First, there is no judgment here. You can define “interesting characters” any way you like if it applies to your family. Actually, most families have a quirky relative, or two. If yours does too, and that individual is an heir or beneficiary, you should make some special considerations in your plan. The following provides a few guidelines for everyday “atypical” situations you might want to address in your estate plan.
First, your overall goal is probably to avoid potential conflicts, financial mismanagement, or unintended consequences. That said, here are some thoughts and tips.
Financially Irresponsible or Special Needs Family Members
If you have a family member who is not great with money—perhaps they have spending issues, a gambling problem, or are simply inexperienced—you can set up a discretionary trust. A discretionary trust allows the trustee (a trusted individual or institution) to manage and control the distribution of the funds. This ensures the beneficiary gets financial support without wasting or misusing the inheritance. Depending on the beneficiary’s particular situation, you might consider the following kinds of trusts: Incentive trusts – which can be used to encourage responsible behavior; Spendthrift trusts – which can protect the inheritance from creditors or lawsuits because the beneficiary cannot access the funds directly, and the trustee controls how and when funds are distributed, as well as Guardianship or Special Needs trusts which are commonly used for heirs with special needs or are mentally incapacitated. (Note: you’ll want to ensure their inheritance doesn’t disqualify them from receiving government benefits such as Social Security Income or Medicaid. A special needs trust can hold assets for their benefit without disrupting their eligibility for these programs.) You can also appoint a guardian or conservator to manage their personal affairs and finances if needed.
Estranged or Difficult Family Members
Perhaps you have family members you don’t want to inherit from you; it’s essential to state this in your will clearly. Disinheriting a family member can be tricky, especially in cases where the law protects spouses or children from being wholly excluded. Discuss this with your estate planning attorney, of course, but two strategies are to explicitly disinherit the individual to avoid confusion or potential challenges or leave a token amount that demonstrates intent, and they can’t claim you forgot them.
Letters of Instruction or Ethical Wills
If you anticipate that certain family members will be upset by terms within your estate plan, drafting letters or instructions or an ethical will can be beneficial. They are not legally binding documents but can help explain your reasons for the decisions you made.
Choosing the Right Executor or Trustee
I can’t emphasize the importance of this enough. If there are strong personalities or potential conflicts within your family, the role of the executor becomes crucial. Make sure to avoid choosing controversial family members (and you know who they are) by selecting someone who is neutral, trustworthy, and can remain calm if disputes arise. If you can’t think of anyone within the family, consider a professional executor, an attorney, an accountant, or a trust company to handle the estate.
Be Smart, Anticipate A Contest
If you anticipate a will contest from unhappy family members, and you probably know right now who that might be, you can include a no-contest clause in your estate plan. This clause states that anyone who challenges the will forfeits their inheritance. This can deter frivolous lawsuits, but it’s not always enforceable in all states, so check with an estate planning attorney.
Update Your Plan, Routinely
Just like “normal” families, families with troublesome (however you want to define that) family members change over time. Perhaps the relative with the gambling problem sought help and is on track. The estranged siblings have reconciled, and all is good. Whatever the changes, for good or bad, you should update your plan regularly to ensure it has kept up with what is going on in the family. This is why I offer all of my clients a complimentary estate plan review every three years to ensure all is updated.
Whether your family is totally “normal” (whatever that might mean) or has a few quirky characters, we can customize your estate plan to cover all concerns so you can rest easy knowing all will be taken care of, as you wish. Protecting your hard-earned assets and loved ones isn’t difficult; we’ll develop a plan that is tailored just for you. Call me at 513-399-7526 or schedule our consultation through my website, www.davidlefton.com