Your Estate Plan: What Legacy Will You Leave?

Estate planning is primarily about how to pass your property on after your death to the recipients of your estate with a minimum of fuss, expense and taxes.

But it's about a lot more as well. Over the years practicing estate and elder law planning, I have seen many families torn asunder by poorly planned estates. (Of course, the cracks were already present.)

Whether and how you plan your estate can mean that your children will or will not be on speaking terms after you're gone. It can determine whether they will be shortchanged by Medicaid claims or estate taxes, or will be less financially pressed due to what you are able to leave them.

What Can Go Wrong?

There's the father who set up a trust for his life insurance, but never transferred the policy into the trust and who had a large IRA with no named beneficiary. More than half of his estate went unnecessarily to estate and income taxes.

There's the uncle who wanted to leave his estate to one niece. We know this from a series of statements found in his safe deposit box. But he never executed a will. As a result, another niece and nephew also shared in his estate.

Other cases involve family members fighting over who should be administrator of an estate or whether a jointly-held account should be shared equally among all the children. Without a clearly appointed executor, family members have been known to take property from the house of a deceased parent or other relative, creating animosity and family splits that can be permanent.

Finally, I've seen many instances of funds going to disabled beneficiaries receiving public benefits. Without a trust, this generosity can result in loss of Medicaid or Supplemental Security Income for the disabled heir, greatly reducing the benefit of the gift.

Positive Results!

These are negative legacies that can be avoided. But what about positive legacies?

The most important positive legacy is not to create strife for your heirs. Make sure your estate is set up so that it will pass to heirs with as little hassle and expense as possible.

You need not only to be fair in how you distribute your estate, but you also need to appear fair. The more open the process, the more likely your heirs will feel that it's been handled fairly.

The question of what's fair can be very difficult. Children have different needs. One may be closer to you or provide more care and assistance as you age. In most instances, however, the distribution of an estate becomes a proxy for love and even the distant or well-off child will feel hurt if the estate is not evenly divided.

It's generally better to take care of a child in need or compensate a child who provides extra care during your life. If you make unequal distributions among children, make sure everyone knows why.