Summary: Many things go into making an estate plan succeed.
One element is good communication, especially with your loved ones who will be
beneficiaries of your plan, along with those who will serve in fiduciary roles
like trustees and executors. Another element is having clarity of vision
regarding the objectives of your plan, such that you do not find the actions
you wish to take in contradiction with (and prohibited by) the planning
documents you have in place.
As the holidays fast
approach, many people will visit jewelry stores to explore gift ideas. Anyone
shopping for diamond jewelry likely either knows, or will be educated, about
the "four c's of diamonds." This is a shorthand phrase for the cut,
clarity, color and carat weight of the jewel. There are no "four c's of
estate planning," but two c's are definitely essential. They are clarity
in your documents and communication with your loved ones.
A recent court case from
Michigan points what can go wrong with estate plans sometimes, even with good starts
to the planning process. Joseph Brooks established a trust for the benefit of
his wife, Edwina, and funded it with $467,000. The trust assets were to be used
for Edwina's "health, support or maintenance" during her lifetime.
When she died, the remaining assets within the trust were to go to Edwina's
son, Charles Walker, and three grandchildren (who were not Charles's children.)
Brooks made himself the trustee of the trust.
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| Legacy Assurance Plan For Estate Planning |
During her lifetime,
Edwina's trust paid more than $360,000 to finance the educations of the three
grandchildren and more than $50,000 to a local Baptist church. Charles,
displeased with these payments, sued Joseph, taking the case all the way to the
Michigan Court of Appeals, where Charles eventually won. Why was he victorious?
Because, according to the court, while paying for the grandkids' graduate
degrees and giving a large gift to the church might make Edwina feel good,
these payments could not be considered to help Edwina's "health, support
or maintenance."
Communication gaps may
have existed within this family. If Joseph meant to allow Edwina to help the
church and the grandchildren, he should have communicated this so that the
trust agreement could have been written to permit such gifts. It might also
have been helpful to communicate this to Charles, as advance communication with
loved ones can sometimes stave off lawsuits that would otherwise arise from a
beneficiary's surprise and dismay.
On the other hand, it is
possible that this plan suffered from problems with another "c", that
being clarity with regard to the objectives of the plan. Joseph clearly seemed
to begin the estate planning process with the goal of creating a trust that
would provide for Edwina's well-being during her lifetime. Only if funds remained
in the trust after Edwina died would others, like the grandchildren, receive
the benefit of the assets. Nevertheless, after discussing the gifts with
Edwina, Joseph made the payments to the church and the grandchildren. In short,
by writing the checks to the grandchildren and the church, Joseph as trustee
breached his duty to the trust he created. Joseph the trustee and Joseph the
trust creator seemed not to be "on the same page."
This article is published by the Legacy Assurance Plan
and is intended for general informational purposes only. Some information may
not apply to your situation. It does not, nor is it intended, to constitute
legal advice. You should consult with an attorney regarding any specific
questions about probate, living probate or other estate planning matters.
Legacy Assurance Plan is an estate planning services-company and is not a
lawyer or law firm and is not engaged in the practice of law. For more
information about this and other estate planning matters visit our website
at www.legacyassuranceplan.com.
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