Brady, Nordgren,
Morton &
Malone, PLLC
2301 Sugar Bush Rd, Suite 450
Raleigh, NC 27612
Toll Free: 1-866-573-8832
Phone: 919-782-3500
Fax: 919-573-1430
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Talking With Your Adult Children About Estate Planning
by Brady, Nordgren, Morton & Malone, PLLC
I am often surprised with a client's reluctance to talk about money and death
or incompetence with their children, perhaps because my family has always been
very open about these issues. After all, everyone is going to die sooner or
later and children are the most likely ones left to deal with the situation
afterwards. Nonetheless, many clients prefer to keep their business and their
plans to themselves. This wish should always be honored, particularly in light
of the recent Supreme Court Vince Foster decision that clarifies that the
attorney-client privilege extends beyond death. However, I will generally
counsel my clients as follows:
Share Basic Information. Even though you may not want to share your net worth
with your children, let them know that you have completed your estate plan and
give them a general outline of what your plan is. This can be as simple as:
"We have just written our wills and I think you should know that your share
comes only after both of us are gone. We considered the tax issues and have
tried our best to reduce the taxes as much as possible but our own security is
most important." This will let your children know that you are on top of
things, give them a basic description of your intentions and provide them with
some peace of mind.
Inventory Personal Items. Talk to your family about the hardest assets to
divide, your furniture, jewelry, silver and special family items. Make a list
of these "things" and share it. Try to assign items by making a memorandum
directing the disposition of the most important of these items. It goes
without saying that there is much emotion following a death. Since one of the
first things that happens is the division of personal property, the smoother
this goes the better and the rest of the process should be much easier.
Although the personal property may be relatively small in value, these
"things" can be the most important to your family.
Provide a Working Outline. Children do not need to know everything, but they
should at least know of the existence of assets or liabilities without the
detail. Compile a list of your bank accounts, brokerage accounts, retirement
accounts and IRA's, annuities, leases or contracts, real property descriptions
and insurance policies, together with a summary of long term obligations such
as mortgages. The listing should include the account numbers and the name of
the broker or agent that you work with. If you have designated a beneficiary
or joint owner of the asset, that information should also be included. If you
own life insurance policies, you should indicate the location of the original
policy. Review and update the outline often. Either give the outline to your
children or tell them where it can be found. Make sure that the location is
accessible to them. A safe deposit box is not the best place to keep this
outline unless you are certain that someone is listed as a co-owner or deputy
on the box. If you have a safe deposit box or personal security box, share the
location of the box and the key or the combination. It is most distressing to
find a safe deposit box key and not know what it fits.
Designate Your Helpers. Estate planning not only involves a preparation for
the transfer of assets following your death but also includes establishing a
procedure for managing your affairs in the event of your incapacity. Your
executor manages your property after your death, files your final income tax
returns, pays your debts and funeral expense, files your estate and
inheritance tax returns and distributes your assets to the beneficiaries named
in your will in the manner you describe. If you have not signed a valid will,
then an administrator is selected by the clerk of court from a statutory list
of people who may have an interest in your estate to perform these duties and
distribute your property to your intestate heirs.
In the event of your incompetence, your property is managed by an individual
appointed by you as attorney-in-fact. If you have not appointed an
attorney-in-fact, a guardian is appointed for you by the court. If you execute
a power of attorney, it is not necessary to limit the appointment to one
person as two or more may serve together and you may name substitutes to serve
in the absence of the primary attorney-in-fact. The written power of attorney
document provides the extent of the authority given to your attorney-in-fact.
The authority may be very broad and sweeping or limited to a specific
transaction or account. The power of attorney may also contain conditions or
limitations under which it may be used. It is common to find that a power of
attorney be effective only after your attending physician and one other
physician determine that you are unable to handle your affairs. You may direct
that the power of attorney be effective only after you have been declared
incompetent, which will require a court proceeding to make that determination.
In most all cases your power of attorney should contain specific language that
it is a "durable power of attorney" and that it remain in effect after your
incapacity. North Carolina and most other states provide that the power of
attorney terminates at incapacity unless it specifically provides otherwise.
It should also be noted that a person acting as attorney-in-fact in North
Carolina is not authorized to make gifts of your property unless that
authority is specifically granted in the document. Even though the attorney in
fact is given authority to "deal with your property in any manner he or she
deems appropriate" that is not sufficient to allow the attorney-in-fact to
make gifts of your property since that would be inconsistent with the
attorney-in-fact's responsibility to act only for your benefit. Gifting
authority should be considered when executing a power of attorney and
limitations on the gifting authority should be discussed with your attorney.
Often the gifting authority is limited to a specific annual amount and gifts
may be made only to a limited class of people such as children and
grandchildren.
North Carolina also has a statutory provision that allows you to designate a
health care agent by execution of a health care power of attorney. This agent
is given the authority to make health care decisions for you if you are unable
to make them for yourself. The agent may hire or fire physicians, consent to
medical procedures, authorize the disconnection of life support if appropriate
and provide for organ donation and the disposition of your remains.
If you have minor children, North Carolina also allows you to appoint a health
care agent for a minor child in you absence. This is desirable if you will be
away from you child for a vacation, or if you child is traveling without you.
Once you have designated you helpers, share the names of these appointments
with your family. Better yet, give you children and other close family members
copies of the powers of attorney and let them know what you have done.
Update Documents. There is no real need to share the terms of your will with
your children but they should know that it exists, where it is located and
that it is up to date. However, if you have executed a living will, which is
an expression of your wishes concerning life support and treatment in the
event of a terminal illness, copies should be provided to all family members
who would be involved with your care. If you have executed trusts to provide
for the disposition of your property, copies or duplicate originals should be
provided to each of the named trustees and successor trustees and each should
know where to locate the original. Copies of amendments should also be
provided as made.
Consider Full Disclosure. If you have made a decision not to share the
particulars of your estate and the management and disposition of your estate
with your children, that decision is yours alone and should be honored.
However, be aware of the fact that surprises create uncertainty, and tension
perhaps at a time when your family is very emotional and needs to feel most
secure. Try to avoid those surprises and the possible conflicts. Start with
your personal property. Tell your family now that you love them, what you have
planned for them and who is going to be in charge. Avoid the conflict and
tension while you can. |
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