News Column

Bequeathing a legacy

July 20, 2014

By Winthrop Quigley, Albuquerque Journal, N.M.

July 20--An estate plan could include a will, powers of attorney, end-of-life directives, charitable remainder trusts, special needs trusts, business succession agreements, and any number of tax-avoidance strategies.

Believe it or not, that can be the easy part.

Experienced estate-planning advisers say the hard part is knowing yourself, being honest about what matters to you, and, possibly, confronting some unpleasant realities about your family life.

"It's not how complicated a will might be," said Nell Graham Sale, an estate and tax lawyer with the Pregenzer, Baysinger, Wideman & Sale law firm in Albuquerque. "It's all the things you have to think about to come up with an estate plan that truly express your wishes and your values.

"The mechanics of estate planning are the arrows in the quiver. We can pull out all of these devices to come up with the mechanics to solve problems people pose to us. But it comes down to what are your values and what kind of legacy do you want to leave?"

Money is just a tool, said Michael D. DeVenzeio, a vice president with Wells Fargo Bank Wealth Management in Albuquerque. The goal of an estate plan is to put money to work in the best possible way.

"What do you see 10 years from now, 25 years from now, 100 years from now?" he said. "What difference would you like to make in your children's lives, to a charity, to your nephews' lives, to your university? What is the most beneficial use for your money?"

The problem with those questions, DeVenzeio said, is that the answer often is: "I don't know. I've never thought about it."

"You can't ask someone, 'What is your value system?'" Sale said. "That's not a question most people can answer. It's too abstract."

Instead, planners ask about the client's family, hobbies, interests and vision for the future. It is a process that can take hours and multiple meetings.

Family culture key

At the end of the process, estate planners know a lot of family secrets and a great deal about a family's culture. Those insights wind up in estate plans.

Some heirs are disabled, so any assets they inherit may render them unable to receive public assistance such as Medicaid, said Mary Ann Green, an estate attorney in Albuquerque. Another heir might be a spendthrift who could blow through an inheritance in a matter of months if he is not protected from himself.

Or a grandparent who may want her estate to pay for college for the grandkids could have a daughter who doesn't value education at all. A potential heir might share your values about child-rearing but not your values about money.

"You have to look at the personalities of all these people" when thinking about estate planning, Green said.

There are ways to handle all of these issues, she said. A disabled heir's inheritance can be directed into a special-needs trust that will protect his eligibility for public assistance. Funds can be left to an education trust for the benefit of the grandchildren.

The worst thing you can do is ignore the issue.

"A lot of people say, 'Well, I'll be dead,'" Green said. "That's a terrible attitude. They leave behind all kinds of bad feelings."

It is precisely a reluctance to confront these family-culture issues that keeps many people from visiting with an estate planner, Sale said. Family dynamics are shaped by alcoholism, domestic abuse, divorce, intergenerational differences, religion, marriage, step-children, you name it.

"I've learned over the years I can't fix families," Sale said. "But I can try to bring out in a gentle way what I see to be the culture of the family and help the people I'm working with to relate to that."

Some families, for example, equate love with money, she said.

"I'm not critical of that. That's just how the family operates. So the clients feel the need to express affection for different family members based on how much money they give them," she said.

In Green's experience, some of the worst feelings arise when a parent favors one child over another, usually because the parent thinks one child needs the money more than another, one will handle the money better, or one is more deserving for some reason. She urges clients to bequeath funds equally among children, if at all possible.

'Who wants my watch ?'

Distribution of personal property can be another sore point, Green said.

"There are personal household effects of no value, or parents don't think they have value, but which have sentimental value for the children," she said. "There are more fights over personal effects than finances, I think. I've seen people fight over Avon bottles."

As painful as it can be, Green recommends parents create a list of personal effects, then ask their children if they want any specific items. Still, she acknowledges "it's morbid to sit around the Thanksgiving table and say, 'Who wants my watch?'"

One of the more complicated family-dynamic problems occurs when a big part of an estate is the family business, DeVenzeio said.

Often a couple of children work for the business and a couple don't. The challenge is to give the kids who don't work for the business their fair share of the estate without forcing the kids who do work for the business to sell out in order to divide the assets fairly.

One solution, DeVenzeio said, is to buy an insurance policy that will pay enough of a benefit to buy out the heirs who don't work for the business.

People are often inclined simply to pass on the entire estate to the kids, and, if there are no kids, to nephews and nieces. But what if the kids are 60 or 70 years old? "I discuss with clients why they want to give their entire estate to those children," Sale said. "They should have estates of their own."

As for nephews and nieces, Sale said, you should keep in mind that "these are people you have no duty to support." Rather than bequeathing money to less-immediate relatives, Sale suggests giving to charity.

"I'm a strong advocate of charitable giving, not necessarily for tax reasons, but as a way of expressing values," she said. "When you give money to children, it's their values that determine how the money is spent."

But even charitable giving has to be thought through properly.

DeVenzeio had a client who wanted to support health charities and planned to divide his estate among several well-known national organizations. DeVenzeio suggested that "rather than giving it to 1-800-New-York," the money could go to the local affiliates of those organizations, which needed the funds more.

People find all sorts of ways to express their values. Another DeVenzeio client had no family but owned horses.

"Her horses were like her family," he said.

She found people who could take care of them after her death and established a trust to pay the horses' expenses. When the last horse died, the remaining funds in the trust went to charity.


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Source: Albuquerque Journal (NM)

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