Watch your Assets or someone else will
Watch your Assets
As parents grow older, hopefully they watch their children grow into self sufficient adults. At some point you know you will pass on your own assets to them, hopefully making their lives a little easier. Some of them may be well off, others not so. You may want to redistribute your wealth by the use of a will to help the less financially successful ones. What you don’t want is one child to unilaterally decide that he is more deserving than the rest, and leave behind a family feud.
The problem is that many put estate planning off, and take legal short cuts or wait until the last minute. Worse still, you might you pass on before you get the job done. Short cuts in estate planning can lead to real nightmares for your children, heirs, or beneficiaries. The lack of planning can allow for children to meddle in with your decisions at a time when you lack the strength to decide for yourself. Sometimes elder parents are physically or mentally frail, and children begin to make decisions for them. Sometimes an adult child warps the parent’s will to the effect of shortchanging siblings, or just decides to take what he can by clever deception. This can lead to a costly estate battle after your gone, and a divided family. That son or daughter may not start out greedy, but the temptation can be overpowering when wealth becomes easily accessible.
Today, we are going to look at several ideas aimed at preventing the greedy sibling scenario, out of the multitude that can arise, and safeguarding your assets so that they pass down as you desired. First, you should take a yearly inventory of your assets, and write it all down – start big, and work your way down. For example, start with real property, meaning real estate or land and buildings, and then move on to personal property, such as vehicles, stocks and securities, insurance, cash, jewelry, and so forth. At some point, you should have this document held by a trusted third party, such as your attorney, in a sealed envelope if you wish, with instructions that it will become public to your heirs at the reading of your will, or sooner if you want. A safe deposit box is okay, too, if you are careful about who has access to the keys.
What this accomplishes is the creation of a history of your assets, so that all beneficiaries and your lawyer will know just what you had. In effect, it makes it harder for a greedy family member to think that they will be able to “acquire” some heirloom without it being missed. Questions like, “I don’t remember, didn’t Mom have a diamond necklace?” may be avoided. The asset list can work to prevent faint memories from becoming the excuse a greedy sibling needs to take what he can by plundering the house. By creating a paper trail, the existence of the asset, and its location, will be exposed at the proper time. This will not prevent theft, but it may be enough to just inform your adult children that such a list exists, to keep them from reaching for the cookie jar. This is a tip more about keeping honest people honest, then restraining thieves. If you raised a den of thieves, well, then better call Fort Knox. There are things you can do in that case, but it’s more involved.
“Asset acquisition” by children usually happens more subtly than by outright “theft”. It usually arises where one child lives nearby, and the others far away. That child may over the years be given more and more responsibility for the parent’s affairs. With that scenario, as confidence grows, it becomes easier for that sibling to try to control the parents and press his or her will for what he or she believes they are entitled too.
Many elder parents then make the next big mistake, allowing that adult child to become a co-signer on their bank accounts. The parents usually intend it as a matter of convenience, while they are alive. The problem is that after they die, and sometimes before, that child uses the parent’s account as their own private piggy bank. That can create a whole Pandora’s Box of legal issues, with other siblings justifiably upset. It can appear by virtue of the title that the bank accounts really belong to the child, as they would to any joint owner, when in reality they do not. The legal system can correct such things, and usually set things straight, but only after either a threatened or actual litigation. Regardless of the outcome, family members can become bitter enemies.
One way to avoid this, if you really need help with handling your day to day affairs, is to carefully consider a properly drafted power of attorney, such that title to your property is not clouded. Then, someone may handle your affairs, but it will be clear that the assets are not theirs. This won’t prevent theft, rather it will just make it clearer that it is theft, and not a gift. To prevent a wrongful taking, you might decide that two children need to act together, or a child in conjunction with a bank or other person acting in the capacity of a fiduciary. If the assets are great enough, require that a bond is posted. There are many possibilities so as to restrain the person entrusted with your money from getting carried away.
The quick and easy path might work for a time, but your beneficiaries might end up paying for it in the end. The most important points for now are first to establish just what your estate contains, and second not to place others in joint title with you if you intend the assets to go to others in the future. From time to time we may revisit this topic, and add to what you can do to organize your affairs.
Robert Ricco, an attorney admitted to practice in New Jersey and New York, lives in Bergen County. He welcomes questions from readers about legal issues affecting everyday life in suburbia. This column is not intended to be a comprehensive summary of recent developments in the law nor is it intended to provide legal advice or to render a legal opinion. Readers are advised to consult their own attorney for legal advice.