Estate planning challenges include mastering financial markets, tax laws and other arcane technicalities. But when deciding how to leave your assets often what’s the very trickiest aspect is the psychological issues. These can range from an aversion or thinking about death to complicated feelings about children, in-laws and other relatives.
I have had several clients who struggled with deciding how to allocate their assets after they are gone. One all-too-common issue is an emotional or moral paralysis. A married couple I advise knows, for example, understands the need for estate planning and has done most of the necessary work.
But they just won’t sign.
They have paid to have their lawyer draft the documents, but even when these trust papers are complete and ready for their signatures, they can’t get to the dotted line.
I know they have been estranged from their children. We have been working on this long enough that they have managed to reconcile with some of them.
Still, they just won’t sign.
A third party that brought me into this situation is working with me, so unfortunately, I’m not close enough to the couple to figure out precisely the problem. Even though we have been working on this for almost five years, it’s at a stand-still. Rational considerations tell them their high net worth and business put far more at stake than just family matters.
But the less-rational issues often overshadow the nuts-and-bolts, dollars-and-cents calculations. This is one reason I’m convinced financial advisers can best serve our clients when we know them, not just as a portfolio of assets, but as people with families, histories, hopes, dreams and worries.
Another of my clients has four children, but only two grandchildren. She couldn’t choose to whom, beyond the children, she should leave her assets. We finally left it at letting those four children make those decisions individually in their own wills. This wasn’t ideal, but the client couldn’t bring herself to decide. After many discussions, letting the problem flow downstream to the next generation was the best we could come up with.
This client didn’t want to give to charity or name either of the grandchildren. Being in her 80s, she figured she had a slim likelihood of seeing anything happen. Well, guess what? Her grandson and a son both died, within months of each other. The trust she had set up for the son ended up going to the granddaughter, which she wasn’t happy about. All the conversations we’d had about that very possibility had been totally forgotten. Despite my best efforts up front, it took me a while to get back into her good graces.
A third client never married and had no children, and really struggled with a decision on to whom he should leave his significant wealth. He did want to make specific bequests to a few friends - and to give the lion’s share to charities - but had a hard time deciding how much each should get.
After talking… and talking… and talking, I finally got to the bottom of it. His deep-seated fear was that somehow, if he made a will, he would die. He never did get over the magical thinking that, by not making a will, he could live indefinitely. For many years, I managed his funds but he never did make a will. Finally, after he became ill, some distant relatives turned up and “helped” him make a will contrary to everything he had ever told me. Within weeks, he was dead.
Despite his uncertainty about what to do, he was always crystal clear about what he didn’t want to happen. Yet his irrational fears meant he not only allowed but actually enabled all those things he didn’t want to happen.
Few issues are more challenging than when clients feel they are favoring one child over others. Maybe one can manage money better than another, or a child is married to someone the parents don’t like or trust. Perhaps the child has problems like addiction.
Because the emotional challenges make it hard to think straight about such things, the best approach can be to work with an independent trustee or executor like Old North State Trust.
I don’t mean to scare people with horror stories. But I think these examples show we have the experience to cope dispassionately, yet still empathetically, with these types of challenges. As disinterested third parties, we can deal with the heirs without drama when it’s time to distribute the funds.
A final example: a current client is a twenty-something who has never worked and has no intention of ever working. Yet he wants to live lavishly. His father, who recently died, was a well-respected doctor who worked hard all his life. The son believes he’s entitled to live the same lifestyle his dad earned. I am now the one to tell him this isn’t going to happen.
No question, these conversations have psychological ramifications, especially in a case like this, where substance abuse mixes with feelings of entitlement. It’s necessary to approach these discussions in a way that won’t send the heir into a spiral, but will let them clearly understand how things are going to work from now on.
Old North State Trust, LLC (ONST) periodically produces publications as a service to clients and friends. The information contained in these publications is intended to provide general information about issues related to trust, investment and estate related topics. Readers should be aware that the facts may vary depending upon individual circumstances. The information contained in these publications is intended solely for informational purposes, is proprietary to ONST and is not guaranteed to be accurate, complete or timely.
Susan Willett is the director of trust services and oversees all aspects of trust administration for Old North State Trust, LLC. Old North State Trust, a North Carolina chartered trust company, provides: asset management services; income, estate and trust tax consulting; retirement planning and administration; and trustee and estate services to both individuals and businesses. Old North State Trust professionals have many years of experience and for over a decade have assisted clients in identifying and reaching their financial goals. For more information, visit www.oldnorthstatetrust.com or call 910-399-5470.
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