the estate/trust?
How would each child react to his or her sibling receiving compensation for administering the estate/trust?
Are your children financially stable?
Have your children or their spouse committed any crimes or have an addiction problem?
Are your children in similar financial situations?
Is there a child you foresee demanding his or her inheritance immediately?
Do your children have time to fulfill fiduciary responsibilities?
Do your children have the financial and personal skills to administer the estate/trust?
Is there a family friend or business partner the children/beneficiaries respect?
Corporate fiduciaries are an excellent option when: (1) there is dysfunction among beneficiaries; (2) there is a blended family; (3) the estate is comprised of complex assets (e.g., closely held businesses); (4) assets are distributed in trust to be administered over a long period of time; and (5) there are significant tax considerations based upon the value of the estate. Corporate fiduciaries also have several advantages over individual fiduciaries:
1. Family harmony.
Most individuals would reduce the amount their family inherited if it increased the likelihood of family harmony. Yet these same individuals are often reluctant to nominate a corporate fiduciary because of fees and costs. Appointing a corporate fiduciary allows family members to continue to be family members and prevents dysfunction created because one family member is in a position of authority over another. Eliminating this possibility can go a long way in promoting family harmony.
2. Experience.
Corporate fiduciaries have experience dealing with difficult beneficiaries and family dysfunction. Corporate fiduciaries also have experience dealing with complex estates which may include ownership interests in corporate entities or rental real estate.
3. Expertise.
Corporate fiduciaries specialize in interpreting legal documents, preparing accountings, investing assets, and are familiar with requisite tax filings and their fiduciary duties. Whether intentional or unintentional, individual fiduciaries are more likely to breach their fiduciary duties because they are less familiar with interpreting legal documents and may not understand the intricacies of their fiduciary duties.
4. Objectivity.
Corporate fiduciaries are neutral, objective, and unbiased. An individual fiduciary is much more likely to breach his or her fiduciary duties because of a personal bias towards or against other beneficiaries or due to a conflict of interest.
B. Family Meeting.
Facilitating a meaningful discussion through a family meeting allows the client(s) to provide a narrative explaining their thoughts and decisions to the members of their family. Failing to provide a narrative often results in each family member creating their own. The goal of the family meeting is to avoid surprises and conflict between loved ones after death.
1. Who should attend?
An estate plan is most effective when everyone is on the same page. To get everyone on the same page, everyone needs to be in the same room. It is beneficial if all children and their spouses attend the family meeting to control the message.
2. What should be discussed?
The focus of the family meeting is “big picture” details of the estate plan. Sending an outline prior to the meeting allows everyone to prepare questions, which results in better dialogue and ultimately a more effective meeting. Without disclosing specific financial information, summarize the distribution of assets. Also discuss why specific individuals or a corporate fiduciary was chosen.
3. Where should the meeting take place?
Given the important subject matter of the discussion, conduct the family meeting in a formal setting.
4. When should the meeting take place?
Typically, the meeting occurs after the estate planning documents are signed. Occasionally, a client requests a meeting prior to execution to obtain input from their family members regarding fiduciary selection.
II. Estate Administration.
Contrary to how Hollywood portrays what follows a death, there is no such thing as a reading of the will. Instead, the goal of the initial estate settlement meeting after a death is to answer questions and provide a clear roadmap of the steps going forward. The tone set at this meeting can go a long way in making sure family members get along throughout the process. It is especially important when the decedent died intestate (without a will) or when a family meeting to discuss the estate plan did not take place.
1. Who should attend?
The surviving spouse, children, nominated representatives, and beneficiaries who attended the initial meeting should also attend the estate settlement meeting. It is also helpful for the decedent’s financial advisor and accountant to attend the meeting.
2. What should be discussed?
In such meetings it is apparent within the first five minutes if there is dysfunction within the family, and when discussions start getting heated and you hear the phrase, “it’s not about the money,” you know it is about the money. The best practice is to get all issues on the table from the beginning and address some key topics:
a. Attorney-client relationship.
First, it is important to identify to the family that the attorney represents the individual serving as fiduciary and not anyone else. If given permission, the attorney can include others on correspondence, but the attorney should not provide legal advice to anyone other than the fiduciary. If multiple individuals are serving as fiduciary, the attorney should obtain a conflict waiver. If the individual died intestate, it is important to discuss who has statutory priority to serve as fiduciary and to determine whether he or she wishes to serve. If multiple individuals have priority, determine whether they are able to work together or if they would be better off appointing a third party or corporate fiduciary.
b. Distribution of assets.
Summarize the terms of the will or trust or discuss the rules of intestate succession regarding the distribution of assets. The attorney should identify statutory rights afforded to the surviving spouse or children regardless of the terms of the will or trust.
c. Timeline.
Set realistic expectations of when the fiduciary will be appointed and when assets will be distributed. It is important to stress this is not a quick process and it may be necessary to file tax returns which will ultimately delay the final distribution.
d. Open discussion.
To promote family harmony, it is important that everyone have an opportunity to speak and voice their thoughts and opinions.
3. Where should the meeting take place?
Typically, the meeting takes place at the attorney’s office, but convenience for the family should be considered. Individuals can also participate via phone or video conference if they are unable to attend in person.
4. When should the meeting take place?
An individual’s loved ones occasionally call the day after death. Typically, nothing needs to be done immediately regardless of whether the decedent died testate or intestate. Often the meeting takes place within the first two weeks after death.
III. Conclusion.
Lack of communication and transparency, whether intentional or unintentional, breeds suspicion. Even with beneficiaries who seemingly get along, lack of communication can result in hard feelings and speculations that something is terribly wrong or that the person in charge is taking advantage of the situation. Having a family meeting after the estate plan is completed and after death provides much needed transparency, which can go a long way in promoting family harmony.
Wealth Strategies Journal 