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Katya Sverdlov Blog

Tuesday, April 28, 2015

Taking family dynamics into consideration, or thinking of expected family issues when planning!

When drafting a testamentary or an estate plan, one always should always consider family dynamics in order to preserve family relationships.

Parents may have several concerns about their children: entitlements, sibling rivalry, children’s spouses, safeguard from malpractice actions, and safeguard from drug abuse.

Entitlements: for parents of younger or minor children, the parents may not know what the children are going to be like when they grow up. It is up to the parents to build in incentives into their estate plan, so that the child graduates college, gets a career, waits until a certain age to get married, etc. One must be careful of entitlements that are against ‘public policy’ as those may be found void by the courts. Explicitly racist bequests (i.e. no money if she marries a Chinese) will not be upheld.

Sibling rivalry: most parents should be concerned about sibling rivalry. Once the parent is gone, the glue that held the family together may be gone as well.  A typical parent usually names the older child as the trustee or an executor of the trust, despite the feeling of ill-will that this nomination may cause. One method to avoid the rivalry may be to name a third party executor or a trustee.  This way the children may actually unite against a common enemy, who is not distributing the assets fast enough (in their opinion).

If the parent has left different provisions to children, it is imperative that the parent have a conversation with the children about his plan prior to his own demise. It is unfair to all siblings involved, if the disinherited child will find out about his disinheritance from the other siblings. In addition to feelings of resentment against the parent, the disinherited child may also suspect the other siblings in coercing the parent into doing what was done, and may start litigating.

Spouses of the Children:  parents usually want to leave bequests to their children and grandchildren, but not necessarily to the spouses of their children. Bequests to spouses may either be specifically avoided, or restricted, such that if the spouse divorces the child, the bequest will terminate.

Protection from malpractice action: A lot of the trusts that are now set up are done to protect the beneficiaries from creditor actions. The trust can be structured in a way that permits the beneficiary to enjoy the assets but not to technically own them.

Protection from drug abuse: if the parent is concerned about a child who has a drug, alcohol or gambling problem, naming a third party trustee is almost a necessity. The trust may also permit a trustee to engage in periodic testing of the child, and to stop making any payments to the child, in full discretion of the trustee. The goal is to provide for the child’s basic needs (shelter, food, clothing), and potential rehabilitation, without supporting the problem.

Disclaimer: This article only offers general information.  Each situation is unique. It is always helpful to talk to a specialized attorney, to figure out your various options and ramifications of actions.  As every case has subtle differences, please do not use this article for legal advice. Only a signed engagement letter will create an attorney-client relationship.


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