Estate Planning At The Movies®: How Estate Planning Can Stand Talli
When The Game Stands Tallii tells the story of the essential qualities that created the greatest winning streak in football history. De La Salle High School, of Concord, California, under the coaching leadership of Bob Ladouceur won 151 consecutive football games, spanning from 1992-2003, including contests against the toughest high schools in the nation. While the team had many great players over these 11 years, and some went to the NFL,iii the team was often smaller and less gifted athletically than its opponents.
However, no other team achieved the level of commitment to excellence, greater focus and dedication to achieve one’s best and/or recognition that unconditional love established as a necessary condition for a successful team…the extended family. In one scene of the film, a talented player feels lost when his mother and last surviving parent dies of cancer. The player feels that, apart from his brother, the player felt he has no family. Everyone around him has died. Coach Ladouceur reminds his grieving player that he has a family, namely the teammates, from whom he receives unconditional love. Coach Ladouceur shows his player that unconditional love is the essential quality of any family.
Yet, blood relations — including between parent and child — may have nothing to do with family from the standpoint of giving and sharing unconditional love. Oliver Hudson, the son of Goldie Hawn and brother of Kate Hudson, made the following observation:
Blood relatives often have nothing to do with family, and similarly, family is about who you choose to make your life with.iv
One might ponder whether Coach Ladouceur was speaking of the ideal biological (or in-law) family or the bond among teammates who choose to be together and endure the common pains, devotion, and excitement that define a football team that is highly successful because of its commitment to perfect effort.
Estate planners may lament that Coach Ladouceur’s observation that unconditional love defines the family is too often the ideal not the reality within nuclear families. Trust litigators, on the other hand, thank their lucky stars that biological and blended nuclear families often exist within fractious relationships or among children competing to unwind slights from youth or the sense of being less loved and less valued by their parents.
Legacy of Estate Planning Failures
Estate planning failures can lead to years of litigation, lost value through needless taxation, or the breakdown of the family once the elder dies. Perhaps the creation of a distraction so that family members do not have to sit down and speak, accounts for some of the popularity of televised football games during the Thanksgiving holiday. In any event, family dynamics, and in particular the perception or actual existence lacking of unconditional love undermines a successful estate plan and opportunity for post-death family cohesiveness. By no means is the lack (or perception of the lack) of unconditional love the sole catalyst for an unsuccessful estate plan. Moreover, fights among siblings can break out in the most loving of families.
Yet, estate planners and their clients can undertake steps to recognize when problems arise post-death and how to minimize the impact. When family members feel comfortable in their relationships with parents and among siblings, terms and bequests in the business succession or estate plan are more likely to be accepted by the surviving family members. In the best of cases, the surviving family members may be “gifted” either a legacy of unconditional love or find solace by forgiving their parents for any perceived shortcomings. In the meantime, the estate planning documents may need to develop mechanisms to reduce the probability and intensity of post-death disputes regardless of origin.
Children Raised with Conditional Love… Revenge of the Undervalued
“Unconditional love” refers to affection without limitations, or love without conditions,v in contrast to conditional love. With conditional love, care, reinforcement, nurturing, physical affection or other attributes of love are meted out based on pleasing the parent or other giver of love. Among its harmful effects, the child’s sense of self-esteem is diminished, which can create lasting effects on the child’s future life choices.
Conditional love fosters competition among the children while children strive for rewards. Conditional love may cause a child to feel less loved and of lower “value” when compared to his or her siblings. Rewards and benefits can also be a part of parenting with unconditional love when the focus is on behavior and not the individual, or worse, comparison to a sibling.vi
Lack of self-esteem or the feeling of being cheated (real or imagined) can create particularly agitated litigation among siblings, or even the parent in his or her elder years. Post-death estate and trust litigation often creates expensive battles that outweigh the economic value of the controversy even if the litigation does not reach the duration or expense of Jarndyce and Jarndyce from Charles Dickens’ Bleak House,vii or fails to produce an efficient settlement through alternate dispute resolution.
Unless all of the assets are cash or marketable securities, it will be nearly impossible to divide everything equally. Some valuation judgments will arise, particularly if closely held businesses or real property are allocated disproportionally. Moreover, an equal allocation of family enterprise interests may be wholly unfair to the child(ren) who is active in the business. Thus, some level of goodwill and sense of respect must exist or the surviving family members will feel embittered, and may take action on those feelings.
This article does not purport to advise anyone on good parenting. The available literature, media, television shows, psychology and medical professionals are among the sources of professional guidance for parents trying to do the best they can do.
Practical Action Steps for the Estate Planner
Our focus will be on action steps that can be taken to minimize the likelihood of trust litigation or course of legal vengeance actions against family members or loved ones. Consider the following:
- Emphasize fairness, not equality, when establishing the estate plan and allocating assets. If the children are adults, the parents can inform the children of the plan and thinking. Explanation by the parents may enable the surviving family members to accept decisions that are made. Should a child then undertake a campaign of badgering and whining, it will be up to the parents to stay with what the parents believe is proper. Of course, if the adult child has spent a lifetime as a successful whiner, the parents will need to stick to their guns or face continual lobbying for change.
- Appoint a bank or other independent fiduciary to administer the trust or estate rather than a child, or worse the children. If the children really do not get along as individuals, it will be worse once they are fiduciaries. They may then each lawyer up, or form alliances. In any event, administration becomes more expensive and protracted. Many clients are concerned with the fee structures that banks charge to serve as fiduciaries. Yet, the selection of a bank as trustee may be the wisest investment, particularly when administration by a neutral party will lessen conflict and enable all loved ones more likely to accept administrative and tax-related decisions that are made after death.
- Look realistically at personal effects (art, jewelry, household items, etc.). The distribution of these items often creates the greatest hostility. A variety of approaches can promote fairness, including but not limited to: (i) division into lots and random selection of items; (ii) pre-death designation of recipient in a list signed and dated by the transferor; (iii) direction of the trustee to purchase a duplicate of particularly special items (such as the engagement ring) so each particular child (such as each daughter) can have one; (iv) either sealing the house or otherwise prohibiting the entry and removal of items except under an established protocol or oversight; and, (v) keeping the in-laws out of the discussion unless participation and the relationship really, really merit involvement.
- A limited power of appointment may be helpful if it is believed that the surviving parent should be able to change the estate plan of the first spouse to die (whether to change shares or the terms and conditions for the receipt of a share by a particular loved one). In this way, the surviving parent cannot be taken for granted by the children. On the other hand, if the surviving parent would unduly change the plan for the benefit of a “favorite” child contrary to the wishes of the decedent, then the inclusion of the power should be questioned or limited to acceptable levels.
- If assets will be distributed subject to valuation discounts (which may become irrelevant in the hands of the recipient), then address issues of economic value versus tax value. For example if the estate has two children (son and daughter) and each parent owns one-half of a building, the estate tax law will discount the value of that one-half interest. The receiving child (let’s say the daughter) will be receiving assets at a discounted value. If the overall estate is equally divided then more of other assets will be needed to balance the daughter’s share to the extent of discounts.
Example: An estate has a value of $14 million with two children. A building has a fair market value of $6 million and the balance of the estate is comprised of cash and securities. On a discounted basis (used with the estate tax return), the building is valued for $4.5 million, bringing the overall estate value down to $12.5 million. Will each child receive $6.25 million (dividing on the discounted value)? If the daughter is receiving the building, the discount is an illusion. On the other hand, her income tax basis is not increased to 100% of the non-discounted value.
In the foregoing example, will the son receive a preresiduary gift to balance for the fact that the daughter will receive a $6 million building (pre-discounted value) plus $1.75 of other assets (for a total of $7.75 million out of $14 million — yet only $6.25 million out of $12.5 million in discounted value? The parents should address how they want fairness established in this setting. The foregoing lends itself to various approaches. The key is to recognize the issue and for the parents to resolve what they believe to be fair.
- Often times, parents want the estate distributed equally to the children but also want a given child to receive a particular asset. Will the allocation of that asset be on account of the equal division of the overall estate… or will it be a specific gift “off the top” before the overall estate is divided?
In some situations the children will fight regardless of what is done. No scale of weighing, no independent fiduciary gnome and no well-crafted trust or Will can prevent people who do not like one another, or who want to get the better of the other, from doing their worse. Three real life events in practice illustrate these principles.
😥 In one estate litigation action a child felt undervalued, even stating in a declaration that she was loved less than her brothers, to justify her actions (one might call abuse) toward her mother.
😥 In another situation, three children had to be monitored while choosing personal effects once they started to fight physically over bathroom curios.
😥 In the third example, a son sued his mother and brother over trust administration, in the course of which he lost over one dozen motions and accounting objections. He finally gave up when he saw his mother exercising 5/5 withdrawal powers, thus depleting the trust. Such was Mom’s right. Underlying the entire action was the fact that the son thought his mother loved his brother more.
- If the parents want to motivate particular conduct (such as obtaining a college or advanced degree), promote working (such as with distributions to match salaried compensation or contracting income), or to dissuade actions (such as no distributions or other limited access in the event of certain criminal activities or convictions), the estate planning documents can so state. When the criteria is based on an objective standard, the focus is on the standard. If the criteria is based on pleasing someone, then the estate plan continues after death the thesis of conditional rather than unconditional love.
- Engage a family dynamics consultant to work with the clients and/or family members. Such consultants are commonly engaged to assist closely held businesses, particularly among family members, with issues of governance, problem resolution, communication, family values, and strategic planning. The Family Firm Institute,viii among other organizations dedicated to family business succession can provide references not otherwise known to assist with the omnipresent emotional and “soft-issue” estate planning dynamics. The author has found the engagement of family dynamics consultants (often psychologists) extremely important with pre-death and post death problem avoidance.
- Depending on the law of a given state, the no-contest clause can dissuade a Will or trust contest. In fact, Richard Nenno, Senior Managing Director and Trust Counsel for Wilmington Trust, points to a Delaware statute that allows the creator of a trust to send notice while living to the loved ones and giving them a limited number of days to object. Of course, with the settlor living and able to testify, and change his or her estate plan, the potential contestants are more likely to remain docile.
Whether competing as a part of a highly successful sports team or creating and implementing an effective estate plan, the values instilled by the elders, whether that be the coach or parents, lay the groundwork for the best chance of victory however that level of success is defined. Perhaps, the greatest gift parents can leave their children is the sense that unconditional love in the pursuit of fairness provided a guiding light. Estate planners and their clients who face the realities of expressing and implementing whatever is planned can then consider the lifetime and post-death protocols, systems, and choices to either make the estate plan more likely to be accepted or build-in safeguards to diffuse or discourage challenges.
i© Keith Schiller September, 2014. All rights reserved. Keith Schiller is the shareholder of the Schiller Law Group, Orinda, California. www.slg4law.com. He is the author of Estate Planning At The Movies®-Art of the Estate Tax Return, published by Bloomberg BNA. http://www.bna.com/bnabooks.aetr. Mr. Schiller is also a member of the BNA Advisory Board for the Estates, Gifts and Trusts Journal and Consulting Group for the Leimberg Information Services , Inc. Newletter.
iiWhen the Game Stands Tall. © Affirm Films, Mandalay Pictures. 2014. All rights reserved.
iiiMaurice Jones-Drew, D.J. Williams; Aaron Taylor, Demetrius Williams, Amani Toomer, T.J. Ward, Matt Gutierrez, and Derek Landri.
ivBrainy Quotes (Relative quotes) www.brainyquotes.com.
vWikipedia Encyclopedia, which cites various books and articles on the subject.
viSee for example, Kahn, Alfie, Unconditional Parenting: Moving from Rewards and Punishments to Love and Reason, © Simon & Schulster, 2006; for contrasting view see, Parenting: Unconditional Love Is Bad!, James Taylor, published November 6, 2009, in “The Power of Prime”, Psychology Today, on line.
viiBleak House by the British Broadcasting Corporation for Masterpiece Theater © 1985 and 2005. All rights reserved. In the silent era, Master produced it in 1922, starring Sybil Thorndike as Lady Deadlock. © 1922. All rights reserved. Novel by Charles Dickens © 1853.