Croakspeak

I. Beclouded by Croakspeak? Take Charge!

Most of us who have estate plans can't tell you what's in them. We thought we understood at the time we signed our wills, but somehow that has slipped away.

Granted, estate planning can be complicated, especially for the well-heeled. And it's not much fun to think about the financial fallout from our croaking.

But that's not why we forgot. We forgot because we didn't take charge. We abdicated our financial immortality to hired wizards who beclouded our memories with croakspeak.

Spoken croakspeak assumes you can't bear to talk about your own death,

"If something happens..."

Written croakspeak sounds like an incantation,

"I give, grant, bequeath, devise, set over and enfeoff..."   

Arise, all ye who would rather sit for a root canal than discuss the financial consequences of your death. Take charge!

Begin with three sheets of blank paper. Forget all you know, or think you know about estate planning, or have heard at the beauty parlor or the golf course. Make your mind as blank as the paper.

On one sheet write down who you really want to get what when you die. On a second sheet, write down what you really think those who get it will do with it. On the third sheet, write down what you really want to do or accomplish between today and the day you croak.

At the very first meeting with your wizard, and before the cave becomes beclouded with croakspeak, produce these three sheets of paper. Insist that the two of you start with what you have written down. Then let your wizard do his or her croakspeak thing.

Your wizard is expert at making sure that what you want to happen - post croak - actually comes to pass. But your wizard doesn't know what you want unless you say. And unless you say it very clearly, your wizard will get preoccupied with saving croak taxes and croakspeak syntax...all at the risk of casting your three sheets to the winds. 

Here are three more suggestions about taking charge:

One: Ask your wizard how the proposed estate plan will really play out in your life and in the lives of those dear ones who will get your stuff; how the plan will really affect your most important relationships, and theirs; the plan's impact on your relational estate.

Two: Ask if those dear ones who will get your stuff can come listen to your wizard's explanation.

Three: Do One and Two before you sign anything.

Do all this while you are still healthy and influential with those dear ones. Ask for their reactions and suggested changes to your wizard's proposed plan.

Too much estate planning takes place in secret. Too many dear ones are taken for granted or by surprise. In secret we leave our dear ones what we think they ought to want in ways we think they ought to want to get it. But we don't involve them.

No amount of croakspeak can substitute for candid conversations with our dear ones. Ask them, talk with them, get their input, then decide and have the wizard do your thing.

Yes, those conversations could lead to tears. After all, the topic is your death. And that's hard for you and for them. But not nearly as hard as taking dear ones for granted or by surprise after you're gone.

Don't become beclouded by croakspeak.

Take charge of your estate plan!

II. Taking Good Advice: Story-Changing Choices

My client owned a coffee company. Twenty years ago, pricey experts forecast that baby boomers wouldn't be coffee drinkers and would never buy bottled drinking water at soft drink prices.

Our world is awash with advice, some expensive, some free, some profound, some loony, some dangerous. How do we sort it out? How do we choose which to follow, and which to ignore? Here's some advice about taking advice.

Step No. 1: Do you need help with a choice? Or do you just need someone to listen to your story and share your feelings about it? Do you want the other person to empathize or to strategize? Be clear at the outset whether you want advice. She could begin: "I'm not asking for advice right now, I just want to ventilate about this." Or he could ask: "Do you want me to listen or do you want me to fix it?" Asking someone to listen invites empathy. Asking someone to help you choose, invites advice. Be clear.

Step No. 2: Suppose you're making a choice that could change the unfolding story of your life - a story-changing choice. Some examples: to have a child or another child, to change jobs or locales, to stay or to split with your partner, to undergo major surgery, to write a will.

Will you make that story-changing choice alone, or share the choosing, or let someone else choose for you? Some people of faith hand off story-changing choices to a Higher Power.

How might your choice affect others' life stories? Should you check in with them before choosing? Ask for their input, if not their advice? "Suppose I take a job abroad?" "What if I name you executor of my estate?" Having a child is a clear shared choice. So is moving away if you're leaving together. You may be cool with someone else making a story-changing choice for you. "If you want another child, we'll have one." A caution: if you let others choose for you, you forfeit the right to complain or to second-guess their choices.

Step No. 3: Are you qualified to make a story-changing choice wisely? Or do you need professional advice from someone with special knowledge - a physician, lawyer, psychologist, accountant, or clergy? It's a mistake to delegate your choice to experts. Expert advisors don't want to substitute their judgment for yours. They want you to make informed choices supplemented by their expertise. And that's the way it should be. It's your body, your money, your relationships, your soul. If your expert advisor tries to make choices for you, I'd get a second opinion.

Step No. 4: Choose timely. Don't rush, but don't dawdle either. What events need to fall into place before you choose? What do you need to know beforehand? Establish a sensible deadline for choosing, and don't be afraid to change it. Unmade choices can increase your anxiety level, disturb your sleep, sour your disposition. Resist well-meaning friends who detect your discomfort and push you to choose prematurely. You risk overlooking something important that only the passage of time can reveal. Likewise, resist well-meaning friends who would lull you into procrastinating.

Step No. 5: Don't discount your feelings. Some choose with their heads and hope their hearts will follow along. Head choosers may counsel you to choose "unemotionally", but I don't. Emotions can play a huge part in how and when you choose. If you resist choosing unless or until you feel right about your choice, that's probably OK.

Step No. 6: Sometimes you can't choose - you're disabled or deceased. That's why you name guardians for your minor children, executors, trustees. That's why you give powers of attorney so others can manage your finances or make your heath care decisions. Some families fight furiously about what a loved one "intended" after they're gone. Those who will choose on your behalf need to know all they can about how you would choose - if you could. Brief them thoroughly.

Rejecting that expensive expert advice, my client has sold oceans of coffee and bottled water over the last twenty years.

It costs you nothing to reject my advice about taking advice.

III. Sibling-Shared Inheritances: Red Flags, Yellow Flags...or Green Flags?

In his "Children in a Rowboat" articles ¹, Atlanta attorney Robert Edge perpetuates a popular notion among estate planners about sibling-shared inheritance:

The number one opportunity for an estate plan to go wrong occurs when parents tie the children to the same asset or when they require the children to do a job together as a group. This can happen when a surviving parent names several children to serve as executors of a complicated estate, to run the family business, to share an expensive house, or even to distribute assets of the family foundation.

Imagine loading the children into a rowboat on a big lake and requiring them to agree on one destination when their rowboat can go in only one direction, no matter how many passengers it holds.

There may not be many truisms in estate planning, but there is one goal that has prime importance for almost all clients: they do not want a legacy to result in their children avoiding one another.

Plans that require children to agree among themselves when their parents are both gone are simply fraught with danger. Don't we owe the client at least a yellow flag, or sometimes a red one, when a suggestion is made to put the children in the same rowboat as fiduciaries or beneficiaries?

Thus the conventional wisdom is that children in a rowboat fly a red flag...or at least a yellow flag. I suspect Bob Edge speaks from long experience with contentious sibling heirs. Mark Twain's wry remark comes to mind:

"You never really know someone until you share an inheritance with them."

Contentious sibling rivalries don't turn themselves into lawsuits. The legal system is an arch enabler. Elsewhere I wrote:

A war-like 'win-lose' radical individualism permeates the law's current approach to all human relationships, whether commercial or personal. The adversary process assumes that all relationships will ultimately fail, whereupon every individual will need a lawyer to protect him or her from everyone else, even from family. ²

No doubt some sibling relationships would be better served by separated inheritances. It's better to sell their parents' vacation home than to suffer the ongoing ordeal of fights over access and fussing over maintenance. But for other siblings, the very sharing of their parents' vacation home reinforces relationships, preserves memories, continues to connect them.

How does an advisor determine whether clients' children are good risks to share an inheritance--red flag or green flag? Does the advisor raise the issue of shared inheritance as a neutral, yellow flag perhaps, or reveal advisor bias based on some bitter past experiences with other families of ill-sharing siblings--i.e. red flag, "children in a rowboat"?

Consider other "rowboat" implications. Notwithstanding advisors' red flags, lots of fifty-fifty partnerships work out just fine. That most prevalent fifty-fifty partnership--marriage--is also risky. But just because half of the marriages entered this year will end in divorce, neither Bob Edge nor I would discourage formation of marital partnerships, though both might counsel caution and a close look at prenuptial agreements. Is the couple prepared to work through the stresses of a wealthy marriage?

In almost every case of ill-shared inheritances and stuck family businesses I encounter, family members were under prepared for the acute interpersonal stresses associated with being joined at the wallet. Family skills have been neglected and need work.

Here's a partial listing of specific family skills I think necessary to successfully share an inheritance or a business:

• Habits of comfortable communication.
• Clear boundaries between personal independence and family interdependence.
• Rivalry management.
• Accepting differences.
• A capacity to differentiate between thinking and feeling, and a vocabulary for both.
• A willingness to forgive.
• Healthy emotional engagement.
• The ability to listen without judging.
• An understanding that encourages individual family members to speak their own minds, but discourages them from trying to speak others' minds.

Why not share this checklist of family skills with clients contemplating sibling-shared inheritances? Or better yet, suggest that the clients to share the checklist with their children? In my view, broad family feedback is the best indicator of whether a sibling-shared inheritance makes sense. Further, it's helpful to ascertain if the potentially sharing siblings like each other, and whether they favor or oppose the prospect of shared inheritance.

If family feedback indicates deficiencies in family skills, or yellow - or red flags to shared inheritance, the family's relational estate may need work. Relational estates are very high maintenance. For wealthy families who want to remediate some neglected family skills, a family council can offer the needed impetus and structure.
In the military, we trained in heavy oceangoing lifeboats, six facing aft heaving hard on the oars, a coxswain manning the tiller, barking the cadence. A successful family council is no recreational rowboat on a pond. It's more like a lifeboat with everyone pulling an oar to keep family and fortune afloat in sometimes heavy seas.

A successful family council can be the family's lifeboat.

IV. King Lear Fear: What Aging Clients Really Want

King Lear, Shakespeare's most tragic character, had a crazy estate plan.

Lear would abdicate his throne, and then divide his lands among whichever of his three daughters flattered him most. One loyal daughter refused to play the flattery game so Lear banished her. The other two poured on the flattery, took his lands, and then threw him out.

Upon discovering both were having an affair with the same man, one of the flatter daughters poisoned the other, then stabbed herself to death. Meanwhile, the loyal daughter was executed by mistake. Lear now broken, abandoned and demented, began to converse with mice.

King Lear's sorry end personifies what aging clients most dread: Lear died broke, sick and senile, his family a train wreck, his legacy to be forever remembered as a vain buffoon. Aging clients want what eluded poor Lear: financial security, attentive health care, a connected family at peace, and a positive legacy by which they are remembered.

Financial Security. An aging client confides, "I'm afraid of running out of money before I die." Estate advisors should first address this primal fear of aged impoverishment. Once relieved of this lifetime concern, the client can focus on avoiding death taxes. Some aging clients do run out of money before they die because, like Lear, they've improvidently passed on property prematurely.

In my experience, a common obstacle to succession in family business is the senior generation's unspoken fear of impoverishing themselves in old age. The younger generation are unproven managers whose plans may be as crazy as Lear's. Or the senior generation's plan may be crazy too, e.g. continuing huge unearned salaries, perks and benefits for life - a long term liability the company can ill-afford.

Attentive Health Care. "Who will take care of me when I can no longer care for myself?" The family is the primary support group for its aging members. I urge families to discuss carefully how they will cope with members' inevitable declining health. A health care power of attorney and living will are important of course, but not nearly enough. Who will convince an aging parent to give up driving? Who will assure that the physician has been understood, that prescriptions are taken as directed, that good nutrition and exercise are available and encouraged, that the retirement facility lives up to its bargain? Health concerns in old age are not only a family concern, but a whole family undertaking. Lear's loyal daughter suffered acute caregiver burnout while her flatter sisters cavorted.

Family Peace. "I'm not going to finance a family fight when I die!" declared a very thoughtful client. In the vain pursuit of flattery, poor Lear did just that. It was shear buffoonery to stage a flattery contest with huge prizes that overheated murderous sibling rivalries. Surely Lear didn't assume such a competition could promote family peace.

In my experience, the estate planning community is thrown off balance by contentious families, e.g. by adult sibling rivalries running out of control. Tax avoidance and financial products seldom provide an antidote for such hostilities. Nor does estate planning in secret, where parents are encouraged to leave children what they ought to want without asking or forewarning them.

Fortunately, intergenerational estate planning is catching on. The family as a whole, parents and children, givers and receivers, talk openly about what the parents have and what it's worth, who would like to inherit it, and how the inheritance should be managed. Along the way they discuss the roles of executors, powers of attorney over parents' assets, health care powers, and whether Mom would really be the best choice for those fiduciary offices. Quite often Mom discourages her appointment, further suggesting that others speak to Dad about no longer driving when the time comes.

Senior clients need the comfort of family peace during their later years. After they are gone, they want their estates to be enjoyed by peaceable survivors whose recollections and reminders of their parents' largess are themselves, peaceful memories.

"How Will I Be Remembered?" Beginning in their sixties, increasingly in their seventies, and overwhelmingly in their eighties, senior clients are concerned about their "legacy" - how they will be remembered. Dad might not get much professional encouragement about leaving a legacy of peace to warring children. "Give it to charity if they can't get along" counsels one advisor. "Tie it up in trust" advises another.
Dad doesn't want to "finance a family fight". If necessary, he'll reluctantly play the role of peacemaker, and won't mind being remembered as such. He fantasizes about his children reminiscing after his funeral:

"Dad didn't want his money to divide us."

"He stayed on us until we buried the hatchet, or at least locked it away.

"I guess he was right that parenting never ends."

"In his eighties and still dishing out tough love!"

"I've got to admire him for that."

Lear's loopy plan - land for flattery - was doomed from the outset. He failed as a king and as a father with such colossal grandiosity that Shakespeare immortalized his folly. Aging clients want what eluded poor Lear: financial security, attentive health care, a connected family at peace, and a positive legacy by which they are remembered.

V. Controlling Kids with Money: Incentive Trusts Rarely Work

From Le Van, Raising Rich Kids, pp. 32-33.

Medieval alchemists failed to turn lead into gold. Wealthy twenty-first century parents fear a reverse alchemy. Will their children transmute inherited gold into leaden lives--hollow, shallow, self-absorbed, addicted, indolent, meaningless, wasted?

The potentially corrupting influence of unearned wealth is not a new or novel concern. However, the Healthy Wealth Movement introduced new and novel prescriptions for parents' gilded angst. Healthy Wealth advocates insisted that the corrupting influence of money can be minimized by enlightened giving, withholding, or controlling. To parents already preoccupied with money, a money solution seemed sensible--like fighting fire with fire."

Generous trusts created by her second husband guaranteed lifetime support for their twins, Sallie's only children. The twins' trusts were laced with financial incentives and disincentives advocated by the Healthy Wealth Movement. If giving or withholding trust funds could foster good behavior and discourage the bad, Sallie's children would become model citizens." pp. 32-33, 37.

Several years ago a front page Wall Street Journal story reported that star pitcher Tom Glavine, then of the Atlanta Braves, had created incentive trusts for his three sons. As long as a son remained married to a stay-at-home mom, there would be trust distributions; otherwise, none. At the 2003 annual meeting of the American College of Trust and Estate Counsel an expert panel discussed the pros and cons of incentive trusts.

Many incentive trusts authorize distributions equal to the beneficiary's earned income i.e. "earn a dollar, get a dollar." Others reward educational achievement or the avoidance of alcohol or drugs. One parent instructed the trustee of his chronically late children to make trust distributions only to those who showed up at the appointed place on time.

Incentive trusts seem most popular with the new entrepreneurial wealthy who grew up with middle class values and had no experience with "trust babies." They fondly quote Warren Buffet: "I want my children to have enough to do anything but not enough to do nothing." New wealth seems more controlling of their children than old wealth.

The ACTEC panelists suggested that external standards of behavior ignore the more important goal of fortifying the beneficiary internally. The incentive trust imposes outside control instead of encouraging the beneficiary to develop internal controls, emphasizing conformity over personal growth and maturity.

Incentive trusts curtail trustee discretion over distributions by substituting objective standards for beneficiaries' behavior. "Incentivizing" behavior essentially supplants the traditional trustee-beneficiary relationship. Instead of functioning as mentor, model and coach, the trustee becomes a referee.

The ACTEC panel distinguished trust distributions that honor "benchmarks of maturity" such as graduation, marriage, the birth of children, etc. from incentive trusts that reward what the child would not otherwise do. They were particularly concerned with incentive trusts' narrow definitions of desirable and undesirable conduct and their failure to define larger family values and principles.

All agreed that incentive trusts may be useful for incorrigible children who might otherwise be disinherited by parents who have done all they can without success. Disappointed parents--and the major religions--still hold out hope that the most wayward children may yet change their ways.

In lieu of incentive trusts, the ACTEC panelists encouraged cooperative ventures such as family limited partnerships and family charities. Here the beneficiaries are involved, receive information and participate in decisions even though may don't control the enterprise. In the room with their parents, they collaborate on prudent investing and the financial expression of family values.

One ACTEC panelist advocates a "productivity trust" with a mission statement that defines what the family wants its members to do and be, with guidelines towards accomplishing those ends. A trust advisory committee meets frequently with beneficiaries, freely sharing information. The greater collaboration and sharing between beneficiaries and trustees, the less likely the tensions between them.

I have long questioned the wisdom of incentive trusts and applaud this thoughtful ACTEC panel whose combined estate planning experience reaches the same conclusion. Active collaboration between parents and children on family limited partnerships and family charities can reinforce those vital internal gyroscopes that help guide children through a murky world.

Near the end of Raising Rich Kids , Betsy has a conversation with psychologist Dr. Nether, who observes:

"Isn't it ironic that it's time to teach our children before we know ourselves. At best we grow up along with them and we learn together with them. It's called parenting."
"So we and our children search together for answers to their money questions?"
"I think so."
"Aren't those the best answers, the answers you discover together?"
"Inside answers instead of outside answers." Id p.123

¹ Edge, Robert G. "Children in a Rowboat and Other Potential Mistakes in Estate Planning", Probate and Property, January/February and March/April 2003.

²  Le Van, Gerald "Healthy Wealth in Business Families" Business Entities, January-February 2000.