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Beyond the Grave – Jeffrey L. Condon

Book Notes and takeaways via Duncan Kelm

  • Punishing success does not work between children
    • When you give an inheritance heavier weighted to a child who has been successful they will perceive it as they have been punished for being successful
    • Why would parents punish success and reward failure
  • Always talk to your children about your estate plans
    • If you care about maintaining family harmony after death leave your money and property in equal portions regardless of economic circumstances
  • Failing to equalize lifetime gifts is one of the most significant sources of dispute between children
  • As a general rule, do not leave a specific property to each child
    • What starts out equal in value at the time you die may not remain equal years later, instead leave each child an equal share of each property so they will share the upswings and downswings of both
  • Do not name one child as your successor trustee, name all your children as successor co- trustees
  • Do not assume children can work it out themselves
    • If your children will co-own or co-manage the family real estate or business, it is essential to help them resolve their conflicts without rushing to the courthouse
  • Instilling a third party trustee can help manage this process
  • The Transparent Trust
    • Establish a Living Trust and leave your child’s inheritance to your child “in trust” rather than outright
    • The trustee and beneficiaries of this “Transparent Trust” will be your child
    • As trustee, your child will have full control of the inheritance with no third party trustee looking over your child’s shoulder
    • As beneficiary, your child will have the sole discretion to spend the trust assets for any purpose
    • When your child dies, any assets remaining in your child’s trust will pass to your grandchildren
  • How to solve a complicated child and grandchild problem
    • Married son has no children, daughter has two children. Children will share the inheritance equally. When the son dies, doesn’t want money to go to wife of son, wants it to go back to daughter
    • To do this the trust must retain the power to control where the money goes after he dies, therefore he may ne be able to take inheritance outright
    • An Irrevocable Protection Trust works well to keep family money in the family ! Tom Glavin’s Family Incentive Trust
    • The trust states on upon Glavine’s death, all or a portion of his estate will be held by a third party “Money Manager.” The Money Manager will distribute money to his children if they act in accordance with the “instructions” he has set forth in writing. In other words, the manager will pay his children more money if they act the way he wants them to act
      • This is managing from the grave and usually does not cause the behavior or action desired
    • Children will view this plan as your way of continuing to test them even after you are dead
    • Typically advises against efforts of parents to control their child too much from the grave
  • Using a bank trustee
    • Does the bank see eye to eye with you as to how you want your money managed o What procedures are made or followed in making investment decisions
    • Who makes the investment decisions? If a committee, how often does the committee meet?
    • How is the investment mix determined?
    • Will the bank invest the principal entirely in growth assets, entirely in fixed income assets or a mixture of both?
    • Is the investment analysis done in-house or by an outside investment firm?
    • What is the banks performance on its trust funds?
    • You can always appoint one of your children as a co-trustee along with the corporate trustee if there are issues
  • PPM known as personal property memorandum
    • This is private instructions for what to do with personal property
  • If children are requesting to be placed as power of attorney be cautious about this, and consult an attorney
    • If pressure is mounting from children after one spouse is deceased consult an attorney
  • Do not put property in joint names with your children, divorces and credit problems can come directly at you
  • There really is no death tax anymore $11,200,000
  • A living trust can prevent your wealth going to the last caretaker
  • When you have a corporate trustee, instruct them how they should be investing the assets
    • All for current generation and income
    • For a blend of both
    • All for next generation and growth
  • If you hate your second wife and want to punish her, leave her in a situation where your first children cannot get their inheritance until she dies
    • This causes huge issues between families
    • Condon will not allow his clients to create a situation in which the first children have to wait for their second wife to die before they inherit. Instead, I prefer a plan inwhich you leave your second wife a specific amount and the rest to your children (Or vice versa)
    • Don’t count on children being generous when it comes to money
  • If you are going to leave money and property to your child and grandchild Condon recommends a full and frank discussion of your wishes
    • A child can get extremely upset if they feel their inheritance is skipping them and going to their child, even if they get some too
  • How to make an equal trust for all your grandchildren with an estate worth $1 million, a son with one child and a daughter with three children where all grandchildren get $250,000
    • When you die, your children will not inherit your $1 million estate outright. Your wealth will be delivered to a third-party trustee
    • The trustee will hold this $1 million of wealth in an Irrevocable Trust for the rest of your children’s lives
    • The Irrevocable Trust is for your children’s benefit. The Trustee will invest the $1 million and pay your children the income it generates. In addition, the trustee can dip into the $1 million for your children’s support, maintenance, and medical needs
    • When your son dies, the trustee will take his half ($500,000) and divide it equally between all your grandchildren, regardless of the family unit from which they came. So your son’s one child and your daughter’s three children will each receive $125,000 from your trust
    • When your daughter dies the trustee will distribute her half ($500,000) to all your grandchildren, each one receiving $125,000 for a grand total of $250,000
  • A good way to find a quality charity is charityfinder.com
  • Charitable Remainder Trust
    • Ways to donate assets to charity, receive all the tax benefits and still remain in control of the assets until you die
    • You take real estate and transfer to a charity. The charity will put your real estate in a special ‘Charity Trust’ The trustee of the Charity Trust will be the charity
    • The charity trust will sell your real estate and invest the proceeds. For the rest of your life, the Charity Trust will collect the income, administrator the trust, and pay you an annual amount
    • Children lose out from Charitable Remainder Trusts
    • Best are for people with wealth in house or real estate and don’t have children o Down side of CRT is you have to give up all your assets
  • When considering the death tax amount
    • Consider insurance policies, annuities, IRA accounts, pension plans, 401Ks, and any other asset that pays a death benefit
  • One of the best estate planning strategies is to gift your children money while you are alive
    • Each person can gift another person $15,000 (2019)
    • Another way to give money to family tax free is by paying medical and educational expenses directly
  • A and B trusts do not really make much sense any more now with the death tax at $11,400,000 (2019)
    • An A and B trust puts half of the assets in a trust for the children, and the other half in direct control of your spouse. The spouse has ultimate say over both trusts
  • Give away income producing assets but retain the rights to keep income
    • Ask attorney about GRITS, GRATS, or GRUTS planning (page 379)
  • Generation skipping trust
    • Always will fail
    • A generation skipping trust is a way to move additional assets beyond the $11,400,000 threshold
    • Not as applicable now, but was a good tax planning strategy in the 1980’s and 1990’s The GST allows another amount of money to move to the next generation, but the child of the trust not the grandchild has the right to use it for their benefit. Only after the second death do the assets move on to the grandchildren
      • This is a way to avoid the tax for the next generation
      • The child becomes the beneficiary and then on their death the assets pass to their children
      • think through if one of your children will fail to act as an agent of your direction and or refuse to follow through
      • If this is a possibility you might need to be more creative with your estate planning
        • Who pays the death tax is an important consideration
    • In a typical living trust the children inherit and thus the death tax is borne equally to all of them
    • Each child receives an equal share of the estate and an equal share of the death tax o Make sure an attorney who drafts your estate includes what does the Living Trust’s tax allocation provision say
  • There really is no worthwhile justification for not telling your children about the nature, extent, and quantity of your assets, and how those assets will be shared after you die

The financial consultants at Arrow Point Wealth Management are registered representatives with and securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/SIPC.
This material has been prepared for informational purposes only, and is not intended as specific advice or recommendations for any individual.