Signing the paperwork is just one piece of the process. Here’s how we help make sure your estate plan works when your family needs it most.
By Corey Vertich, Uhler Vertich White Advisors
When I tell clients it’s time to talk about their estate plan, the reaction is almost always the same. They know they need to do it. They also have no idea what they want, because they don’t know what their choices are, and that confusion is enough to stop most people before they begin.
I tell them the same thing every time: Don’t think about it.
Don’t try to work it out ahead of our meeting, and don’t lose sleep over decisions you haven’t been given the information to make yet. I will guide you through the decision-making process to get you from here to done.
Today, I’m sharing what that guided process uncovers, and why advanced estate planning for families with substantial assets so rarely comes down to the things people expect it to.
Related: Click here to read “Estate Planning Conversations, Part 1: What Impact Do You Want to Have?”
Are Your Children Ready to Inherit Your Wealth?
Structuring an inheritance well takes knowing who’s receiving it, how they live, and what a sudden influx of money would mean for each of them.
That’s why, when we get to the part of the conversation about beneficiaries, I start by asking about your children:
- How their marriages are doing
- What their own children are like
- How each of them handles money, and whether they’ve managed to save any of it themselves
Once I have that picture, I ask the closing question: if this money arrived in their hands tomorrow as a lump sum, do you see any challenges? I ask in that order on purpose, because I want to understand your family before I suggest anything.
A couple once came to me to help set up an inheritance plan for their adult daughter, who had never done well with money. They wanted her inheritance in a trust so it could provide for her throughout her lifetime without it being spent all at once. Whatever remained in the trust after the daughter passed away would then transfer to her brother, rather than her children.
They had their reasons, and their reasons were sound. What they hadn’t considered is how that decision tends to land on the person receiving it. I’ve seen this play out more than once. The brother learned that he inherited what his sister’s children did not, and he felt obligated to hand over the money. The plan did exactly what it was drafted to do, and the family undid it anyway.
Before drafting anything, I asked them to have an honest conversation with their son: Tell him what you’re considering, ask him honestly how he feels about it, and don’t let him find out after you’re gone. If he tells you he’s comfortable with it, we’ll build it exactly the way you described. If he tells you he isn’t, we won’t put him in that position, and we’ll find another structure that accomplishes what you want.
Pension-style trusts
For children who would struggle with a large inheritance, a pension-style trust can potentially provide income for life rather than a single lump sum.
Adult children typically love the consistency and protection built into a pension-style trust. In all my years, there is only one beneficiary I can remember who didn’t love hers at first. The parents left her sister an inheritance outright, but placed this daughter’s share in a pension-style trust. The parents weren’t doubting their daughter; they simply wanted to ensure her inheritance remained distinctly hers, fully protected and separate from her husband’s assets.
Heartbroken, she called me asking why her parents treated her differently. I walked her through their intentions, the protection the structure offered, and how it would support her month to month. Three years later, she and her husband loved the setup so much they wanted to create the exact same plan for their own children.
Charitable giving
Most families put children first and charity second. When there are no future heirs, philanthropy often takes center stage.
One client originally planned a standard trust for her son, with whatever remained going to charity if he had no children. A large portion of what she was leaving him was an IRA, which would have created some difficult tax consequences inside the trust and produced less income for him as a result.
Because we were certain of her intentions and he’d settled on not having children, we were able to look at a charitable remainder trust instead, which could provide him the same income while directing the principal to the charity she cared about. He receives what she wanted him to receive, the charity receives what she wanted it to receive, and the tax burden on the principal is lifted.
Protection From Creditors, Predators, Lawsuits, Bankruptcy, and Divorce
The second concern parents raise most often is whether the money can be protected once their children have it. Think of it like this:
- If I leave money to you outright, it’s yours. You can do whatever you want with it, but if you’re sued, you can lose it. If you divorce and you’ve commingled the assets, which most people do, half of it can be lost. If a business decision goes wrong and you need to declare bankruptcy, those assets are exposed to your creditors.
- A trust, on the other hand, is its own entity. Your child is the beneficiary, defined as the only person on this planet permitted to benefit from that money. The trustee follows the instructions under the terms of the document to disburse the inheritance, but the principal isn’t technically owned by them or your child.
Additionally, we often include a provision stating that if your child is under duress, such as being compelled by a court to pay money to satisfy a divorce or bankruptcy, the trustee has the right to decline the distribution. Then, the trustee can pay their mortgage, car payment, credit card bill, and so on. Your child is still looked after, and the income never lands where a creditor can reach it.
For many families, we recommend a corporate trustee, and the corporate trustee we most often use is based in South Dakota (a state generally recognized as having strong creditor protection statutes). How those protections apply to any individual situation is a legal question for your attorney, though it’s one more layer we consider when we structure a plan.
We’ll Look After Your Loved Ones When You’re No Longer Here
The third concern parents raise, and often the one they raise last, has nothing to do with structures at all. They want to know who will look after their children and their money once they’re gone.
Uhler Vertich White is a firm, not an individual. That distinction becomes meaningful in the years after the documents are signed, because the people who helped you build this plan are the same people who will be here for your children, and for your grandchildren, and for their children after that. We supervise the inheritance you leave behind, manage it, maintain it, and watch over the family who receives it.
When the time comes, we spearhead the settlement of your estate. Your family isn’t left figuring out who to call or wondering whether something important was missed, because everything is already in place.
Working with your attorney
Once we know what you want, you never have to relay it. We go with you to your attorney and explain the plan, so nothing is lost in translation.
Then the attorney drafts the document, and we read it. I like to say that attorneys write the documents, but we’re the ones who have to use them. We read every trust twice: once to confirm it says what you told us you wanted, and once as the people who will one day be interpreting it, looking for anything that might cause a problem down the road.
A brief word on incapacity
Incapacity planning is the most overlooked part of an estate plan. People sign a power of attorney and a healthcare surrogate, assume they’re covered, and never test how those roles work in real life. To find the blind spots, we run a “fire drill” to map out who controls what if you’re unable to manage your affairs.
A frequent issue arises when your trustee controls trust assets, but your power of attorney (POA) controls everything outside the trust (like your IRA). If two different people hold these roles (say, a bank as trustee and your son as POA), your son might pay your daily care bills using taxable IRA funds simply because accessing the trust is more cumbersome.
We resolve these conflicts in advance. For example, in this scenario, we may name your son as backup trustee during incapacity and letting the corporate trustee step in later.
Protecting Your Loved Ones and Your Legacy With Confidence
Many families have a will or trust sitting in a drawer. Our clients have a living, breathing strategy that evolves with them through generations, coordinated across their entire financial picture, and managed by a team that knows exactly where everything is and why it matters. Every year at your annual review, I ask whether anything has changed in your family or your intentions, and I look at your circumstances myself to catch what you may not have thought to mention.
We are here to help guide the conversation with your estate attorney, ask the right questions, and help make sure everything is positioned to serve your values and protect your family.
Key Takeaways:
- What do parents worry about most when they’re leaving an inheritance? They worry about whether their children can handle a large sum of money, whether that money can be protected once it’s in their hands, and who will look after their children after they’re gone. Those three concerns drive nearly every estate planning decision we make together.
- Why does it matter how an inheritance is structured? Because money left outright belongs entirely to your child, which means it’s exposed to creditors, predators, lawsuits, bankruptcy, and divorce. Money left in a properly drafted trust may be protected for their entire life, and can pay them an income that will always be there.
- What happens after the estate planning documents are signed? We go with you to your attorney, so you never have to relay the plan yourself. We read the documents as the people who will have to use them, and we revisit your plan during your annual review every year. When the time comes, we spearhead the settlement of your estate.
I’ve seen too many families discover complicated things after it’s too late to fix them. I don’t want that to be you. If you’re not yet working with our team but are ready to explore what a truly coordinated approach looks like for your situation, let’s talk. Schedule a complimentary meeting today.
Every investor’s situation is unique, and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation.
The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Corey Vertich and not necessarily those of Raymond James.
You should discuss any tax or legal matters with the appropriate professional.