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How good intentions in real estate planning go sideways – Orange County Register

One of the most attractive features of a trust is the ability to build an estate plan to ensure that your assets are distributed according to your wishes.

Building trust is a satisfying experience because you know you are taking steps to serve your loved ones and favorite objects while preserving your hard-earned assets after you pass away. It may become

It’s great to want to protect your legacy, but how you do it can end up doing more harm than good. As with any complex legal process, even with the best of intentions, potential pitfalls can arise when drafting estate plans and trusts.

I am not a trust attorney, but as a professional trustee who has settled hundreds of trusts for over 20 years, I have seen how estate planning can lead to costly and complex trust administration and family lawsuits. I was. Trust) tries to control too much from the grave.

I’m not my brother’s (or sister’s) keeper

Appointing one child as successor trustee of a trust to distribute funds to another child can create an unfair situation for both children and often leads to probate court.

Children appointed as trustees can feel burdened with managing and distributing funds to their siblings, which can lead to resentment. When they make financial decisions, both children can be adversely affected.

Non-trustee children may feel that they are being abused and that their financial well-being is at the mercy of their siblings. I once witnessed an altercation between her two brothers, trustee and beneficiary. they were in their fifties.

i don’t want to work for my brother

A common saying in communities that organize charitable giving is that if you want children to fight, leave them with a foundation to work with.

Parents often believe that leaving a foundation or business run by their children keeps them close by providing them with a sense of common purpose. Some parents may think that this will bring financial security to their children and protect them from the uncertainty of working for someone else. Doing so may be seen as a way of preserving all that we have built and ensuring that our value and contributions are sustained and recognized by future generations.

When multiple siblings are forced to work together, disagreements in strategy, priorities, and leadership can lead to conflict and legal battles. Watching may resemble young children fighting in the backseat of a car while traveling. Often it has nothing to do with what is best for your business.

Also, not everyone has the skills or personality to run a business. As a result, parents may inadvertently limit the opportunities for some children to pursue unique talents and other career prospects.

Heirs in leadership roles can become bullies and experience significant pressure and resentment, leading to burnout and health problems.

At times, companies are forced to use precious resources to support unproductive families. Alternatively, leaving the company to some children and not others can lead to resentment and a sense of unfairness.

not worth the effort

Sometimes controlling from the grave can be extreme. A grandmother used trust to maintain her family’s high social standing, foster ongoing relationships and networks with her grandchildren, and encourage them to become educated professionals. designed.

Beneficiaries were required to attend frequent family gatherings to receive their quarterly distributions. If they arrived late, were not properly dressed and groomed, or did not display proper manners, they were not paid for the quarter. , did not perform high enough, or dated someone the Trustees deemed suitable, their distribution was cut.

How much their grandchildren hated dinner, unhealthy competition was created between cousins, and how these young adults had to pay for expensive apartments, clothing, and cars to meet their grandmother’s posthumous expectations. It was sad to see.

Complex trusts, like the Spender and Dynasty trusts, are usually designed to achieve specific goals, such as providing education, minimizing taxes, or protecting beneficiaries from creditors. However, the complexity and duration of trust can often lead to unintended consequences that ultimately undermine the effectiveness of the trust. Assets are often insufficient to cover the costs of managing a trust.


As a trustee who has often seen the unpleasant consequences of good intentions, I recommend working with a qualified trust attorney to draft a trust. Avoid lawyers who use boilerplate, hole-filling software, and offer one-size-fits-all living trusts at discounted rates.

By working with experienced and qualified professionals and taking a thoughtful and practical approach, you can create a real estate plan that will benefit your intended beneficiaries in the long term.

Your attorney should be able to offer alternatives, such as using an annuity or other financial/gift plan vehicle or hiring a trustee instead of one brother becoming the trustee of another. .

If you own a business, your attorney and CPA should advise you on succession planning long before you plan to retire. As part of your succession planning, they draft your trust In addition to that, you should propose changes to your company structure and bylaws. The cost of hiring a succession planning expert is often mitigated by tax savings.

Visualize a real estate plan in action and how it will work without your direction. Too complicated or taking too long to resolve? If you want more control over how the funds you leave to your heirs are spent, plan to donate now, perhaps while you’re still here. Talk to a lawyer or CPA about how you can make a positive impact on your family and community and enjoy the results.

Andrew Carnegie once said, “It’s harder to give money wisely than it is to make money.” I’m not sure if that’s completely correct. Yet, being aware of the implications of your plan will help you build trust that reflects your vision, protects your legacy, and ensures the smooth and efficient distribution of assets to loved ones.

Michelle C. Herting specializes in succession planning, business valuation and trust settlement.

https://www.ocregister.com/2023/04/16/how-the-good-intentions-in-estate-planning-can-go-sideways/ How good intentions in real estate planning go sideways – Orange County Register

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