Estate Plan Design: 5 Key Questions for Clients

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Clients often walk in the door with a relatively predetermined idea about how they’d like to leave assets to their children. But for advisors, it is important to help clients take into account the issues they might not have considered on their own, or may not have considered important when developing their plan.

As an attorney and estate planning specialist, I often find that the situation might not be as straightforward as clients initially think.

Here are five important factors to consider when helping your clients design an inheritance:

1. How Much is Too Much?

Clients should be encouraged to consider the appropriate amount of assets to leave to their children. Is there a point when an inheritance reaches an amount that can be detrimental to a child’s ambition and productivity?

One of my modestly wealthy, self-made clients, for example, has decided to leave $250,000 to each of his four children; the remainder of his $3 million estate will go to charity. “It’s more than I had when I started out,” was his rationale.

2. How Old Should Heirs Be?

Even people with a few million dollars of assets may not necessarily consider themselves wealthy -- and as a result, may not see the need for what they consider to be a complicated estate plan that delays the outright receipt of an inheritance by using trusts.

For me, a critical issue is the age the heirs will be when they receive their inheritance. I routinely perform calculations to help clients understand the size of the inheritance that children may be receiving at certain ages, as well as the ramifications of unfettered access to that amount.

Our society is replete with examples of the detrimental effects of young people having too much money at too young an age. Delaying control of an inheritance by the use of a trust can be a relatively straightforward way to address this concern.

3. Are There Any ‘Issues’?

For reasons ranging from embarrassment to denial, clients may have trouble coming to terms with a child’s drug or alcohol addiction or mental illness. However, it is extremely important to take these issues into account in the estate plan.

Unrestricted access in these circumstances can fuel an existing problem or cause ineligibility for an important government assistance program.  Even though it can be a difficult conversation, be sure to always ask clients whether there are any concerns about a child’s ability to handle finances.

4. Should All Children be Treated the Same?

Even if none of the above issues are present, parents overwhelmingly want to treat their children exactly the same in an estate plan. If one child is to receive assets outright or at a certain age, then they believe all children should receive those under the same terms.

But often there are special circumstances that may call for a departure from total equality. What if one child has married a venture capitalist? Or is a movie producer? Or is active in the family business? What happens if one has creditor issues and is about to declare bankruptcy?

Perhaps one child’s inheritance should be smaller than the others, or held in trust, while another child’s is given outright. A customized estate plan can take all of this into account.

5. Who is the Best Person for the Job?

Wills and trusts usually have fiduciaries, known as executors (or personal representatives) and trustees, who are in charge. Many parents may want to simply name the oldest child to perform these jobs, without consideration of whether he or she has the requisite skills.

Of course, the best course of action is to name the best person for the job, rather than naming a child out of concern that he or she may be offended if someone else is given the job.

Additionally, clients should be wary of leaving one sibling in charge of another sibling’s money. Once parents are deceased, decades-old resentments can resurface and make the arrangement quite challenging for all parties. Naming the wrong person for the job can, at a minimum, increase costs down the road; at worst, it could result in an estate or trust being administered incorrectly, or perhaps even in litigation.

Designing an inheritance requires the consideration of a multitude of factors. However, reviewing these factors with clients will result in the best possible estate plan for each client’s particular facts and circumstances.

Estate planning attorney Tracy Craig is partner at Mirick O'Connell and chairwoman of the firm’s trusts and estates group.

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Practice management Client strategies Financial planning Estate planning