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BarJournal ESTATE PLANNING

JULY/AUGUST 2015
FEaTUrE Planning for the Distribution

of Non-Financial Assets:

Avoid (or Minimize) Family Disarray

BY LEIGH H. CARTER

s advisors, our natural focus is Advisors can also provide a “reality check.” to admit to worrying about the rancor a certain
to assist our clients with their Consider a couple, well in their seventies, with division will cause.
economic objectives. When an apartment in Paris, a house in Boston, and a It is also increasingly important for clients
addressing their estate plans, vacation home, each frequented with their children to discuss their wishes should they become
A this usually means seeking ways and grandchildren. Fortunately, effective transfer incapacitated: will a child or an advisor, pursuant to
to maximize the financial benefits to their family techniques will protect their daughters from the a Durable Power of Attorney, become the primary
and charitable beneficiaries, minimize their specter of any future forced sales to pay estate taxes, decision-maker? What items should be sold, if any,
transfer taxes, reduce or eliminate unwanted and division of the properties has been built into to raise funds for care? It is important for advisors
probate administration, and document their the estate plan. Their daughters, however, each have and/or family members to encourage clients to
advance directives. In discussing wishes for homes of their own with growing families to anchor engage in these conversations with caregivers
their beneficiaries, great attention is typically them, and it is unclear if the daughters will have before incapacity occurs.
paid to legal and financial concerns such as sufficient means to support these properties, let
ages of distribution, tax efficiencies, economic alone the interest to use them when their parents Approaches for Lifetime Decisions
equity among descendants, and other monetary have passed. As a result, is the intended simple • Sell a collection. Already knowing the dealers,
implications. With these matters hopefully well equal division of the contents of these homes, selling points and even potential buyers, the
in hand, are we also addressing the emotional amassed over many years, realistic? Is it reasonable person(s) who initially compiled a collection
impact of the estate plan? to expect that the daughters will have the time and is likely best positioned to manage its sale. For
Often, wills leave assets outright to the surviving energy to go through it all after their parents pass? example, an avid book collector took it upon
spouse and then to the children to divide. Is it even fair to them, particularly when there is herself to negotiate the gift of her collection to
Experience suggests it isn’t necessarily assets of some history of occasional disagreement and even a university library, a feat her children could
monetary value that are most desired. With non- jealousy between them? never have accomplished. The act brought the
financial assets, everyday objects of sentimental Holding advance conversations provides an owner enormous pride and eliminated the
value can become contested belongings. opportunity for the parent to confirm an heir’s burden to her children of determining what
Although it’s not strictly legal or financial interest or ability to accept an object. Life today to do with a relatively obscure but potentially
advice that’s needed, these issues can significantly is complicated and fluid, and one person’s beloved valuable collection.
impact the well-being of our clients’ families. collection or possession can quickly become • Identify in writing. Although a Letter of
However, advisors can help prepare clients for a another’s albatross. By proactively airing these Instruction may not be legally binding under
positive family transition, especially with regard issues, a family can reset misassumptions and each state’s applicable law, such a document,
to the non-financial assets. We have found the pave the way for realistic and cherished bequests. signed by the client, makes clear the intended
best resolution comes from proactive family recipient of an item.
discussions during a parent’s lifetime. Discuss Legacy & Decide During Life • Heirs pre-select items. Some families place
When decision-making occurs during a client’s color-coded stickers on the underside of objects
Open the Dialogue lifetime, there is opportunity for storytelling as well to identify who will eventually receive the object.
Advisors can encourage clients to talk about these as confirming that the recipient wants the object
non-titled assets, which are items other than and has a place for it. The conversation doesn’t Dividing Assets After Death
real estate, business interests, deposit accounts, necessarily have to go into specific objects, but In most estates, after the executor is appointed,
marketable securities or retirement accounts. can be directional about how the client would like the titled assets are marshaled, the appraisals
These discussions provide an opportunity distributions to occur after her death. Scratching are completed and, perhaps, a contract on the
for families to share the meaning of items below the surface, most clients have a specific vision sale of the residence(s) is signed. When it’s time
inherited from prior generations or which have of how their heirs will divvy up their belongings — to divide up the non-titled assets that aren’t
particular significance to the client. Following “I know my art books will go to my granddaughter.” specifically bequeathed, the executor and family
this conversation, advisors can coach clients by Further, clients likely can predict the rivalries and members turn their attention to cleaning out the
providing guidance when determining who will behaviors of their children, even if they choose decedent’s house and focusing on the remaining
inherit what. not to confront these issues, and often don’t want contents. This puts aside questions of inventory
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