Updated: May 3, 2013 12:14PM
Originally published: December 18, 2003
Still searching for that perfect present for the entire family? Here’s the solution: a present that will be appreciated by every generation of your family for years to come. It’s the gift of peace of mind, the knowledge that your family will never be torn apart by a fight over “things” from Mom and Dad’s estate.
While I frequently write about estate taxes and financial planning, a new book called The Family Fight: Planning to Avoid It by Les Kotzer and Barry Fish reminded me that while attorneys and financial planners deal with money issues, the real challenge to any family is to avoid a prolonged battle over things like Mom’s china or wedding ring or collection of plates.
Advises Kotzer, “As you sit around the holiday table in the next two weeks, look at your children laughing, sharing memories, and loving each other. Will that picture be the same in 10 years because of something you did or didn’t do about estate planning?”
Kotzer, an estate planning attorney, says his practice is about saving families, not estate taxes. He says the key to good planning is communication, not legal or tax skills. “Secrecy is not golden when it comes to estate planning,” he says, adding that this is not an issue just for the wealthy. Kotzer asks clients to bring in their family photo album because he wants them to realize those photos are the reason for doing planning in the first place.
“The family is the reason to do the planning,” he says. “If you don’t plan, you take the risk of leaving the seeds for a family disaster. The state will decide who inherits your things, and that division of assets may not be what’s really fair.”
You’ll need a specialist in the estate-planning field to create proper documents. But even before you take legal steps, Kotzer says, there are a few things to consider:
* Memories are as important as money. Don’t leave it to adult kids to divide personal items. These decisions can cause more fights than dividing money. Have an open discussion about personal items, then make a non-binding wish list, and attach it to your will or living trust to give your children some guidance.
* Recognize that equal is not necessarily fair. If one child has been a caregiver, and your intention is to give the caregiver a larger share of the assets, tell your children now. It will make it easier on all concerned if you tell them in advance that the care-giving child will inherit the family home, for example.
* The executor or successor trustee decision is critical. Don’t just appoint the eldest child. Discuss this issue with all your children, and explain your reasons. Perhaps one child might not want the responsibility. That applies to powers of attorney over health care, and your living will, which requires the person to authorize the termination of life support. Kotzer suggests that a family with several children might even designate a “majority rule” decision on these issues.
* Never assume your children will want to inherit something or are able to inherit it. For example, your child may not be qualified to make the payments on your condo. Or one child may not want to inherit and run a family business.
* Never assume your second spouse will protect the children of your first marriage. Always plan by having a prenuptial agreement with your second spouse, and make sure your assets are titled appropriately.
* Organization is critical. Lawyers are not private detectives. Make a list of all your accounts, assets, and the location of keys to safe deposit boxes. Otherwise some assets might never be found or distributed.
Kotzer says family fights happen no matter how close families seem in life. Only planning in advance can keep a family from being torn apart. Never assume goodwill between your children or that your kids will “work it out.” Usually it’s the lawyers who end up working it out, and the relationships between your children will never be the same.
Kotzer’s book is written for ordinary people, not for attorneys. You can get a copy in time for the holidays by calling (877) 439-3999. The cost is $19.95 including shipping. And if you mention reading this column, Kotzer will send you an extra free copy in the same package, so you’ll have one for yourself, and one to give to your children. That’s a gift you can’t refuse. And that’s the Savage Truth.
Terry Savage is a registered investment adviser and is on the board of the Chicago Mercantile Exchange and McDonald’s Corp.