Estate planning for not-ready-for-prime-time heirs

Question: We know we need to do some estate planning but we have several children and not all of them are equally fit to handle a significant inheritance. But we don’t want to disinherit them. Is a trust the answer?

Answer: Having your attorney draft a legal trust may be a part of the answer. But may I suggest an attempt at re-building relational trust before you die?

I’ve worked with a lot of families and their estate plans. One of the most painful things to see in estate planning is adult children estranged from their parents. Of course, there are as many reasons for this as there are incidents of it.

Not all such situations are redeemable. But surely some are.

I believe there is hope for many families in which children and parents are estranged from one another. I cannot recall ever talking to the parents, in such a situation, who wouldn’t pay almost any price to see the relationship healed, at least to some degree.

See if any of the follow may apply to your situation.

Bring in a third party. This could be the hardest part, but remember, I’m addressing this to parent who has said, “I would pay any price to restore this relationship.”

Find either a single individual or a small team to come together to act as mediator between you and your adult child. They can listen to you and communicate your desire to restore the relationship. And they can listen to your child and hear the reasons why they feel estranged from you.

Space does not permit me to deal with this stage in significant depth. But understand that if this stage is to be successful, you will need a thick skin, a tender heart and a lot of patience. Listen more than you talk.

Communicate and educate, but don’t manipulate. If step one is successful to any degree, you can move on to the stage of communicating your desire to include them in your estate plans. They may have assumed you had already written them out of the will (and perhaps you had).

Here your third party’s skill as a communicator will be tested, for she will have to communicate your desire to include them in your estate (inheritance), but with a demonstrated level of responsible behavior on their part. But how do you observe such responsible behavior if you’re dead and gone? By doing it ahead of time…

Take it a step at a time. Rather than wait to drop their entire inheritance on them in one fell swoop (after you’re gone), why not give a portion of it, each year, along the way? The tax code allows anyone to gift $14,000 per year to anyone else (including their estranged child). Two parents could combine their gifts for a total of $28,000 per year.

If you gift money annually, make sure you both agree this is a test run, to be sure both parent and child agree that the money is being used wisely.

I suggest you define success very, very broadly here. Don’t try to over-control their behavior. As long as they don’t just blow the money on frivolous purchases, declare victory and move on.

Hope for progress, but don’t demand perfection. You didn’t get where you are overnight, and a cute little plan like this one isn’t going to suddenly turn you into the Brady Bunch. There will be setbacks, sharp words, arguments and foolish decisions.

But if you’ll take the long view, you can be satisfied with overall progress (relationally and financially), without holding your child to some impossible standard of perfection.

Move from trust to trust. It’s a funny thing how legal language works. If we really don’t trust someone to handle their finances well, we put the money for them in a …trust.

With no relationship and no demonstrated level of responsibility, most parents who want to leave an estranged child something will use a trust – a legal device to hold money and property on behalf of someone else. It imposes responsibility and competence externally, even if the beneficiary (the estranged child) seems to have none of either.

But if the long process of repairing the relationship and progressively re-laying a foundation of demonstrated responsibility towards one another succeeds, wealthy parents can move from total dependence on a legal trust, to greater and greater reliance on relational trust.

And rebuilding that restores a kind of wealth money can’t buy.