The foundation of every well-designed estate plan is the careful selection and appointment of your “fiduciaries.” A fiduciary is any person who, legally speaking, has been given a special relationship of trust and confidence by another person. In the estate planning context, lawyers use many names for fiduciaries, such as executor, attorney-in-fact, successor trustee, guardian, conservator, etc. Practically speaking, our clients need to be concerned with only two basic types of fiduciaries: (1) the financial/legal fiduciary, and (2) the healthcare fiduciary. Your fiduciaries are sometimes called “successor decision-makers,” because you give them the legal authority to make financial, legal, personal and healthcare decisions for you if you become incapacitated and can’t make those decisions for yourself, or when you are deceased.
Who are the people you’ve appointed to be your successor decision-makers? Are you sure they have the time and expertise to serve? Do they have jobs and families that would make it very difficult for them to do a good job? When is it better to appoint professionals to help them with the technical details? Trust companies and licensed professionals, such as accountants or CLPFs (California Licensed Professional Fiduciaries), may be a more appropriate choice, given your particular circumstances. Additionally, if you have children who are not yet legal adults (under the age of 18), have you appointed legal guardians for them to ensure that they would be reared in the loving home that you would chose if you should become incapacitated or deceased?
As almost all of us have experienced, emotionally and legally complex issues surrounding the division and distribution of a decedent’s property can cause significant, long-lasting damage to family relationships. Do you have sentimental, one-of-a-kind heirlooms? Many serious family arguments result from the failure of a spouse or a parent to make simple but legally binding arrangements for the distribution of these particularly “emotional” items.
Do you own and operate a family business? More than two-thirds of all family businesses do not survive the transition from one generation into the next. Like it or not, any business (no matter how large or small) is what lawyers call a “complex asset” for planning purposes. It’s a great waste, but most businesses fail when an owner become incapacitated or deceased. This is usually because there is no real business succession plan. Which of your children would run your business? What arrangements have you made in your estate plan for the other children? Does your plan avoid and/or discourage disagreement among your heirs? Or will it act as a “wedge” between family members when you are no longer able to run the business?
Do you have a blended family with children from prior marriages? If you do, what are your plans concerning the treatment of your property upon your death? How will you provide for your surviving spouse and still fulfill your desire to leave an inheritance for your own children from a prior marriage? Also, does your estate plan protect the property that you are leaving to your surviving spouse, if your spouse remarries?
Bankruptcy, divorce, lawsuits or “affluenza” can destroy an inheritance virtually overnight. Does your estate plan protect your property both for your children and from your children?
Finally, does your estate plan account for the uncertainty regarding future estate taxes? And does your estate plan contain the necessary flexibility to achieve maximum “tax efficiency”? If not, like it or not, the IRS might also be one of your heirs.