When Is It Time to Service Your Estate Plan

If you own a car, then you know it requires regular servicing in order to perform well and be reliable. More than likely, your car came with a recommended schedule for service, based on how many miles it has been driven; after a certain number of miles, you need to change the oil, replace the brake pads, rotate the tires, and so on.
If you have a newer car, you probably have an irritating dash light that comes on when it's time for service and stays on until the mechanic resets it. Either way, whether you pay attention to the odometer or rely on that dash light, it's pretty easy to know when it's time to service your car. And if you keep driving it without servicing it, it's a sure bet your car will let you down.
Like your car, your estate plan needs "servicing" if it is going to perform the way you want when you need it. Your estate plan is a snapshot of you, your family, your assets and the tax laws in effect at the time it was created. All of these change over time, and so should your plan. It is unreasonable to expect the simple will written when you were a newlywed to be effective now that you have a growing family, or now that you are divorced from your spouse, or now that you are retired and have an ever-increasing swarm of grandchildren! Over the course of your lifetime, your estate plan will need check-ups, maintenance, tweaking, maybe even replacing.
So, how do you know when it's time to give your estate plan a check-up? Well, instead of having mileage checkpoints, your estate plan has event checkpoints. Generally, any change in your personal, family, financial or health situation, or a change in the tax laws, could prompt a change in your estate plan. Use the following list to guide you.
It's a good idea to review your estate plan every year. Set aside a specific time every year (your birthday, anniversary, family gathering) to review it.

Event Checkpoints for Your Estate Plan
You and Your Spouse, If Married

• You marry, divorce or separate
• Your or your spouse's health declines
• Your spouse dies
• Value of assets changes dramatically
• Change in business interests
• You buy real estate in another state

Your Family

• Birth or adoption
• Marriage or divorce
• Finances change
• Parent or relative becomes dependent on you
• Minor becomes adult
• Attitude toward you changes
• Health declines
• Family member dies

Other

• Federal or state tax laws change
• You plan to move to a different state
• Your successor trustee, guardian or administrator moves, becomes ill, changes mind
• You change your mind

The Best Estate Plan is No Match for Unprepared Heirs

 

Over the course of my career, I have encountered many families who were unprepared for the inevitable aging and loss of parents. These families experienced unexpected rivalries that threatened to cripple or destroy the very family unity and wealth that the parents and their estate planning attorney hoped to protect.

Well-drafted estate plan documents are designed to reflect clients’ instructions for passing their legacies to the right beneficiaries and providing for care of clients and their families. However, the best estate plan is no substitute for preparing heirs to deal with: changing care needs of aging parents and other family members, the complexities of estate and trust administration, and how to avoid elder financial abuse and prevent or resolve conflict among siblings.

Rivalries and conflicts may arise out of innumerable scenarios. For example, consider what can happen when one sibling steps into a fiduciary role while the parents are living and no longer able to manage their affairs unassisted or when a parent passes on. The new fiduciary and other siblings have no idea what Mom or Dad promised to other siblings. Misunderstanding and conflict can arise when monthly cash “gifts” from Dad to one sibling are suddenly cut off without notice or discussion because the trustee had no idea Dad was making these gifts; or a daughter claims Mom had always promised her all of the family jewelry plus an equal share in the balance of the estate. Without a process for communication and resolution, the next step is too often costly litigation and permanent breakdown of family unity.

Conflict is Inevitable. Anticipate it.
Decide on a Process for Resolving it.

There will be disagreements among family members. Whether disagreements are over relatively small or very significant issues, they are inevitable. What is not inevitable is that the family will know how to deal with disagreements and manage conflict. It’s how families prepare for and manage conflict that makes the difference.

Few parents want to think about conflicts among their children, but successful families engage in foundational processes that prepare heirs for parents’ inevitable aging and loss. Working with a neutral mediator in a confidential setting, these families engage in education and planning, anticipate and discuss possible conflicts, and institutionalize conflict resolution. These processes help families and their estate planning attorneys avoid or at least significantly reduce family discord, which in turn helps protect and preserve family unity and wealth. Estate planners have a unique opportunity to integrate estate planning mediation into the estate planning process and educate clients and their families about its benefits.

Prepare Heirs Using Confidential
Estate Planning Mediation

Estate planning family mediation is an appropriate estate planning foundation. This involves bringing all family members together with a mediator in a confidential setting. Mediation conducted by a neutral mediator serves a different purpose than family meetings conducted by the estate planning attorney. At least in California, mediation confidentiality is provided by statute, and mediation with a neutral mediator allows for confidential open discussion. Family meetings with the estate planning attorney are focused on reporting and are limited to topics that avoid breach of the attorney-client privilege. In mediation, the mediator is not competing with the estate planning attorney, attorney-client privilege is not at risk, and the result is a memorandum of understanding for the family and the estate planning attorney.

In this confidential setting, family members hear each other’s concerns and ideas, learn and discuss, e.g., what is required of a family fiduciary who will administer the trust/estate both during the lifetimes and after the deaths of the parents; who wants the position and who might best serve as fiduciary; how to avoid elder abuse and elder financial abuse; express thoughts about inheritance; allow all family members to participate in brainstorming ideas to meet their family needs. The approach is meant to provide a safe setting for family members to express concerns and ideas and work out their own solutions in light of the parents’ wishes. Involved family members are less likely to dispute what they had a hand in creating. Of course, the parents are free to plan their estates as they desire with the advice of their own estate planning attorney.

A signed memorandum of understanding is produced, reflecting the ideas and issues discussed, solutions proposed, agreements reached, and a statement whether or not, and to whom, the memorandum may be released. Confidentiality of this memorandum may be waived to be shared with the parents’ estate planning attorney, investment advisor, and other appropriate advisors, as a roadmap for estate and financial planning.

Participants may return to mediation to resolve new conflicts or matters that have changed since the initial mediation. Should a family member later raise issues with the attorney about the parents’ estate plan, the attorney will be able to refer the family member back to the memorandum of understanding in which they participated.

Both estate planners and their clients benefit from estate planning family mediation. Prepared heirs are less likely to create or sustain conflict within a family or against the estate planning attorney. Estate planners who reinforce estate planning family mediation with their clients reduce the chances for unresolved misunderstandings and disputes, and increase opportunities to protect family unity and wealth.

 

This article was originally published in estateplanning.com and can be seen here
http://www.estateplanning.com/How-to-Leave-Assets-to-Adult-Children/