Top Seven Estate Planning Strategies to Guard Family Harmony

How do I keep my family together after I’m gone? How do I protect my children’s inheritance? How do I choose a Trustee? Should I disinherit an estranged child? Can I protect my estate from my child’s divorce? How do I make sure my children follow my Estate Plan? How do I set up an Estate Plan to avoid conflict among siblings?   

By James L. Cunningham Jr, Esq.

When people talk about Estate Planning conceptually, it’s usually all about the money. But I find that when I meet with people personally, money only scratches the surface of their estate worries.

That’s because your Estate Plan is never just about the numbers. It’s never only a representation of your bank account; it’s a representation of your legacy, your life, and your goals. The decisions you make when you build your Estate Plan have the power to change your family’s future for multiple generations—including your family’s vital cohesion and personal relationships.

In this blog, I want to talk about a crucial issue that is too often glossed over by attorneys: How do you make sure that your Estate Plan won’t drive family drama and split your loved ones down the middle?

I’ll take you through seven estate planning strategies to guard family harmony, as well as five action items to consider right now to get the ball rolling on your Estate Plan. That said, every family comes with its own personal challenges. If you’re unsure of your next moves, contact CunninghamLegal for guidance on your unique situation.

Now let’s hit those top seven estate planning strategies to help ensure family harmony after you’re gone.

1. Choose the right Successor Trustee for your Estate Plan and Educate Them

Whether it’s a few years from now or decades down the line, someone else will eventually take the helm for your financial decisions. This is the “Successor” Trustee – or the one who serves as Trustee of your living trust after you stop serving as trustee.  The most pressing question is deceptively simple: who can be trusted to make decisions the way I would make them?

You may have heard of “executors” and “attorneys-in-fact.” But if you are doing sound Estate Planning, you are almost certainly creating a Living Trust, and the key person will be the Successor Trustee of that Living Trust. For the sake of this simplicity, we’ll assume you are doing this right.

When it comes to choosing your Successor Trustee, you have three primary options:

  1. A family member
  2. A friend
  3. A professional: Trust Company, Trust Bank, or Private Professional Fiduciary.

All three come with pros and cons, but depending on your situation, one option might be more ideal than another. To learn more about making the right decisions, please read my in-depth blog on choosing a Trustee—it’s vital to understand the common issues and all-too-common mistakes!

Let me just touch briefly on the most common situations here.

Family member Trustees

Children rank as the number one choice for Trustees. And that makes a lot of sense. Children tend to have a vested interest in Estate Plans and ideally have your intentions and the best family outcomes at heart. However, choosing the right child for the job isn’t always easy—especially when it comes to keeping the family peace.

Every day, I watch folks shrug their shoulders and say, “I don’t know, I guess I’ll name the oldest kid Trustee.” Now that might be a great idea if your eldest fits the job requirements, but if not, it can be a disaster.

Let’s say you name your eldest son, Stephen, as your Trustee. Stephen loves you very much, but he doesn’t have the greatest track record when it comes to balancing a checkbook. After a few months, Stephen’s siblings, Kyle and Scott, discover $50,000 in assets completely unaccounted for. Not only will Thanksgiving be tense, but this scenario has the potential to create significant rifts in the family.

Alternatively, let’s say you chose Stephen because he’s a whiz on Wall Street and you know he makes deft financial decisions. Trouble is, Stephen lives in New York and you live in San Francisco, right next to Kyle and Scott. Stephen might be the best choice financially, but Kyle and Scott probably have a better handle on your life, assets, and wishes—not to mention they will be there for your final weeks. Who’s better equipped as a Trustee?

Let’s say you can’t choose between the kids, so you name all three as equal Trustees. How are decisions made? Do they vote? Does that vote have to be unanimous? What happens if they can’t come to a decision? Again, for more on these issues, let me refer you to my blog on choosing a Trustee.

What about choosing friends as Trustees?

It’s possible to choose a friend to handle your estate management as Successor Trustee when you set up your estate plan, but will this friend have the time? Will they be too old by then? Maybe they understand your goals, but will they understand the basic legal requirements and responsibilities? Might such a choice create unintended conflict within your family?

Does a third-party trust company, trust bank, or professional private professional fiduciary make sense?

If you don’t have an appropriate family member to nominate, a better estate planning strategy than naming a friend as successor Trustee is probably to name a third-party trust company, trust bank, or private professional fiduciary. These pros will have a deep understanding of the legal and financial requirements of serving as a Trustee, and they can help ensure that your estate is managed properly—for the benefit of the beneficiaries. Importantly, using such a service often provides the additional benefit of helping prevent conflicts among siblings, as well as guarding against personal liability on the part of any Trustee you might name.

Once again, I also deal with the different kinds of trust companies and professional trustees in my in-depth blog on choosing Trustees. Please read that blog carefully, then ask a savvy lawyer for advice before putting anything down on paper.

Should I get buy-in from future Trustees? How can I educate them?

Regardless of whom you choose as your successor Trustee, you should consider telling them and getting their buy-in, then prepare them for what may be a difficult job. Point them to my webinar on how trusts work, suggest that they consider professional trust administration (which we do here at CunninghamLegal); and while I admit you may scare them off, please have them read about the risks of serving as a Trustee. Too many Trustees have no idea what to do or the dangers of doing it wrong!

2. Carefully reconsider disinheritance when creating or revising your Estate Plan

Having worked with hundreds of families before, during, and after a death, I’m going to start this section by telling you to think twice about disinheritance. Nothing holds more potential to split up your family after you are gone than cutting someone out of your Will and Trust.

There are plenty of valid reasons for disinheriting a family member—and I’m not saying you don’t have a perfect right to distribute your assets as you desire. But there are also plenty of ways disinheritance can go very wrong.

You’ll be gone, and you won’t have to deal with the fallout. But your children will, and so will your other relatives. Do you want your children to continue getting along after you’re gone? Do you want your other children to ostracize their disinherited sibling? Or be themselves ostracized for benefitting at the other’s expense? Do you want all your kids standing in front of a judge, arguing?

Believe me when I say I’ve seen terrible cases, and you risk creating a situation you may want to avoid even more than giving a part of your estate to a child you’ve come to dislike. This is especially true if the reason behind the disinheritance doesn’t hold up in court—such as disinheriting a child because they married a person of another race. Because yes, if that child challenges your Will and Trust, your reasons for disinheriting may very much matter to a court.

If you are at all considering the disinheritance of someone who might be expecting part of your estate, please read my blog on disinheritance with great care, and speak to a qualified attorney before making any moves.

3. Account for advances on inheritance

In this day and age, especially if you have Millennial or Gen Z children, it’s common to lend them a financial helping hand. In many ways, this may be a smart choice—it can go a long way towards preserving family harmony and ensuring multi-generational wealth.

Sometimes that financial assistance may come in the form of a simple gift or loan. However, you can also give your children money through an advance on their inheritance.

An advance on inheritance means your child receives the amount of their inheritance before you pass away. This can be a great way to help your child invest in their future, especially if they’re looking to pay for college or make a down payment on a house.

The tricky part about inheritance advancements is that you need to properly account for them in your estate if you have multiple beneficiaries. When you create an Estate Plan, a good lawyer will help you add the right clauses.

Why does it matter? Well, if you give your son Stephen $500,000 out of his inheritance to buy a home, but don’t subtract that amount from his portion of the estate, your other kids might be a little miffed that Stephen is walking away with an extra half a million. You’re well within your right to let that inequity slide, but if you’re concerned about preserving family harmony, you’ll want to consider altering Stephen’s inheritance accordingly.

I have far too often seen terrible family strife when siblings find out that their parents significantly helped one child without attempting to square things up in the Will.

Keeping things fair is often very important to the kids.

4. Protect your plan from the undue influence of others

Often, the scariest situations—with the most power to irreparably damage family harmony—stem from the undue influence of others. Sibling disagreements are one thing, but elder fraud and manipulation of the estate are quite another.

First off, stay hyper-aware of scams. Senior citizen scams cost older Americans up to $36.5 billion per year. You don’t want to be part of that awful statistic. Such scams can be perpetrated by many bad actors, including charming caregivers, as you age.

Familial manipulation, however, can be equally worrisome.

Let’s look at a hypothetical scenario. You write up a simple Will which leaves everything to two of your sons, Stephen and Kyle, naming Stephen as Executor, and disinheriting your wayward child Scott. You stuff the Will in a drawer and forget about it. A few years later, you become incapacitated—losing some of your mental acuity. When he finally comes to visit, wayward son Scott finds the Will and discovers he’s being left with nothing.

Rather than talking to his brothers Stephen and Kyle about it, Scott starts visiting you every day. He “changes his ways.” Over time, Scott becomes the constant in your life, and you start to believe what he says about Stephen and Kyle not caring enough to visit. They’re just off with their families, making plans to spend the estate! Understandably, as you lie on your deathbed, this breaks your heart.

Scott tells you if you create a Living Trust and name him the Trustee, he’ll make sure the money is spent according to your wishes. Eventually, you agree, and Scott supervises the creation of your Trust, bringing a notary right to your bedside. The Trust is carefully worded in such a way you don’t even realize that Stephen and Kyle are left out in the cold. And neither do they.

When you pass, the brothers fight a long battle in court. Regardless of the outcome, they never speak again.

Such things happen. And it’s crucial to highlight the power of undue influence because it’s extremely difficult to prove in court after the fact.

One way to combat undue influence is through open communication and early establishment of a Living Trust well before any incapacity—a trust that includes the right protections worked out with the advice of a qualified attorney, and potentially including a professional Trust Protector.

One reason scams occur is the secrecy in which Estate Planning often takes place. If everyone in your family knows your plans well in advance, and the Trustee you desired starts their job while you’re still here, you can reduce the chance of a scam. You may want to read more in my blog about avoiding elder fraud.

5. Write a statement of intent

A statement of intent usually takes the form of a letter that clarifies your wishes, accompanying your Estate Plan.  It can reinforce what is already legally in your Trust. While statements of intent can be powerful, they do not have any legal power.  They are often used as guidelines for a trustee and ultimately a Probate Judge if your estate ends up in Probate Court.

Only the Trust itself has legal power. So why bother with a statement of intent? Well, let’s return to our trio of brothers: Stephen, Kyle, and Scott.

Let’s say you still name Stephen as Trustee of your estate, but you don’t tell any of the children what they’re set to inherit. When the day comes to read the terms of the trust, the brothers discover that Stephen and Kyle inherited a large portion of the estate, and Scott was mentioned as being a son but is otherwise left out of the document completely, inheriting nothing—and he’s furious about it.

You have intended to leave Scott out as a means of disinheriting, but you’re no longer there to tell them all the reasons why…because you are dead.  While the trust is a legal document and the Trustees must follow the terms of the trust, not writing down the reasons for the disinheritance creates a void of information and data.  It is a Probate Court shaped hole in the Living Trust.  Scott runs to Probate Court, files a Trust Contest, and seeks to invalidate the entire plan because “all this is new to him” and “he loved his dad” and “this isn’t fair.”

Scott, like everyone else, is entitled to his day – or years – in Probate Court.

This is where the power of a statement of intent comes in.  When Stephen is served with the lawsuit, Stephen’s lawyer asks for all the documents.  This includes the letter you wrote explaining why you disinherited Scott.  Since you aren’t around to tell everyone, your statement of intent becomes extremely powerful evidence of your state of mind. While not a legal document, a statement of intent clarifies the intentions of your estate plan and your trust. Because your statement of intent says “I intentionally left Scott out of the trust because he was estranged from me, on drugs his whole adult life, and chose to separate himself from his family, etc.,” then Scott’s case has gotten very weak very fast—especially if your statement is handwritten by you.

How does this help maintain family harmony? To be honest, if you’re leaving a child out of your trust completely, then maybe harmony is off the table anyway (see my blog on disinheriting). However, leaving a statement of intent does allow Stephen and Kyle to say, “Listen, Scott. This was Dad’s decision. Let’s talk it out.” And that situation bodes a lot better for future Thanksgivings than putting Stephen and Kyle in a position where they have to testify that “maybe Scott wasn’t the best of sons.”

6. Protect inheritances in special circumstances: divorce, irresponsible heirs, special needs

Sometimes an inheritance needs to be protected to ensure that assets stay within the family and are used appropriately after you are gone. Let’s take a quick look a three common situations and strategies–but everyone’s circumstances are different. If you are concerned about any of the below issues, I urge you to contact us to investigate the options. Setting up the appropriate trusts well in advance of your death will not just help ensure that assets are used properly, but will prevent family battles down the road.

Inheritance protection trust

Ex-sons-in-law and ex-daughters-in-law are the single most common threat to preserving multi-generational wealth.  It’s the number one issue I hear about when it comes to protecting lasting legacies—and for good reason. Simply stated, California law loves marriage. If you leave your child any unprotected money, accounts, real estate, or business interest, those inheritances start out as “Separate Property” but often are inadvertently—or intentionally— “transmuted” into community property. That means that whoever shares a marriage certificate with your child may get 50% in a divorce—whether you liked them or not.

An Inheritance Protection Trust can establish a multi-generational plan for your estate. If you leave Kyle a $2 million unprotected inheritance and he divorces the following year, $1 million of that inheritance might well go flying out the door with his ex-spouse. However, with an Inheritance Protection Trust, that money becomes much harder to touch. Even if Kyle passes, an Inheritance protection trust may ensure that the money skips Kyle’s spouse and passes directly to Kyle’s children or someone else of his choosing.

I also invite you to read more about these issues in my blog about divorce, as well as our page about asset protection in general. You may also wish to learn about Dynasty Trusts to protect multi-generational wealth.

Dole-It-Out trust

The Dole-It-Out trust can help protect your estate from divorce, but it also provides an alternative to the disinheritance of an irresponsible heir. With a Dole-It-Out trust, you determine who is in charge of how much of an inheritance can be “doled out” at a time based on certain factors. Often, this “Successor Trustee” will work with a Certified Financial Advisor to create a budget for the person who gets money from the Trust (the “Beneficiary”) and determine an appropriate monthly amount or stipend.  Doling out the inheritance helps prevent the entire sum from being frittered away by an irresponsible heir and lets you leave an inheritance for less-than-trustworthy beneficiaries.

For example, if you were going to disinherit that wayward son Scott because of a gambling addiction, no one would blame you—but it might put a sizable rift in your family harmony. By using a Dole-It-Out trust, you can limit Scott to $2,500 per month, pay his rent, pay for his dental care, etc., and keep him from blowing it all at the poker table. Read more about such strategies in my blog on irresponsible heirs.

Special Needs Trust

A Special Needs Trust (SNT) protects a portion of your estate designated for a loved one with special needs. This is typically a recipient of needs-based public assistance benefits such as Supplement Security Income (SSI). This Trust is all about preserving not only the monthly Federal and State benefits, but also access to a variety of social services including the Regional Centers in California. By creating such a trust, you will also be relieving your family from the burden and conflict of decision-making about how to provide for the special-needs loved one.

Special Needs Trusts (SNTs) require attorneys with dedicated expertise. Please read our Special Needs practice page to learn more, and contact us to learn more. Also, stay aware of frequent changes in laws related to these issues.

7. Consider a Trust Protector and/or Independent Trustee

Trust Protectors and Independent Trustees can help preserve family harmony by keeping the inheritance process out of Probate Court. There is no legal requirement to have a Trust Protector or Independent Trustee.  However, most experienced and savvy lawyers use Trust Protectors and Independent Trustees when Continuing Trusts are used.  Continuing Trusts include Inheritance Protection Trusts, Dole-It-Out trusts, and Special Needs Trusts.  Trust Protectors and Independent Trustees are also a good idea to consider for the protection and maintenance of any Living Trust of any size or structure.

Trust Protectors

A Trust Protector has power over the trust, but is NOT the Trustee. Protectors are less common than Independent Trustees, but they make a huge difference when the circumstances require them.

Most of those circumstances occur because people forget to update their list of assets in their wills and trusts. Let’s say you decide to split everything evenly between Stephen, Kyle, and Scott. You solidify and itemize your estate and then don’t bother to look at it again because everything’s set to distribute equally. Upon your passing, however, Stephen discovers that you left him a ranch property in California that was at some point sold to buy another ranch property in Texas.

That new property isn’t included in your assets, and not specifically given to Stephen, so it doesn’t pass to Stephen. Without a Trust Protector, the family might have to go to Probate Court in California and in Texas to modify the Trust so that Stephen gets the Texas Ranch—not just a hassle, but creating the potential for family conflict.

With a Trust Protector, it’s far easier.  The Trust Protector, after communicating with all the stakeholders, can modify the Trust in a way to give the Texas ranch to Stephen:  a single document and no Probate Courts, helping the family escape a long and tedious, multi-state court process. Please read my extensive blog on the issue of Trust Protectors.

Independent Trustees v Interested Trustees

Independent Trustees, on the other hand, are Trustees not related by blood or marriage to you and are not otherwise under your control. The term “Independent Trustee” is described under Internal Revenue Code 672(c).

The opposite of an Independent Trustee is an “Interested Trustee.”  This would be you, your spouse, an ancestor such as a parent or grandparent, a child or grandchild, or a sibling of yours.  Nieces and nephews are not considered as an “Interested Trustee” and are therefore an “Independent Trustee” —provided they are not your employee.

Sometimes both are used.  Let’s say you create an irrevocable Trust for a grandchild and put $100K into it.  Since you are an ancestor and Trustee, if you have more power than to distribute assets to the grandchild-beneficiary for their “health, education, maintenance, and support”—those powers can have adverse Estate Tax consequences for you.  This means that the gift of $100K plus any growth is included in your estate and subject to Federal Estate Tax of up to 40% —and 45% in 2026 and thereafter.

If your Trust allows the appointment of an Independent Trustee—perhaps a friend from business school—that Independent Trustee can distribute Trust property to the grandchild “for any purpose.”  This is significantly broader.

It is common in this situation for you to be Trustee (albeit an Interested Trustee) and if a need arises beyond health, education, maintenance, and support, the Trust Protector appoints the Independent Trustee to make the decision to distribute more to the grandchild than is needed for health, education, maintenance, and support.

As you can see, the use of Trust Protectors and Independent Trustees is very important in administering a “Continuing Trust”—a Trust that is not dissolved immediately upon your passing, such as an Inheritance Protection Trust, Dole-it-Out Trust, or Special Needs Trust.

Additionally, when multiple beneficiaries have competing interests and one of them happens to be a Trustee, an Independent Trustee can ensure that the Trust is managed fairly and equitably to prevent conflicts and support all beneficiaries—and can make sure all beneficiaries benefit from Trust-related advice. You can learn more on our Trust Administration page, and remember that these are complex situations requiring savvy legal advice. Contact us for a review of your situation.

Five action items to protect your estate right now

If you’re sitting here thinking, “Okay, I want to protect my estate and my family harmony after my death, but where do I start?”—that’s understandable.

Here are five Estate Planning checklist items you can work on right now, no matter where you are in your Estate Planning process.

1. Review your Living Trust-centered Estate Plan.

Life changes and your Living Trust should reflect those changes. That neighbor you chose as your Successor Trustee 20 years ago may not be the right person now.  You CAN change your mind and you CAN change your Successor Trustee. A lot happens over the course of two decades—including the possibility that your first choice is in retirement, is no longer alive, or is otherwise incapable of serving as Successor Trustee.

Take a look at your plans and make sure they align with your current values, loved ones, and assets. The last thing you want is for your children to discover your Trustee is an ex-spouse they’ve never met! Contact our office for an appointment to review your Living Trust.

2. Find a savvy lawyer if you don’t have a Living Trust.

If you don’t have a Living Trust, find a lawyer who can walk you through the decision-making process—even if that process is just deciding whether or not you need a Living Trust at all. You might not need one; not everyone does. But you should know if you do.

Most people who reach out to us could benefit their loved ones by creating a revocable Living-Trust-centered estate plan. Too many people think that because they aren’t millionaires, they don’t need Living Trust planning.  On the other hand, very wealthy people believe they need something well beyond a Living Trust—they’re right, but the wealthy also need a Living Trust as the foundation of a more advanced plan.

Finding the right lawyer is crucial. The subtitle of my bestselling book, Savvy Estate Planning is “What to Know Before You Talk to the Right Lawyer.” I chose that subtitle for a reason. Estate Planning is not a do-it-yourself project. You don’t know what you don’t know, and what you don’t know can wreck your family’s future.

3. Think about what your legacy means to you…and your loved ones.

I come back to that word “legacy” a lot—but I really cannot overstate its importance. No matter where you are in your life or your Estate Planning, it’s never too early to think about what your legacy means to you and what you want your loved ones to value after you’re gone.

Is it money? Is it family? Is it love? Is it the lake house? Is it a combination? You may not think you have the power to influence those ideals, but the decisions you make in your Estate Planning can have ripple effects on your family for generations to come. And you can start making those decisions right now.

4. Be mindful of who will control and influence those who inherit from you.

We touched on undue influence and protecting your assets from divorce, but I want to take a moment to remind you to think about the people behind these influences. When we talk about family harmony and managing estates to maintain future peace, we’re not just talking about existing family members.

Yes, you might take issue with a child’s current spouse, but a future spouse can hold just as much influence in the case of divorce—even if you never meet them.

If you’re worried about keeping your estate in the family, talk to a lawyer about taking the right precautions before a second or third spouse comes into the picture.

5. If your estate isn’t evenly split, or there are unusual circumstances, consider a statement of intent or other written documentation to clarify the situation.

We touched on statements of intent when we looked at disinheritance, but disinheritance isn’t the only situation where these statements can make a massive difference. A statement of intent simply defines your wishes in your own words. You can use one to confirm leaving an individual out of your estate, but you can also use your statement to clarify other, potentially unequal choices—such as gifting a smaller sum to a wealthier child than their poorer sibling.

Of course, a statement of intent doesn’t eliminate the possibility of friction around the Thanksgiving table, but it does go a long way toward making your decisions known and decreasing the odds of your inheritors going to court. Just keep in mind that statements of intent, while useful, are not legally binding. If you want to make any legally binding decisions, make sure you reflect those choices in writing in your will.

How do I get started with a harmony-first Estate Plan approach?

At CunninghamLegal, we help guide families through some of their most difficult and emotional financial decisions. We understand that you want Estate Planning strategies that will provide for your children and your future—and we want to help you implement those strategies with accuracy and empathy.

Reach out to make an appointment with CunninghamLegal for Corporate and Tax Planning, Estate Planning, and more—see our complete list of practice areas. We’re happy to talk to you about your future via phone at (866) 988-3956 or via our online call booking system. You can also use the inquiry form on this page.

You might also wish to check out my bestselling book, Savvy Estate Planning.

We look forward to helping you protect your family’s future!

Best, Jim
James Cunningham Jr., Esq.
Founder, CunninghamLegal

We guide savvy, caring families in the protection and transfer of multi-generational wealth.

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