In my last column I talked about gifts between family members during the time that an elder is depending on family for support and long term care. Today I want to talk about gifts and how they affect the wills, trusts and the administration of estates.
Gifts that undo an estate plan.
Your estate is the money and property you have on the date of your death. The money goes first to pay your bills and then to the people named in your will or trust. If you are old and sick and rich you may find long-estranged children returning to the fold and new friends willing to share your last days with you. Sometimes they are there out of love. Sometimes they want your money.
The most common method of defeating the distribution plan contained in a will or a trust is to convince an elder to give away all of her money before she dies. As I wrote in my last post, a gift is complete when the property is handed over, and thereafter the recipient can do whatever she wants with the property given. Most wills give a parent's estate to the children in equal shares. Sometimes there is a child interested in getting more than an equal share. The best way for that child to turn that obnoxious will or trust into scrap paper is to get dad to sign over all his property while he is still alive. If he has nothing left at his death, the will means nothing.
The traffic in my office, suggests that the last years of a wealthy elder's life is a never-ending parade of relatives jamming papers in front of the elder for signature. Most of these papers transfer money or property from the elder to the person who came up with the paper. They have all sorts of reasons why the elder should sign and why it needs to be done right now. “I need to be on your account so I can pay your medical expenses.” “If you don't put me on the house, you will go to probate and the government will get all your money.” “If you don't give me this money now you will have to pay taxes on it.” The creativity of these folks is quite astounding, but none of the schemes benefit anybody but the person who receives the property. No matter how sick you are, there is no good reason for giving away your money because a relative or your hairdresser thinks it's a good idea. If these people really cared about you they would be offering to pay the cost of a visit to a competent estate planning lawyer.
Deathbed gifts often lead to litigation in which the people named in the will or trust attempt to recover what was given away. These cases employ a lot of probate lawyers. The cases are nasty and expensive, and no matter who wins, the lawyers get a big chunk of the estate.
Gifts and Sibling Tension.
Gifts that Complicate Estate Administration
Let's assume you died without giving away everything you own. Gifts are still going to play a role what happens.
Whether you like it or not, your children are going to treat the administration of your estate—the distribution of your money and belongings—as some sort of final reckoning of everything you did for them and everything they did for you. Death is time to balance the books and settle accounts for everything that happened while you were alive.
A lot of families who end up in my office have one member who needed more help through life than did the others. Sometimes the help was necessary because of an obvious physical or mental illness. The healthy siblings in these cases are usually understanding. Other times the disability is addiction, irresponsibility or congenital laziness, and the children who did not get the extra help are not inclined to be as forgiving. They see the recipient of lifetime gifts as having a balance on the books that, upon death, needs to be taken into account when it comes to passing out the inheritance. The recipient of the parental largess, who is often still broke and in need, doesn't see it that way.
Similarly, the child who has selflessly given up time and career opportunities to provide care for a parent, sees the administration of the estate as a time to be financially recognized for the sacrifice he made while the other children pursued their personal aims. Generous and giving people often want their self-sacrifice to be rewarded and there is no better way to do that than when dividing father's estate.
Wills and trusts, however, seldom take these lifetime gifts into account. The estate is divided equally between the children. The child who has lived off his parents for decades gets no deduction for the gifts he received, and the one who toiled to provide care gets no credit for his sacrifice.
Thwarted in their desire for a final account that acknowledges the gifts given by the elder and the gifts given by the children, the children focus their frustration on what seems to outsiders as something arbitrary. Sometimes it is a bank account. Sometimes it is a lamp. Whatever it is, it is a symbol for their complaints against each other and their resentments against the dead elder.
As I wrote in my first post on gifts, mutual gifting is the way we take care of the those family members who need help. Sometimes it is the older members helping out the younger. Sometimes it is the younger members helping the elders. But don't be fooled. Gifts have long and lasting effects. No matter what your age, give with care and receive with caution. A gift is without expectation of repayment. It is not, however, without consequences.
There is an adage that the question is not whether to give, but when and how. Put as much thought into your gifts as you do your estate plan. Your will or trust, your beneficiary designations, and the gifts you give should form a coherent whole. Each piece should compliment the others and advance the goal of leaving everyone in the family better off. You cannot eliminate the possibility of your funeral being the scene of rancor and litigation, but by thinking carefully about the gifts you give and receive you can significantly reduce the chances.