Happy Estate Planning

It’s not uncommon for someone to feel more than a little unsettled at the thought of estate planning.  After all, estate planning means thinking about how to dispose of your estate when you are gone.  It can be helpful to look at estate planning from a different perspective.  Estate planning helps give us control over an event that is totally outside our control — death.  When you think about to whom you want to leave your estate and in what manner, your intentions are understood and your goals are realized.  You protect your family from uncertainty and conflict and allow them time to focus on you and their relationship with you.

I like to think of estate planning as the Irish think of funerals.  The Irish are well known for choosing to celebrate the lives of their loved ones at their funerals.  Funerals often involve plenty of food, drink, and celebration.  The Irish tend to think of funerals as a happy send off for their family members.  I cannot think of a better way of conducting a funeral.  Our lives are full of laughter, love, joy, and celebration.  I love that the Irish conduct their funerals with this in mind.

I like to think of estate planning in the same way.  During an estate planning meeting with an attorney, you will discuss what will happen to your assets when you are gone from this world and on your way to your next adventure.  It is a time to evaluate the people and things in your life that you hold most dear.  It is a time to think of who in your life you love, who you trust, who you admire, whom you want to protect, and how hard you have worked to get to where you are.  It is a time to reflect upon how you got to where you are.  It can be an enlightening experience for many people.  A listing of assets can be reaffirming and reassuring as we approach retirement or other significant experiences in our lives.

Estate planning is also a time when you can sit down with your spouse, significant other, loved ones, and an attorney and explain your fundamental beliefs about death and dying.  A valuable estate planning document, a health care directive, is available for you to describe in detail your core values and desires regarding a time when you may be incapacitated.  You may have spent 50 years with your spouse and never once discussed these issues.  It can be an enlightening experience where you and your spouse see each other through new eyes.

For most people, estate planning provides peace of mind.  They know that after they draft these documents, they never have to worry about what will happen to their families after they are gone.  Estate planning can open the door to a conversation with family members about your wishes.  “I left Tommy the house, Sue the farm, and Billy the business” can open up a dialogue with your loved ones about what they want and how it will be perceived.  So many times people fight over little souvenirs from their parents’ homes without ever realizing that what they are fighting over isn’t the souvenir but rather the feeling behind the souvenir.  If Tommy tells you he really doesn’t want the house, but Sue does, you can avoid putting your children in awkward and disruptive situations during a time they should be focusing on you.

Estate planning does not have to be sad.  In fact, it often is quite the opposite.  People often walk out of an estate planning meeting feeling happier, more in control, and with more peace of mind.  Happy estate planning!

Blended Introduction

Welcome to Blended, part of the Excelsior Law Blog.  Blended provides resources for blended families.  These resources include a discussion of estate planning and blended families, as well as discussions of issues facing blended families.  In The Seven Principles for Making Marriage Work, John Gottman, Ph.D. talks about how it is only when a divorce is finalized that couples realize how much they have lost.  Nowhere is this more true than in a blended family.

Statistics show that the percentage of couples divorcing in the United States is roughly 50 percent.  Statistics also show that approximately 60 percent of second marriages fail.  And in a study set forth in the book Dating the Divorced Man by Christie Hartman, 75 percent of women report that it was not worth it to marry a man with children.  This blog is dedicated to helping blended families deal with the issues they are bound to face in coming together and spending their lives together forever.

One of the first pieces of advice a person will receive when saying he/she is dating a man/woman with children is the following: “the children always come first.”  But the dire truth is that this piece of advice, acting by itself, makes it difficult to form a lasting relationship and a solid foundation with the parent of the children.  This blog is dedicated to helping couples find a way of navigating the difficult world of blended families in a way that will bring couples closer together rather than tear them apart.  For after all, what better gift to give children than the gift of seeing a healthy, loving relationship between their parent and their stepparent?  Showing children how to treat one another lovingly, how to support one another during difficult times, and how to show up for one another again and again is a gift so precious it is priceless.

The difficulty is in knowing how to give our children this gift.  When we date a man/woman with children and when we attempt to blend our lives with theirs, we quickly realize that blended families do not always follow the same rules as traditional families do.  (I use the word “traditional” realizing that one day, a blended family will be the norm, not a family that includes a couple on their first marriage with children they share with one another.)

So the question inevitably becomes, “what is normal?”  Is normal the way a majority of people behave?  Is normal the way in which people usually behave in certain situations?  Is normal the way people should behave?  Is normal an idea that causes people to wish they could behave in a certain way?

In a blended family, so often it’s easy to ask the question, “what is normal?”  Is what I’m feeling normal?  How exactly am I feeling?  Is what we’re going through normal?  Is it normal for me to feel this way?  If not, should I ignore this feeling?  If so, what should I do about this feeling?

The key is to understand that, fundamentally, you are in control of what your normal is.  You are in control of what is okay with you and what is not.  And when you not only reach that realization but are able to live by that mantra, normal will no longer be a concept you try to grasp or a question you ask yourself.  Socrates once implored humanity to “know thyself.”  Thus, set out to know who you are and what you want.  Seek to know what makes you happy and comfortable.  If we don’t know what makes us happy and comfortable, we will never know whether we are in the right relationship or not.

That said, once we find ourselves in a relationship with a man or woman with children, we inevitably deal with the fact that what makes us happy and comfortable is not always going to be the main goal.  In fact, we’re told over and over again by well meaning friends and family members that “the kids always come first.”  That may be a noble endeavor, but it bodes poorly for creating a lasting relationship.  If the kids always come first, then the new spouse invariably comes last.  This fundamental breeds all forms of neglect and, in extreme cases, can lead to isolation, alienation, anxiety, depression, stress, and other mental and physical health issues.

Humans are social creatures.  We need to feel a sense of belonging.  We need one another.  In a March 19, 2015 article posted on http://www.today.com entitled “10 Basic Rules for a Happier Life,” author A. Pawlowski quotes Gretchen Rubin, author of “The Happiness Project” and the book “Better Than Before.”  Rubin stated that “We need to be able to confide. We need to feel like we belong. We need to be able to get support and just as important for happiness, we need to be able to give support.”

This is a powerful concept for blended families to understand.  In a traditional family, a couple meet, they fall in love, they date, they marry, and then they have children.  This process can take years.  During that time, the couple learns about one another in a patient, romantic, and loving way.  They delicately learn to build trust in one another.  They confide in one another.  They spend hours, days, months, years fondly learning what the other likes, what motivates the other person, how they respond to conflict, etc.  Real conflict may not arise for years after they have been together.  By the time the children arrive, the couple has developed a strong foundation.  If the couple has not developed that strong foundation, divorce looms.  Because nothing will test a relationship more than children.  Marriage counselors report that most couples begin experiencing issues once children arrive.  Children test boundaries and cause parents to default to parenting techniques that the other may not share.

In a blended family, the relationship between the couple starts once the children have already arrived.  The relationship is tested from the beginning.  The process of building a foundation between the couple takes a very different path.  Real conflict is experienced almost immediately, and the couple is forced to learn how to deal with it.  Once again, if the solid foundation cannot be created between the couple, the marriage will suffer and divorce will loom.

Only this time, the pain tends to be greater and the losses seem to be more significant than ever.  For now a person with children has experienced two divorces.  Not many people would say that a divorce is not an extremely painful process.  To suffer more than one in a lifetime can be life-changing.  And now the children have seen not one, but two, relationships crumble.  They have witnessed their parent experience something truly depressing twice.  They may wonder what a good relationship looks like or feels like.  A good relationship may seem unattainable.  And for social beings like humans, this can be a devastating realization for children.

When a relationship is coming to an end, it can be traumatic for the individuals involved.  The relationship slowly devolves to a point where the couple see only the bad in one another.  Their hurt and rejection has amassed to a blinding level.  The parent with children may retreat into his/her relationship with the children, further isolating the other spouse.  The negativity spirals into a vicious cycle.  The children sense it.  A sense of hopelessness pervades the household and everyone in it.  Everyone copes with the process differently.  This can can cause further isolation of the family members.

The marriage ends.  And it is only then, as Dr. Gottman writes, that the couple realizes how much has been lost.  They have lost the companionship of one another.  They have lost the hopeful feeling they had at the beginning of the relationship.  They suddenly see the fragility of life and relationships.  They have lost their confidence and, in some cases, their sense of identity.  The stepparent usually loses their relationship with their stepchildren.  And the stepchildren lose the hope that a healthy relationship can be sustained, nurtured, and grown.

This does not need to happen.  These relationships can be saved.  And saving the relationship is as simple as creating a business plan.  In his brilliant book The EMyth Revisited, Michael E. Gerber discusses how the key to creating a plan is to organize it around your feelings.

As illustration, Gerber retells his experience at a barber shop.  He visited a barbershop and had a wonderful experience.  The barber used scissors instead of an electric razor, Gerber was offered coffee the moment he sat down, and the barber washed his hair for him.  The haircut was wonderful, and Gerber decided to return.  The second visit to the barber, the barber did not wash Gerber’s hair, Gerber was offered coffee, but not until later, and the barber moved to the electric razor earlier in the process.  Regardless, the haircut was wonderful, and Gerber again decided to return.

The third visit to the barber, Gerber was not offered coffee, but a glass of wine later in his visit, and the barber washed his hair again but did not use scissors at all.  Gerber admitted that the haircut was still wonderful, but he was disappointed.  Gerber was disappointed because there was no consistency between these experiences.  He wrote that he opted not to return to the barber.  He wrote that he did not talk to the barber about this experience or his needs because he felt silly saying how he really felt.

Apply Gerber’s brilliant assessment of the need for consistency in a business’ operations to a relationship and, especially, to a blended family’s experience.  Consistency is required.  Without consistency, no one wants to return.  This is not to say that everyone must constantly strive to please one member of the family.  This would ruinous to the family unit and to the situation.  Instead, all family members must participate in creating a consistent experience for everyone else so that everyone feels respected and part of the family.

My next blog post will focus on how to create that consistency.  Thanks for reading!

Should I Have a Will or a Living Trust?

A client recently asked me whether he needed a will or a living trust.  I told him that the answer depends upon the extent of his assets and his specific needs.  This post will help you determine whether a will or a living trust may be the right option for you.

A living trust is not for everyone.  In Minnesota, a living trust is a good option for unmarried individuals, blended families, individuals with closely held business interests, individuals owning property in other states, some individuals with large, complicated estates, etc.  It is important to know the approximate value of your estate and whether you anticipate your estate growing significantly or becoming more complicated at any point.

There are pros and cons to consider before drafting a living trust versus a will.  Before exploring these pros and cons, let’s consider the definitions of a will and a living trust.

What is a Will?

A will is a legal document that communicates whom you want to receive your property upon your death.  A will also communicates whom you want to be a guardian of your minor children, whom you want to be your personal representative, etc. upon your death.  You work hard to earn money to have possessions and property.  Many of us are closely tied to our possessions.  We also love our families and friends and want to take care of them after we die.  A will ensures that your property and possessions will be transferred to the people you want to have them upon your death.  This allows us to take care of those we love even after we are no longer with them.

Upon your death, even with a will, your estate will pass through probate.  Probate is a legal process by which your assets are distributed to those identified in your will.  The probate process settles your estate and your affairs.  Your property is gathered and inventoried, your debts are paid, and everything left over is divided among your heirs according to the provisions of your will.  Your personal representative is responsible for “probating” your will.  The probate process begins with an application filed with the probate court and ends when all debts and taxes are paid and all assets are distributed.  If there is disagreement over your will, a probate judge will resolve the differences.

You are not required to have a will.  If you die without a will, Minnesota law will control the division of your property.  Minnesota law mandates that, in the absence of a will, your property will go to your closest relatives.  If you are married and have children, the property will go to them in a manner specified by law.  If you are not married and have no children, the property will descend in the following order: grandchildren, parents, brothers and sisters, and then more distant relatives.

What is a Trust?

While a will communicates to whom you want to receive your property upon your death, a trust dictates the manner in which your property will be distributed to others upon your death.  A trust requires a donor (you), a trustee, and a beneficiary.  A trustee can be a professional with financial knowledge, a relative or friend, or a professional trust company.  The trustee holds the title to the property and manages the property for the benefit of the beneficiaries.  A beneficiary is the person to whom you would like to transfer your property.  This may be a specific person, a group of people, or an organization.

What is a Living Trust?

Specifically, a living trust is a trust you make while you are still alive.  If you are a parent, you could establish a trust for your child(ren) during your lifetime and designate yourself as a trustee and your child(ren) as beneficiary.  As the beneficiary, the child does not own the property, but is able to benefit from it.  Living trusts can be revocable (you can make changes to them) or irrevocable (you cannot make changes to them).

The most popular type of trust is the revocable living trust.  A revocable trust usually allows the trustee (you, in this case) to pay all income to yourself for life and to pay the trust assets to named persons after your death.  Don’t worry.  If the concept seems odd and redundant, then you are understanding it correctly.  The pro of a revocable living trust is that you continue to own and use your property during your lifetime, just as you would do with a will, and then your property would automatically be transferred to your beneficiary (your children, perhaps) upon your death.  Revocable living trusts avoid the probate process.  Revocable living trusts, however, do not shelter assets from federal or state taxes.

An irrevocable living trust is usually set up to reduce estate or income taxes.  For tax purposes, the trust becomes a separate entity.  Assets cannot be removed nor can you make changes to the trust.  In most cases, you cannot be sole the trustee without losing the intended tax benefits.  For these reasons, irrevocable living trusts are less common than are revocable living trusts.

Which is Right for Me — a Will or a Living Trust?

There are pros and cons of creating a revocable living trust versus a will.  The pros are as follows:

  • With a living trust, you are allowed to appoint a trustee with financial expertise to manage your assets during your lifetime.  The trustee might charge a fee of around 1% of the total amount of the property in the trust. A trustee could help you invest your assets, arrange for payment of your bills and debts, file your tax returns, etc.  You could also establish yourself as a co-trustee for added control of the trust.  Having a trustee with financial expertise manage your assets is particularly useful if you are having difficulty managing your financial affairs.  Specifically, if your estate exceeds $500,000, if you have property in other states, numerous cumbersome financial obligations, closely held business interests, this could be the right option for you.
  • You can protect your privacy regarding the distribution of your assets.  A will mandates that an inventory of your estate’s assets be filed with the court.  The inventory is, therefore, public information.  A revocable living trust, on the other hand, is privately handled upon your death.  Typically, only the beneficiaries of the trust will be informed of the nature and the value of the assets.
  • Probating a will typically takes time.  With a revocable living trust, trust assets can usually be distributed to beneficiaries almost immediately after your death.
  • If you own land in another state, like a cabin in Wisconsin, a revocable living trust might help you avoid a probate proceeding in the other state.

There are also some cons in establishing a living trust versus a will.  First, transferring property into a revocable living trust may make you ineligible for Medical Assistance.  Second, if you are also the trustee, you have an obligation to protect your property, not just for your benefit, but for the benefit of the beneficiaries (i.e., your children).  This obligation is a high standard.  You will be required to follow the terms of the trust and the law in good faith and with loyalty, confidence, and candor to the beneficiaries.  There may be times when your personal interests in your property will conflict with the future interests of your beneficiaries.  This can create a conflict, and you may be forced to favor the interests of your beneficiaries over your own interests.  Finally, you may also need a will in addition to a living trust, if not all of your property goes into the living trust.  If your assets are disposed of by will, they will have to be probated, negating the advantage of the living trust.

Contact Excelsior Law Firm, L.L.C. with any further questions or to obtain a free consultation to determine which estate-planning instrument is right for you.