This time of year is generally associated with new beginnings, but life doesn’t always abide by our schedule. In December, my mother-in-law passed away. My own mother is approaching her 90th birthday in February, and each day, she faces a new opportunity. But us children know that one day, she will pass too. All of us are mortal and only have so much time on this planet. So, aside from grief and existential questions, what happens after you’re gone? You should know what your beneficiaries — the people you love — can expect and how your assets will be handled.
When you have a will, matters are relatively simple. A judge is in charge of your assets and will distribute them based on the law and what you’ve written in your document. It’s a bit more
complicated if you’ve opted to use a trust. When your assets are held in a trust, your power of attorney and any other documents become null and void, and the trust will take precedence. A beneficiary you selected will become the successor trustee and run the estate until all of the money has been distributed. They will need to notify your financial advisor and banks and provide the death certificate and a copy of the trust to prove that they have authority over your assets. Once they do, the assets are frozen and liquidated, and they can only be deposited into the trust account. The person in charge of your trust has legal fiduciary duties. They must follow your written instructions to the letter. If there’s any ambiguity in the trust, it not only creates difficulty but also puts your successor trustee at risk — someone else can use the uncertainty to litigate. It’s also important to note that your fiduciary needs to fulfill the obligations of your trust to the wording, not your intention. If, for example, you allocated $50,000 to a favorite charity, but the estate has been reduced to $40,000 by the time of your passing, the charity will receive the entire estate and leave nothing for your other beneficiaries. Since your assets change, we recommend you use percentages rather than dollar amounts when creating your trust. It’s much cleaner and allows your true intentions to be upheld.
Sometimes, parents may make decisions with their assets that their children won’t
understand. Often, a parent will leave more money to one child — not to punish any other children, but because they’ve received less financial support throughout the parent’s ifetime. Even if they did receive assets earlier, a child might still be surprised when they receive little or nothing out of the estate. It creates an unwinnable situation for the person running the trust.
Other family members will frequently inundate them with requests to distribute the estate more “fairly.” These matters often result in hurt feelings and create a wedge between family members. They also can create legal issues for the successor trustee. If that’s not your intention, you should take the opportunity to write a note to each of your children. Include how much you love them, how proud you are of them, and the good times you remember with them. Then, include an explanation for why you’ve allocated your assets as you did. In many cases, that heartfelt letter and a description of how you’ve tried to be fair to everyone will mean much more than money ever could. Handling a person’s assets after they’re gone
is not an easy task — there’s much more than I’ve been able to include in this article. Whoever is in charge of running your estate when you leave this earth or become incapacitated needs to understand their legal obligations. I strongly suggest they attend a workshop for this purpose. Educational opportunities are available in person and online; either way, they should know what to expect. You probably recently gathered for the holidays and had an opportunity to spend time with the people you love most. In passing on your assets, you don’t want to hurt them — financially or emotionally. None of this is legal advice. Instead, while you still can, I’m urging you to tell the people you love how much they mean to you. It’s a gift that far exceeds any other.
-Gary Mattson