Law News and Tips
Fred L. Vilbig © 2017
I often say that a good estate plan is where five years after mom and dad are gone, the kids still celebrate holidays together. When it does happen, it’s a joy to see, but I’m afraid it’s pretty rare.
Some of the time the divisions are not immediately apparent. I remember one family early in my career. There were four kids, and only one of them was married. Two of the sisters lived together, and a brother lived nearby. The married sister lived in the area as well. They came in together to plan their estates, and all seemed fairly happy.
Then one of the sisters died. She had named a niece as the personal representative. They all came in to talk about probating the estate. The senior partner of our firm started the meeting with a pretty stern warning that if any disputes came up, everyone except the niece would have to leave the conference room. I guess he had a sense that something was up.
Within 10 minutes (maybe even five), they were at each other’s throats. I don’t even remember what the issue was. I was stunned. The partner was yelling for everyone but the niece to leave. That was a rude introduction to what money can do to the family dynamic.
Other times the conflict is well-known. I recently met with a woman whose sister was refusing to cooperate and was using trust assets for her own benefit. The mother had named both daughters as co-trustees, so the use of trust assets for personal benefit was clearly a breach of fiduciary duty. My client was not happy and wanted to get her sister out. The trust was basically paralyzed.
There was another problem. Although mom had created a trust, for some reason she did not transfer her bank accounts into the trust. She added pay-on-death (“POD”) clauses on all of them naming both of the daughters as the beneficiaries of the accounts. My client had gone to the bank to cash out her share of the accounts, but the bank refused. It turns out that if there are multiple beneficiaries on a POD account, no one can get anything out of the accounts unless all the POD beneficiaries are there. The banks don’t want to get in the middle of any conflicts.
Normally it’s easy to get people together when they’re getting money. In the case of the sisters, the one sister refused to show up. Apparently she would rather not have the money if it meant that her sister would get some money. Things don’t always have to make sense. Litigation may follow.
So what are parents supposed to do? I typically discourage multiple trustees. I like one person to be in charge. If there are multiple trustees, I like having an odd number so that a tie vote is unlikely. If the sibling conflict is obvious to the parents, then a relative, friend, or corporate trustee may be in order. It just depends.
In any event, parents need to honestly assess their children’s relations. Otherwise, the kids might end up with a paralyzed estate.
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