Beyond the Grave, Revised and Updated Edition

Jeffery L. Condon

• Publisher: Harper Business
• Year: 2014
• ISBN:
  9780062383402
• Topic: Economia
• Subtopic: Finanza pubblica

This expert, one-of-a-kind handbook shows you how to

• ensure that your inheritance instructions will be carried out the way you want them to be;
• protect your children's inheritance from creditors, ex-spouses, addictions, tax troubles, mismanagement, squandering, and other risks of loss;
• prevent family conflict that can arise when parents die and children divide the "family money";
• leave more money to your children and grandchildren, and less to the IRS;
• avoid creating inheritance problems in your family with "cautionary tales" of inheritance planning gone bad;
• understand why you still have to deal with estate tax issues even if your net worth falls below the new death-tax-exemption.

Part I

Introduction

1

The Journey from Innocence
to Cynicism

or

You Really Don’t Know Your Children—
Until They Divide Their Inheritance

When I was a younger attorney, I was innocent in my approach to human nature. When my clients told me there would never be any inheritance conflicts between their children, I believed them. After all, who was I to dispute my clients’ conclusions about their children?

Nothing, however, prepared me for the harsh reality of human conflict when my clients’ “perfect” children divided their inheritance. Lawyers are not taught to recognize inheritance conflicts in law school. There are no “how-to” books or classes on this subject. The only way to learn about inheritance conflict is the hard way—from dealing with the children after both parents die.

Your “Perfect” Children

I typically hear this from people who attend my seminars: “Mr. Condon, I don’t need this book. Your clients’ children may do combat over their inheritance, but my children will not. They love each other. If an inheritance conflict comes up, they will work it out.”

Let me respond this way. In every literate society, there is this saying about inheriting wealth: If you really want to know a person’s true character, share an inheritance with that person.

This is sage advice. Having observed what happens between children following theirs parents’ deaths, I have arrived at one indelible conclusion: Your children may be perfect—but you really don’t know them until they divide your money.

Perhaps you will better understand my point after you read the story of Arthur and Hetty, the hallmark case in my journey from innocence to reality.

The Sad but True Tale of Arthur and Hetty

The voices of Arthur and Hetty are as clear today as they were twenty-five years ago. They said, “Mr. Condon, our children are absolutely perfect. They love each other, and there will never be a problem between them.”

The inheritance plan I drafted for Arthur and Hetty was very basic. Everything they owned would be left equally to their three children: David, Mark, and Jennifer. About twenty years later, Arthur died; Hetty died a few years later, and their children came to my office to sign the documents that gave them their inheritance.

My meeting with David, Mark, and Jennifer could not have begun more pleasantly. They talked about how marvelous their parents were, how hard their parents worked, and how their parents sacrificed themselves and did everything they could do for their children and grandchildren. This was a conversation that would gladden the hearts of any deceased parents.

They ultimately came around to how wonderful Arthur and Hetty were to put David through Stanford undergraduate and medical school. With this comment, the room grew strangely quiet, and Jennifer’s CPA husband stared off into some forlorn corner of my office.

Jennifer’s husband wasn’t admiring my office décor. He was making quick calculations in his head.

A few moments later, Jennifer’s CPA husband announced that with books, tuition, rent, food, and fraternity dues for David’s undergraduate studies, and with similar payments for medical school, Arthur and Hetty must have spent about $250,000 on David’s education. On the other hand, Mark went to the local junior college and became a real estate broker. Jennifer never pursued higher education of any sort.

I sensed that the joyous and good feelings among the children were rapidly deflating. A silence ensued following the realization that Mom and Dad had spent almost a quarter of a million dollars on David’s education—and literally nothing for Mark and Jennifer.

Jennifer finally broke the ice after this awkward moment. In a voice that can only be described as “cutesy,” she said that if Dad and Mom had thought about it, they certainly would have equalized. They certainly would have left extra money or property to her and Mark to make up for their lavish support of David.

The implication Jennifer had made was this: If David was a morally upright person, he would now give a portion of this inheritance to his brother and sister to make up for their parents’ failure to equalize.

But not a word was heard from Dr. David, and I noticed Mark and Jennifer staring at their brother. Finally, after a long, awkward silence, Jennifer’s husband icily quipped to his wife, but loud enough for all to hear, “Well, I guess your parents just didn’t love you as much.”

So much for family loyalty and “perfect” children. To this day, David no longer speaks to his brother and sister. This chasm has transcended the generations, as David’s children have no contact with Mark’s and Jennifer’s children.

And the grandchildren have no idea why.

The “Inheritance Gene”

If you have shared an inheritance with anyone, you may know of what I speak. Like Arthur and Hetty’s “perfect” children, people simply behave differently in the inheritance arena. It is as if a special “inheritance gene” deeply recessed in the human body surfaces to change a person.

What is it about dividing an inheritance that leads to the most unpredictable and unforeseen conflicts between children? Why does dividing the inheritance breathe life into long-dormant irritations between children, daughters-in-law, and sons-in-law?

The answer came to me only after years of on-the-job training in dealing with my dead clients’ children. After you are gone, your children may still be your children, but they are also people dividing your money.

And when money becomes involved, it is a whole new ball game.

Other Benchmarks on the Road to Reality

Inheritance planning is more than just preventing and resolving inheritance conflicts. It is also recognizing the numerous other inheritance problems that may rear their ugly heads.

When I started in this business, I simply could not fathom the myriad problems and risks that often surface in inheritance situations. At this point, after all the years of seeing what happens when wealth is transferred to heirs, I believe I have witnessed the entire Parade of Horribles.

I have seen the surviving spouse who lost the family money to the last caretaker.

I have seen the daughter who lost her inheritance to her husband in a divorce.

I have seen the son whose business creditors “ate up” his entire inheritance.

I have seen the son who casually disregarded the inheritance instructions made by his parents in their Living Trust.

I have seen the charity that used my client’s money to buy Cadillacs for its directors.

I have seen clients’ heard-earned money and property end up with their daughters-in-law’s second husbands.

I have seen the children who had to give the IRS nearly one-half of their inheritance in death taxes.

I have seen the daughter who magnanimously bestowed her entire inheritance to a cult.

I have seen the son who was supposed to handle his disabled sibling’s share of the inheritance but who instead put it in his own pocket and walked away.

As I am extremely fond of pointing out, recognizing a problem is 95 percent of its solution. In this book, I will open your eyes as mine have been opened during my transition from innocence to cynicism. I will show you the many fates that may befall your family in the inheritance arena. I will bring your attention to problems and issues in inheritance planning that you may not have otherwise considered. I will show you risks your money and property could be subject to once they are in the hands of your children, spouse, or other heirs.

By making you aware of these problems and giving you solutions, I hope to help you avoid the traps that so often hurt those whom you only sought to help.

2

Why an Inheritance Plan?

or

Seven Challenges from
Beyond the Grave

Think of your Will or Living Trust as a computer—a very powerful computer. It is so powerful you can program it to send a rocket ship to the moon. But you use it only to write your checks.

My point is this: If you are like most people, you will fail to use your Will or Living Trust to its full potential. You will use it only to say who gets what. For example, if you have three children, your inheritance plan probably states that when you die, they will inherit one-third each. End of story. And when you die and your estate is distributed, your inheritance plan “dies” with you.

Your inheritance plan, however, should be more powerful than that. You should program it to live on after you die. It should be your “periscope from the grave” to accomplish the “Big Seven” goals of inheritance planning.

Goal Number 1: Program Your Inheritance Plan to Prevent Inheritance Conflicts among Your Children

Your plan should minimize the likelihood of conflicts, jealousies, bitterness, and after-death disputes between your children.

For example, take Arthur and Hetty, whom I told you about in chapter 1. They gave substantial dollars to one child for his medical education but failed to equalize between their other children. Had Arthur and Hetty used their inheritance plan to equalize, all their children might be on speaking terms today.

However, Arthur and Hetty never once gave any thought to equalizing among their children. They assumed, as do most of my clients, that each child and each son-in-law and daughter-in-law would act perfectly when they divided the inheritance.

Goal Number 2: Program Your Inheritance Plan to Protect the Inherited Money from Your Children’s Potential Problems

If you are like most people, it is important to you to protect your money and property from risk. Accordingly, you have taken steps (or will in the future) to shield your assets from the human and economic problems that may arise in your life.

Doesn’t it make sense to provide for the same protections once your wealth is in the hands of your children? Indeed, once your children inherit, your money and property become subject to the winds of their fates.

Your son gets a divorce? Your ex-daughter-in-law may wind up with a portion of your son’s inheritance.

Your daughter runs into financial problems? Her inheritance may be “eaten up” by creditors.

Your son’s business fails? His inheritance may fall into the hands of the bankruptcy trustee.

Your daughter causes an auto accident an...