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Q&A: Consider Making an Estate Check-Up
a Multi-Generational Family Matter
Questionable estate planning has gotten some recent attention
with the sudden death of actor Heath Ledger. The 27-year-old
actor died suddenly this year with an older will that provided
only for his parents and other immediate family — he never
revised those documents to accommodate his young daughter or the
child's mother.
Though Ledger's parents told the media that the daughter and
mother would be fairly provided for, that's not the same thing
as a solid estate plan that leaves nothing to chance. And if
Ledger's death offers a lesson, estate planning should be done
at the earliest point in your life that you start to gather
assets and responsibility for others.
In estate matters, it's a good rule of thumb to review your
plans every three years or whenever there's a material change in
your family's lifestyle — a marriage, a divorce, a remarriage,
the birth of children, the loss of an immediate family member or
a major rise or fall in assets. Those are the biggies.
For individuals and couples with elderly parents and/or young
kids starting out on their own, it might be smart to do a
multi-generational estate checkup at the same time. Why? Because
in families with significant assets or other pressing financial
issues involving businesses or dependents, each generation's
wishes for the dispersal of shared or personal assets should be
documented legally and shared with all the relevant parties.
Q: What are some of the multigenerational issues in estate
planning?
A: In some families, this may mean the future of a
multigenerational family business, perhaps one of the most
complex estate issues any family will face. In others, the
assets may consist mainly of cash, property and other
investments, but similar problems can occur when all the parties
aren't on the same page about who will get what.
Q: What kind of problems can be prevented by
multigenerational estate planning?
A: It's important to realize that estate planning
isn't just about splitting up money — it's also about disaster
planning. If a family hasn't planned for business succession,
it's possible that other damaging secrets may emerge like
problems in the business or significant debt the family might be
liable for. Also, the sudden death or lengthy incapacitation of
the head of a family may turn chaotic without proper health care
or financial directives to manage the person's illness or the
money and business issues that follow. Multi-generational estate
planning may not be the easiest thing in the world to accomplish
given how families communicate — or don't communicate — about
money. But such dialogue might be the smartest thing any family
does together.
Q: How does an estate plan support a family legacy?
A: Proper discussion, documentation and review of a
family's assets — with the participation of the right legal, tax
and financial planning advisers — can keep more of those assets
in the family and working to the family's wishes. In the case of
a family business, generations of family members have built
careers there or might otherwise be depending on that income to
live. Yet a business might not even be at the heart of an issue —
families may also have foundations or other charitable
activities they've supported for years with a certain mission
that those in charge don't want changed. More than a few
families have imploded in ugly legal squabbles over these
situations and more. The results can be lengthy legal battles
with damaging tax consequences, a potentially unfair split of
assets among relatives or simple mismanagement of those assets
going forward.
Q: How can estate planning fail?
A: Bad estate planning can happen in the wealthiest of
families. It's not unheard of in the richest of families for the
matriarchs and patriarchs to die or become incapacitated without
proper wills or directives for their heirs. Every adult family
member — young or old — should commit to the creation of such
documents and as appropriate have them written in a way that
doesn't shipwreck the family fortune or mission, no matter how
big or small it is.
Q: What should be done about non-married family?
A: The Ledger situation is a good illustration of the
potential for estate problems when couples are not legally
married. That's why multi-generational planning should also
address estate and child custody arrangements for unmarried
heterosexual or gay couples who might or might not have done the
appropriate legal planning necessary to secure the estates of
their current or past partners and their heirs. At the very
least, all family members should understand the need for such
planning to avoid conflict later. As non-traditional families
become more common, families need to be open to that discussion.
May 2008 — This column is produced by the Financial
Planning Association, the membership organization for the
financial planning community, and is provided by Don McCarty of
Financial Decision Partners, a local member of the FPA.
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