(The Press-Enterprise) “It’s not fair!” We all have witnessed how children have a difficult time understanding why one sibling was treated differently. To overcome this, parents will make the well-intentioned mistake that fair and equal are the same. That is, if they treat their children the same, the kids will stop arguing about who received more, who gets to go first, or who is the favorite.
Trying to treat each child equally rarely works. The parent is left feeling guilty and inadequate, and the sibling rivalry never ends.
Adult children can have an emotionally charged and often juvenile reaction to their parent’s estate planning, especially following a parent’s death. Beneficiaries frequently equate terms of the will with love or lack thereof. Receiving a perceived smaller distribution or not being chosen to be in charge could confirm an adult child’s viewpoint of, “Mom always loved you more.”
Which child to manage my affairs?
One of the most difficult estate planning decisions is who will manage the estate. Many times, this question can halt the estate planning process because mom and dad cannot decide which child to choose. Sometimes, mom and dad decide not to choose one child and select several adult children as successor co-trustees.
Elaine was a single mother with three daughters. She named all three daughters as co-trustees, dividing the estate equally. A few days after her death, the daughters, all in their 50s, made runs on the banks to empty accounts before the sisters could “steal” assets. They ended up in court and had to endure lengthy and emotionally painful depositions.
If you want your children to stop holiday gatherings, hire multiple law firms and spend time in court, have them work together to manage your estate. While we have seen a few successful administrations with sibling co-trustees, we have also seen how much waste, animosity, and sadness this decision can create.
Should someone else serve?
Some parents choose a family member or friend to manage the estate to avoid choosing one child over another. This decision sometimes works well, especially if the trusted person is a financial or legal professional with trust administration experience.
But relatives and friends may have favorites, too. They may even dislike one or more beneficiaries. Some potential trustees, especially the parent’s siblings, might be deceased or too infirm to serve. (You should always pick someone you believe will outlive you.) Some might also see the position as a trustee as a financial opportunity.
Charles chose his brother, Jack, to be his successor trustee. Jack strongly disliked one of Charles’ sons, Peter, who was close to his dad. Uncle Jack chose to delay Peter’s distribution indefinitely. Uncle Jack did this because of his own financial problems and not to benefit Peter. He wanted to delay closing the estate to continue to receive trustee fees and to invest trust assets into his failing business.
How about a professional trustee?
Institutional trustees, like banks and trust companies, can be a good alternative if a suitable family member or friend can’t be found, but they will decline to serve if it’s a small estate. They can also be more costly and inflexible to the needs of the beneficiaries.
For instance, one large bank only accepts trusts with assets of over $3.5 million and will not administer trusts with real estate. If your estate is small, have very specific or complicated instructions, or are concerned about fees, an institutional trustee is probably not a good idea.
You might also consider a professional fiduciary. These are licensed and bonded professionals in California. Although their fees may not be less, their minimum estate size requirement usually is.
Choose results over fairness
Your estate plan should have clear instructions to administer it expeditiously and to pass on the most assets possible to beneficiaries. The simplest and least costly trustee choice could be one of your children. It would be the fair choice to pick the one with the least need for the inheritance and is most likely to follow your instructions.
Talk with your attorney and your long-term advisors about who would be best. Formally discuss with the child you chose what you expect of them and make sure they are up to for it.
Also, discuss with your attorney how to use a trust protector to safeguard the interests of the other beneficiaries. Unlike a trustee, the trust protector does not manage the trust estate but provides a safety valve for specific actions.
Communicate the reasons for your choice to the other children to minimize hard feelings. Your children are more likely to consider your choices “fair” if you’ve discussed your reasons with them. You have the right to do whatever you want with your estate assets. However, there may be unexpected consequences to your choices.
