I LOVE YOU ALL THE WAY TO THE MOON AND BACK

MISTAKE # 30

Making the assumption that after your death your beneficiaries will understand why you have done what you did

IT SURE IS A MISTAKE to think other people can read our minds. They can’t—and their skill at it doesn’t improve after we are dead. Estate and trust professionals often see estate situations where the deceased person’s family, friends or colleagues simply can’t understand why they were treated as they were (or weren’t) in the will. In our conversations with these professionals, we heard time and again about attempts people had made to treat their beneficiaries fairly, instead creating irreparable animosity after the death when the wills’ contents were revealed.

In some cases of course, people intend to create conflict. Leona Helmsley, dubbed the “Queen of Mean” by employees in her hotel empire, explicitly excluded two grandchildren in her will “for reasons which are known to them.” Okay then! No doubt Helmsley, who appeared to thrive on conflict, would have possessed a sense of the outrage this exclusion would cause.

But using a will as a sword is more for the movies and romance fiction than for real life in Canada. Real life in Canada involves most people trying their best to be fair. Unfortunately, attempts to use wills as a way to “even things up” can backfire if the strategies don’t line up with the beneficiaries’ individual recollections of history.

Most of the situations we describe involve families and often families don’t talk out loud about what’s fair and what isn’t. So it may be hard for you to even envision some of the challenging situations that can occur in the pursuit of parents trying to be fair to everyone. Some common examples to get you thinking are:

• An adult child’s long-standing residency with Mom may be viewed by that child as giving up her life for Mom’s well-being but seen as freeloading by her siblings after the child receives Mom’s house in the will.

• Similar but slightly different is the situation where one child lives nearby the parents and is the primary caregiver and go-to person. Giving that child a larger share in the will may be an attempt by the parents to compensate him or her for carrying out this emotionally, physically and (sometimes) financially draining role, but the children who live far away may not see it that way at all.

• A child who never had children of his own may receive a larger share to compensate for the money spent by his late parents on his siblings’ children (the deceased’s grandchildren) over the years—but once again, this may not be seen as fair by the children who get the smaller share in the will. They may have forgotten all about the summer camps, trips to Europe and other expenses paid for their kids by Mom and Dad.

• The family business going to the one or two children who worked in it may feel like fair compensation to those children, but the rest of the children may wonder why their share of the estate is smaller unless the distribution of the remaining amount of the estate (after the family business is transferred) is shared disproportionately in their favour.

• A larger share to the child who is not as financially successful as his or her siblings may feel completely fair to a loving and worried parent but be viewed as nothing less than painfully hurtful to the children who receive less. They may view their financial success as something they have worked very hard to achieve and feel punished by receiving less than their sibling.

Here’s the really sticky part about these examples: each of the viewpoints we’ve suggested makes some sense—each and every one! In an emergency, you may drive well over the speed limit, but, face it, an observer will just think you are a maniac behind the wheel. Similarly people may very well have a different perspective than you do on their place in your will.

Dr. Margaret MacAdam is president of the Age Advantage and has a Ph.D. in health policy and aging. She has devoted her career to the challenging macro-issues of an aging population. But as hard to solve as those big-picture issues are, when we spoke with Dr. MacAdam, she expressed her frustration at the micro-issue of family conflict after Mom and Dad have died. Like many professionals in law, accounting and trust services, Dr. MacAdam commented on the apparent inability of so many families to avoid strife over a parent’s estate. She joined the chorus of estate professionals who mostly had one word for us on this issue: communicate!

It is unlikely that you want to get your loved ones all in a lather à la Queen of Mean. It is also really unlikely that beneficiaries who are all related to you in the same way, notably your children, will understand your reasoning if you decide to do some equal-is-not-fair type of planning. To carry out this type of planning, you need to:

• obtain advice as to whether your intentions are likely to be in line with provincial legislation about providing for children (a couple of provinces limit the ability of parents to treat their children unequally); and

• think about how to communicate what you are planning to do.

At the risk of sounding cheeky, you have two choices about when to communicate to the beneficiaries of your will: before you die or after.

communicating before your death

All things being equal, bringing the issue out in the open while you are alive and competent may be the best tactic. In fact, talking about your will early and often may eventually wear down your kids to see it your way and by the time you pass away, the whole estate plan will be old news.

And who knows? Maybe your children, individually or together, will have some great ideas as to how your objective of fairness can best be achieved. Just be sure to run any such suggestions past your advisor because some “great ideas” can have horrible tax or other unexpected consequences.

communicating after your death

Even though talking is terrific and allows for a back-and-forth discussion, we can imagine situations where people feel they simply can’t raise certain issues with their kids. We won’t delve deeply into why that may be—this is a book on estate planning after all, not a psychology textbook. But we accept that a Sunday afternoon family meeting about wills isn’t for every family. Even so, you can still work with your lawyer to put together an ancillary document to be stored with your will, providing some details behind your thinking.

Why bother with all this communication? The main reason of course is to minimize unhappiness and hard feelings after you die by providing your personal perspective in a way that the wording in a will can’t achieve. When people are upset with the contents of a will, they tend to take out their anger on others: the estate executor, the other beneficiaries, the deceased’s lawyer, the cat-sitter, whoever happens to be around. A written statement of your love for your children and why you are providing for some children differently than others will direct the focus where it should be: on you, your thoughts, the wealth you have amassed during your lifetime and how you see that wealth being appropriately distributed at your death.

Communication about the reasons behind your planning will not necessarily make everyone happy. However, the probability of hurt feelings or even litigation can be reduced if Mom or Dad, for example, share their candid thoughts and plans about their wills while they are alive, rather than leave it all as a big surprise for after their death.

points to take away

• Over the years, certain dynamics can cause you to consider providing for one beneficiary in a different manner than others you care about.

• Although most Canadian provinces allow parents of adult, financially independent children to leave them whatever share of the estate the parent wishes to leave, if you are thinking of an unequal distribution, it’s essential to consult with an estate lawyer to ensure that this can be achieved in accordance with the legislation in your province.

• Although your reasons for your estate planning may make good sense to you, if the planning comes as a surprise to the people that you care about, or once cared about, it can cause tremendous heartache and result in the possibility of avoidable estate litigation.

• Communicating your plans to your beneficiaries, especially your adult children or grandchildren, while you’re alive or working with your lawyer on a document to be read after your death are two ways to think about approaching “unique” planning in your will.

• The final point to take away is this: it is your will after all. Even with the best of intentions and professional advice, you may not be able to avoid conflict or even a court challenge to your estate plan. In some situations, you may just need to accept that one or more of your beneficiaries won’t be happy.