Cindy and Bill have raised four great kids and they have a close-knit family. Lately, however, the situation is far from picture-perfect with one of their children, Tony. Following a surgery, he became addicted to the pain killers that were prescribed for him, and Tony fell into a substance abuse problem that he continues to deal with. Cindy, Bill and their other children are trying to get Tony the help and support he needs. Meanwhile, Cindy and Bill found themselves struggling with how to treat Tony in their estate plans, torn between a desire to take care of their children while not wanting to feed Tony’s addiction.

One solution can be to provide for the beneficiary or child through a trust, subject to certain restrictions so that the individual doesn’t just get the money to do with it whatever they please. A trustee in place or a third party will make sure that the assets are not dissipated or used for improper purposes.

This way, the trust is limited to taking care of a beneficiary or child’s health, welfare, housing, or education as appropriate. The assets will be preserved, rather than provided directly to someone who is not capable of responsibly handling them.

Generally, there must be a deposit of certain money, investments, or other assets into the trust. Then all requests and payments can flow through the designated trustee, so they only are made for treatment or support, and then directly to the provider.

That way, the beneficiary does not have the ability to get to the assets directly, nor to handle any payments. Instead, the assets are used to cover their needs.

What happens once they get the help they need?

Let’s go back to the example of Tony, the troubled child of Cindy and Bill. He’s now gone through a treatment program successfully and after quite some time, it’s clear that he’s put this painful chapter of his life behind him. He’s living a healthier life. With this in mind, can he now get a different portion as outlined in the estate plan as his life has changed for the better? It depends on how the trust is structured.

Addictions are strong. It’s good to have certain options in your estate plan to protect against a relapse. If they have completed treatment and made a recovery, the question becomes whether the trust should continue as is, be distributed in whole or in part, or whether any terms should be changed. That depends on what the trust allows, as well as the inclination of the trustee based on the progress made by the beneficiary.

While a trust can act as a restrictive mechanism for the protection of the assets as well as the beneficiary, a trust also is a vehicle that can provide some hope, by making sure that there will be some ongoing support for the beneficiary during post-treatment recovery. When set up in this manner, it may alleviate the stress of re-entry into a normal routine.

If you’re seeking answers during the estate planning process of how to account for a family member struggling with an addiction or simply financial mismanagement, making a plan to account for them while reflecting your wishes is very possible. Talk to Windy City Legal to learn how to make it possible.

Clients often express a desire to leave their estate to their children in equal shares. But when the estate includes a family business, that might not work.

For example, consider a situation where the father, Frank, has spent the last several decades creating and building a family business. Now as Frank ponders retirement, he wants to leave the business to his three children, Amy, Brian, and Colleen.

Amy is intensely interested in the business and has been working in it for the last several years. She knows the systems, processes, products, and clients. In fact, as Frank wanted to step back, Amy picked up the slack. She is ready to go immediately, so that the business keeps making money.

Brian is totally uninterested. He is an outdoorsman at heart, and hates the idea of being behind a desk of any kind.

Colleen has the aptitude for the business, but has a consulting job that has her working long hours. She is often out of town at client locations, and does not have the time to put into the family business.

Dividing everything equally would be unfair and impractical. Amy would be putting in all of the work for only a third of the profit. That is a recipe for disputes among the three children. It also may create other problems that arise in operating a business with absentee owners, from morale problems to governance issues. Worse yet, it would be possible for Brian and Colleen to out-vote Amy in any significant business decisions, even though they do not have any experience with the business or its operations, employees, culture, or products.

In other words, this is a case where an equal division would be unfair to Amy – and potentially also harmful to the business itself and to its employees.

Instead, Frank might think about other allocations of assets. One possible way is to designate the business to Amy and other assets for Brian and Colleen. A different strategy may be for Frank to purchase life insurance for benefit of Brian and Colleen to give them reasonably equivalent value. And there may be other possible solutions.

Estate planning fortunately allows a lot of flexibility to tailor a solution, and to avoid the kinds of situations that can impose stress on both the business and the family. If a small business is in the family, it pays to make sure that it will not fall apart because of – or due to – an unsuitable allocation among beneficiaries or a succession plan that does not consider the interests, pursuits, or strengths of those that will be involved.

One of the inevitable questions that comes up in estate planning is who to designate as the executor of your will.

It should be:
– Someone you trust,
– Someone who is organized, and
– Someone who is diplomatic.

Why?

Nominating someone you trust is a clear necessity. An executor will be responsible for collecting information about the assets you own and the liabilities you owe, paying off any debts and taxes, and then eventually distributing the estate according to the terms of the will. You must have confidence in whoever is entrusted with such information and duties.

Gathering the assets and liabilities requires some organization, particularly as statements from creditors and accounts owed roll in. Creditors may include utility service providers, open credit card accounts, home loans and mortgages, car loans, consumer installment contracts, medical service providers, subscriptions, clubs and societies that you belong to, insurance, and on and on. Assets may include bank and brokerage accounts, retirement accounts, insurance policies, real estate, personal property, and more. There potentially can be a lot to get organized, and someone who will approach it systematically is likely to be a strong choice.

Finally, the larger the family, the greater the number of people who have a potential interest. That can also increase the potential for a dispute, whether based on emotions or family history or perceived unfairness. Having a diplomatic executor who can deal with such issues — particularly at a time when emotions can run high — may be best able to keep the family on track and focused on moving forward together, and to diffuse any tensions that build up.

When Shannon and Joe executed their Estate Plan, they were delighted to have a plan that reflects their true wishes, and even covers a variety of “what if” scenarios.

“Now we have that out of the way,” they thought.

Only a few years later, some things in Shannon and Joe’s life began to change. They became proud grandparents, then decided to move to be closer to them. Joe started talking about selling his business earlier than he originally thought he would. And they began talking about how to help fund college for the grandkids.

These are not rare and unheard of circumstances, but they can impact the estate plans. And other unplanned, less fortunate circumstances can arise too.

So how do you deal with the unplanned in estate planning?

1) Replace “One and Done” with Estate Planning that can change with you.

Some things you can see coming and some things you can’t. After all, life has its ups and downs. That’s why the best approach to estate planning is not to have a “one and done” mindset.

Instead, we emphasize revisiting the Estate Plan every so often ,including for each phase of life and each major life event. We don’t want to think about your life’s work being a single conversation or document that you sign and gradually forget about. We want it to be something that grows with you, changes with you, and reflects where you are now as well as where you’re trying to go.

2) Build a plan to address many “what if” scenarios

When you build your estate plan to take certain “what ifs” into account, you can better recalibrate where necessary, such as appointing different agents or reconfiguring the beneficiaries of certain things.

There are also major life events that should be taken in account. Weddings. Births. Job changes. Perhaps divorce. Eventually death. How will these kinds of events impact what you have or want in the estate plan? It’s possible that such an event leads you to change certain allocations, or to add or subtract provisions to take care of certain family members. In addition, there may be insurance or retirement accounts may need to be updated.

So rather than view the structure of your plan as permanent, look at it as a foundation you are continually building upon, re-shaping the structure where necessary.

3) Assume there will be law and technology changes

Over time, the law changes. For example, changes to the estate tax from time to time have changed certain estate planning priorities, and have led to different planning opportunities. Also, the enactment of HIPAA increased the healthcare-related documentation often included in plans.

We’ve also seen technology changes, such as the increase in online transactions through email, financial accounts, and even online photography through Instagram, Facebook, etc. It’s now important for an agent or executor to be able to access these kinds of digital accounts. That wasn’t an issue years ago. However, as technologies evolve, things change — and as they do, certain provisions in your estate plan may need to be updated.

Life isn’t a simple plan – make sure your estate plan can keep up.

If you don’t review an estate plan periodically, you’re taking a chance that you outgrow it. This creates a potential situation where you have documentation that doesn’t reflect your present set of circumstances.

Instead, with an estate plan that’s regularly updated, you can rest easier knowing that for all of life’s changes, you’ve done everything you can to account for where you are today, and what your wishes are for tomorrow.

John and Jessica are ready for a long and happy life together as they’re getting married in a few months. They’ve even decided to sit down with an estate planning attorney to talk about the long haul and putting some paperwork in place that expresses their wishes.

Just as they head off to their appointment with the attorney, Jessica turns to John and says, “You know, should we really talk to someone about this right now? After all, we’re going through a big change. Let’s just do this a few months after we get settled. Then we’ll have a plan that matches where we are.”

John agrees. A few months later won’t hurt anything. Of course, a few months stretches into a few years. That’s when John asks his spouse, “Hey, I think we should talk to our attorney about a will.” Jessica responds, “I’m all for it. But look, we’ve got a lot of big changes coming up – what with the baby arriving in six months and then we’re planning on moving into a bigger place. Let’s just wait until things settle down. Then we can have a plan that syncs up with our life at that point in time.”

But when is life ever truly “settled”? It seems like there always will be an impending life change happening. The instinct in people like John and Jessica is to wait until the change occurs so they can address estate planning to match their circumstances, but by the time they get past one event, another change will be on the horizon.

How to Break the Cycle of Fear and Make Estate Planning Real

A common fear of doing estate planning is that if you put plans in place today, those plans will be set in stone or inconsistent with your needs in no time. Instead, remember that life isn’t static and change is going to happen. This is not a reason to choose to do nothing at all.

In fact, it’s when you know there’s a change coming up that you have an incentive to create or update your estate plan accordingly. But a significant life event does not always change the structure of your estate plan, and does not necessarily mean having to start from scratch just to account for the update.

If you carry the assumption that you can’t take action right now, however, that attitude may result in you never taking any kind of action.

Plan. Pivot. Repeat.

At Windy City Legal, we see clients who are going through changes great and small. The big changes can consist of events like a marriage, birth of a child, divorce, or the recent sale of a family business. There’s no doubt that these can change the picture of your estate plan. But remember that we can pivot the plan to face such change when we need to. Change, regardless of the degree of it, is not a reason to hold off on estate planning. Nor is it a reason to hold off on updating as you go.

So rather than pressing the pause button and waiting for some mythical point in time when life “settles down,” seize the moment to tackle estate planning with us now.