Circumstances can change dramatically

By Jim Ward

James Ward

Part of my work as an estate planner is to help people think through their plan for the distribution of their assets after their death. Another part of my work is to convince people that some of their long-held plans for distribution may not work out as they envision.

Imagine a 75-year-old widow with four children and six grandchildren. She says she just wants everything to go to her oldest daughter, and the daughter knows how the mother wants everything distributed to the children and grandchildren, and the oldest daughter will take care of getting it done according to plan. Good plan?

Now, imagine the oldest daughter has a massive stroke, or traumatic brain injury, but she doesn’t die — and then the mother dies. Since the daughter was still alive at the mother’s death, the oldest daughter, despite being incapacitated, inherits everything.

Next, imagine the incapacitated daughter can no longer work, and requires a lot of medical care and expenses, and she also has two children in college. What does the son-in-law do? His wife is incapacitated, the family income has dropped, and expenses are up. Then, his wife passes away.

The son-in-law is sitting on the entire amount left after his mother-in-law’s death, and his own family has been decimated.

Do you think, in his state of loss, grief, and financial need, that he’ll “spread the wealth” as his mother-in-law wanted? Maybe. Maybe not. Circumstances changed dramatically.

Think about it. Stranger things have happened. Since we never know the order of death, and we never know who might become incapacitated right when you want them to be making decisions for you, make the right plan that doesn’t leave so much undefined. Clarity of thought can lead to better planning. I’m not here to throw cold water on everyone’s plans, but part of my responsibility is to point out where plans could go wrong. I do this because I have seen hundreds of plans that have gone wrong after death or incapacitation, and I need to point out possible problems in the plans that people have devised in their minds before they come to see me.

In most cases, the client will realize the plan has problems and start to talk through different options with me.  Ultimately, I tell the client it’s their money and their family, but let’s be careful. Many people have a hard time accepting the plan might not be perfect, and they need to go back home and think it through, or even return with that oldest daughter to brainstorm together with me.

One of the most important considerations in a living trust is who will make decisions for you if you become incapacitated? Who will liquidate your assets and spend your money for your care and well-being? That’s no minor consideration. Also, who gets what after you die, and will it make a change in their life?

One woman wanted to give gifts of $50,000 to $75,000 to several of her closest friends, but I had to point out that, although they were her friends, they were already financially doing well in their 80s, and those gifts would mean about $400,000 or $500,000 less for her 50-something-year-old son who had certain disabilities and had never been able to work. Think about it. Where should your money go after you go? Maybe your disabled son needs it more than your well-off friends.