Common Dilemmas You May Recognize
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I won't offend any of you by assuming you're regular readers of the AARP magazine quite yet, but a recent issue raised some of the knottiest planning dilemmas faced by families these days - so I'll mention a couple of them and toss in my two cents worth. Then, there's a suggestion about potential relief from student loan obligations, if that's a problem for anyone you know.
Challenge number one is a really common scenario in this age of exceedingly expensive care in assisted living facilities, and it involves one child taking care of the parents at home. That offspring typically lives close enough to do so and wants to help out, while the other children may be on the west coast or have all-consuming families of their own to attend to. The dilemma is how to reward or fairly compensate the caregiver child for that extra effort, without having the rest of the siblings feeling treated unfairly.
There's really no way to deal with this imbalance except to talk it out while the parents can still do so and to give the children who can't help out the chance to be heard. That may be an uncomfortable conversation, particularly if the children don't get along all that well, but we owe it to them to confront the issue before the caregiver is left to deal alone with recriminations and suggestions of undue influence after we're gone. Modifying expectations ahead of time is always a better course than having someone feel blind-sided after we're no longer around to explain ourselves. If we just can't face that issue in person, at least a carefully written side letter is better than saying nothing at all. And keep in mind that even though one child may be rewarded for his/her efforts, there will likely be more left for everyone if all our life savings aren't spent on an institutional caregiver.
A corollary of that one occurs when there's a family business that one child has become the successor to, but which represents a large portion of the parents' estate. It's probably not fair to leave all that value to the one running the business - after all, he/she has been getting paid to do so - but providing for that child to pay the others for at least a portion of that value - perhaps from the business income over a reasonable period of time - may be the way to even things up. The ones not involved in the business will likely appreciate the income stream and as long as they feel their shares are being appropriately valued, the situation can probably be structured fairly. Or maybe there's enough for the other children to be compensated from the remaining estate assets. Yet again, a family meeting before a final decision is made can go a long way toward getting troublesome feelings resolved and avoiding a serious collision of opinions later on, when the decision-maker is gone and no longer able to employ the leadership skills that built the business in the first place.
Another biggie is what to do about the one I'll call the black sheep, not necessarily to be judgmental but because we know anything left outright to him or her will pass through their fingers like water through a sieve - maybe due to gambling, substance abuse, an unstable marriage, or just financial over-extension. That's another scenario of potential resentfulness, and again the best tack would be to face the issue head-on, if we can do it. The problem is that doing so while we're alive can foster feelings that we don't love, trust or respect that child as much as the others, and it can backfire by souring the relationship we have during the time we have left. Sometimes we've helped out by shouldering the responsibility for crafting a solution.
One plan that might work under the right circumstances is to designate another child or family member who's trusted and respected by the one we're concerned about and to have that one dispense the precarious funds. That's something that needs to be set up ahead of time, of course, and convincing another family member to accept what may be a hot potato may not work either. That's when a professional advisor may need to be designated, in order to deal with the situation more dispassionately and on a purely businesslike basis, without the emotional baggage of a family member's involvement. Whatever needs to be done, though, it's better than sticking our heads in the sand and having a tragic situation created that the rest of the family then has to deal with after the fact.
Then, there's the matter of the family's beloved summer retreat and how to provide for it to remain as such. I'm a great believer in making those arrangements while we're still here and able to establish them on the basis least likely to present problems for the next generation. That's always preferable to leaving the property to multiple children with fractional ownership shares and then having them try to hash it out among themselves. The latter is a recipe for destroying otherwise good relationships, so bite the bullet and give them an opportunity to be a part of the solution by providing their own suggestions about how the arrangements should be structured.
I have some personal history with this one, as Cathie's family has had its place on Lake Winnipesaukee for almost 100 years, and her father set up a trust to own the property 30 years ago that's worked well for us so far. We have two branches of the family and each has a trustee to represent its interests - so there are only two decision-makers, not what would be more than a dozen at this point. If one branch needs a new trustee, it decides who that will be and the next generation then carries on.
In addition, no one has an actual property interest in the property, so there's never an issue about buying out someone's share. If family members don't want to participate any longer, they don't have to pay any of the expenses and they simply stop visiting unless invited. If the day arrives when no one can afford to keep the property or no one is using it any longer, the trustees could decide - unanimously - to sell it (though that would be a sad day indeed) and the proceeds would be divided among the family members then living. Sort of like when the music stops in musical chairs.
Needless to say, there are a lot of minefields out there to be careful about, and we want to be remembered as the ones who helped navigate through them successfully, rather than the ones who caused the family to self-destruct. Believe me, uncomfortable conversations are never easy or pleasant, so make sure at the outset to preface the discussion with recognition that having something worth dividing up is better in every respect than having the next generation worrying about how to pay obligations we might have left them instead.
Finally, if you've read this far, and if you or a loved one has federal student loans taken out prior to 2010, now would be a great time to schedule some time to talk about them. The Department of Education has just extended a crucial deadline, but just until June 30, for the "Income Driven Repayment Waiver". I won't bore you with the details, but what it means is that if you or a family member has certain types of federal loans that were very common prior to 2010, the person struggling with that debt could be eligible to have the entire obligation erased. And if you're in the clear, feel free to pass this tip on to someone who might benefit. And if you need help, my colleague Jaran is the go-to guy on this convoluted subject
Posted 06/05/2024 - Estate Planning
Challenge number one is a really common scenario in this age of exceedingly expensive care in assisted living facilities, and it involves one child taking care of the parents at home. That offspring typically lives close enough to do so and wants to help out, while the other children may be on the west coast or have all-consuming families of their own to attend to. The dilemma is how to reward or fairly compensate the caregiver child for that extra effort, without having the rest of the siblings feeling treated unfairly.
There's really no way to deal with this imbalance except to talk it out while the parents can still do so and to give the children who can't help out the chance to be heard. That may be an uncomfortable conversation, particularly if the children don't get along all that well, but we owe it to them to confront the issue before the caregiver is left to deal alone with recriminations and suggestions of undue influence after we're gone. Modifying expectations ahead of time is always a better course than having someone feel blind-sided after we're no longer around to explain ourselves. If we just can't face that issue in person, at least a carefully written side letter is better than saying nothing at all. And keep in mind that even though one child may be rewarded for his/her efforts, there will likely be more left for everyone if all our life savings aren't spent on an institutional caregiver.
A corollary of that one occurs when there's a family business that one child has become the successor to, but which represents a large portion of the parents' estate. It's probably not fair to leave all that value to the one running the business - after all, he/she has been getting paid to do so - but providing for that child to pay the others for at least a portion of that value - perhaps from the business income over a reasonable period of time - may be the way to even things up. The ones not involved in the business will likely appreciate the income stream and as long as they feel their shares are being appropriately valued, the situation can probably be structured fairly. Or maybe there's enough for the other children to be compensated from the remaining estate assets. Yet again, a family meeting before a final decision is made can go a long way toward getting troublesome feelings resolved and avoiding a serious collision of opinions later on, when the decision-maker is gone and no longer able to employ the leadership skills that built the business in the first place.
Another biggie is what to do about the one I'll call the black sheep, not necessarily to be judgmental but because we know anything left outright to him or her will pass through their fingers like water through a sieve - maybe due to gambling, substance abuse, an unstable marriage, or just financial over-extension. That's another scenario of potential resentfulness, and again the best tack would be to face the issue head-on, if we can do it. The problem is that doing so while we're alive can foster feelings that we don't love, trust or respect that child as much as the others, and it can backfire by souring the relationship we have during the time we have left. Sometimes we've helped out by shouldering the responsibility for crafting a solution.
One plan that might work under the right circumstances is to designate another child or family member who's trusted and respected by the one we're concerned about and to have that one dispense the precarious funds. That's something that needs to be set up ahead of time, of course, and convincing another family member to accept what may be a hot potato may not work either. That's when a professional advisor may need to be designated, in order to deal with the situation more dispassionately and on a purely businesslike basis, without the emotional baggage of a family member's involvement. Whatever needs to be done, though, it's better than sticking our heads in the sand and having a tragic situation created that the rest of the family then has to deal with after the fact.
Then, there's the matter of the family's beloved summer retreat and how to provide for it to remain as such. I'm a great believer in making those arrangements while we're still here and able to establish them on the basis least likely to present problems for the next generation. That's always preferable to leaving the property to multiple children with fractional ownership shares and then having them try to hash it out among themselves. The latter is a recipe for destroying otherwise good relationships, so bite the bullet and give them an opportunity to be a part of the solution by providing their own suggestions about how the arrangements should be structured.
I have some personal history with this one, as Cathie's family has had its place on Lake Winnipesaukee for almost 100 years, and her father set up a trust to own the property 30 years ago that's worked well for us so far. We have two branches of the family and each has a trustee to represent its interests - so there are only two decision-makers, not what would be more than a dozen at this point. If one branch needs a new trustee, it decides who that will be and the next generation then carries on.
In addition, no one has an actual property interest in the property, so there's never an issue about buying out someone's share. If family members don't want to participate any longer, they don't have to pay any of the expenses and they simply stop visiting unless invited. If the day arrives when no one can afford to keep the property or no one is using it any longer, the trustees could decide - unanimously - to sell it (though that would be a sad day indeed) and the proceeds would be divided among the family members then living. Sort of like when the music stops in musical chairs.
Needless to say, there are a lot of minefields out there to be careful about, and we want to be remembered as the ones who helped navigate through them successfully, rather than the ones who caused the family to self-destruct. Believe me, uncomfortable conversations are never easy or pleasant, so make sure at the outset to preface the discussion with recognition that having something worth dividing up is better in every respect than having the next generation worrying about how to pay obligations we might have left them instead.
Finally, if you've read this far, and if you or a loved one has federal student loans taken out prior to 2010, now would be a great time to schedule some time to talk about them. The Department of Education has just extended a crucial deadline, but just until June 30, for the "Income Driven Repayment Waiver". I won't bore you with the details, but what it means is that if you or a family member has certain types of federal loans that were very common prior to 2010, the person struggling with that debt could be eligible to have the entire obligation erased. And if you're in the clear, feel free to pass this tip on to someone who might benefit. And if you need help, my colleague Jaran is the go-to guy on this convoluted subject
Posted 06/05/2024 - Estate Planning