Holiday Thoughts on Love and Money
When it comes to estate planning, what do prospective beneficiaries really want? If you answered “THE MONEY”, think again.
Consider Betsy, the youngest child of Sarah (now 80) and Henry (now deceased). (Names and identifying details have been changed to protect clients’ privacy.) Henry married Sarah after the death of his first wife, Faith. Sarah helped to raise Henry and Faith’s children: Andrew (now 63) and Alex (now 60 and married, with a 12 year old daughter, Clare). Sarah and Henry also had two children of their own, Brian (now 50) and Betsy (now 47).
Alex was 13 when Betsy was born. Alex loved having a little sister and doted on Betsy as she grew up, watching her gymnastics meets when he was home from college and driving her and her friends to the movies and the mall. He hosts family birthday dinners for her every year – and never puts more than 21 candles on the cake. Betsy in turn dotes on Alex’s daughter, Clare, attending her ballet recitals and soccer games, and taking her to plays and concerts.
A number of years ago, Sarah consulted her lawyer to develop an estate plan. When Henry died in 1990, he had left half of his assets to a trust for his children, and the balance – an investment portfolio, a New York apartment, and a home in the Connecticut suburbs – for Sarah. The trust investments had performed well and helped to augment all four children’s incomes. Since the older children were well-provided-for, Sarah’s lawyer suggested that she might wish to focus her own planning on her two children, Brian and Betsy. As part of the resulting plan, Sarah contributed the Connecticut house to a Qualified Personal Residence Trust (“QPRT”) for their benefit. By using a QPRT, Sarah was able to transfer the house to her children using very little of her lifetime gift tax exemption, while retaining the right to live in the house for a number of years.
Earlier this year, the Connecticut house was sold and Brian and Betsy each received a six-digit distribution from the QPRT. When Betsy learned that Andrew and Alex had not received the same benefit, she asked her mother to change her will to “even up” the distributions among all four of Henry’s children. After some very difficult conversations, Sarah did as Betsy asked.
With the changes to Sarah's will, Betsy will receive substantially less when her mother dies. Altruism? No – Betsy will tell you she acted primarily from self-interest: she feared that when Andrew and Alex learned that Sarah had favored Brian and Betsy in her planning, their vision of themselves as a family unit would be damaged, and their relationship with Betsy might become strained. Betsy and Brian are not close, and besides her mother, Andrew and Alex and their families are Betsy’s support system. To Betsy, the risk of losing Andrew, Alex and Clare worried her far more than inheriting less of her mother’s estate.
Estate planning is not just about dividing up the money and the assets. Financial allocations create non-financial consequences which deserve thoughtful consideration. Simple scenario planning – even just envisioning future Thanksgiving dinners – can help families and planners uncover the unexpected consequences of an estate plan for all family members. At Fisher Renkert LLC, we have extensive experience developing sophisticated, tax-efficient, cost-effective plans that also take future Thanksgiving dinners into consideration.
Consider Betsy, the youngest child of Sarah (now 80) and Henry (now deceased). (Names and identifying details have been changed to protect clients’ privacy.) Henry married Sarah after the death of his first wife, Faith. Sarah helped to raise Henry and Faith’s children: Andrew (now 63) and Alex (now 60 and married, with a 12 year old daughter, Clare). Sarah and Henry also had two children of their own, Brian (now 50) and Betsy (now 47).
Alex was 13 when Betsy was born. Alex loved having a little sister and doted on Betsy as she grew up, watching her gymnastics meets when he was home from college and driving her and her friends to the movies and the mall. He hosts family birthday dinners for her every year – and never puts more than 21 candles on the cake. Betsy in turn dotes on Alex’s daughter, Clare, attending her ballet recitals and soccer games, and taking her to plays and concerts.
A number of years ago, Sarah consulted her lawyer to develop an estate plan. When Henry died in 1990, he had left half of his assets to a trust for his children, and the balance – an investment portfolio, a New York apartment, and a home in the Connecticut suburbs – for Sarah. The trust investments had performed well and helped to augment all four children’s incomes. Since the older children were well-provided-for, Sarah’s lawyer suggested that she might wish to focus her own planning on her two children, Brian and Betsy. As part of the resulting plan, Sarah contributed the Connecticut house to a Qualified Personal Residence Trust (“QPRT”) for their benefit. By using a QPRT, Sarah was able to transfer the house to her children using very little of her lifetime gift tax exemption, while retaining the right to live in the house for a number of years.
Earlier this year, the Connecticut house was sold and Brian and Betsy each received a six-digit distribution from the QPRT. When Betsy learned that Andrew and Alex had not received the same benefit, she asked her mother to change her will to “even up” the distributions among all four of Henry’s children. After some very difficult conversations, Sarah did as Betsy asked.
With the changes to Sarah's will, Betsy will receive substantially less when her mother dies. Altruism? No – Betsy will tell you she acted primarily from self-interest: she feared that when Andrew and Alex learned that Sarah had favored Brian and Betsy in her planning, their vision of themselves as a family unit would be damaged, and their relationship with Betsy might become strained. Betsy and Brian are not close, and besides her mother, Andrew and Alex and their families are Betsy’s support system. To Betsy, the risk of losing Andrew, Alex and Clare worried her far more than inheriting less of her mother’s estate.
Estate planning is not just about dividing up the money and the assets. Financial allocations create non-financial consequences which deserve thoughtful consideration. Simple scenario planning – even just envisioning future Thanksgiving dinners – can help families and planners uncover the unexpected consequences of an estate plan for all family members. At Fisher Renkert LLC, we have extensive experience developing sophisticated, tax-efficient, cost-effective plans that also take future Thanksgiving dinners into consideration.
posted by Amelia Renkert-Thomas at
10:38 AM
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