Sidestep a Financial Family Feud by Planning Ahead

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September 29, 2015

We’ve all heard stories of families torn apart over the distribution of a loved one’s estate.


Even when wealth owners have an estate plan in place, they might be setting up their family for years of frustration, disappointment and potential financial risk if the plan doesn’t include a clearly defined settlement strategy, including an executor who has the time and skills to manage the many tasks involved.


“No one wants to think their family will fight over their assets, but it happens a lot,” says Trisha Vicario, Vice President of Estate Administration for The Private Client Reserve.​


To reduce that potential for tension, wealth owners should work with their financial and legal advisors to create a settlement plan that will streamline the distribution of their estate while keeping loved ones abreast of what they will receive and when, she says.


That begins with choosing an executor. While it might seem like a good idea to choose a friend or family member, individuals with complex estates should be sure the chosen person has the time and skills to do the job effectively. “Being an executor is a huge responsibility to put on someone,” Vicario says.

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September 29, 2015

The Role of an Executor


The executor’s job begins with collecting and valuing assets, including everything from stocks and bonds to businesses, real estate holdings, cash and personal belongings.


Once those assets are gathered and under the executor’s control, he or she must pay any debts, file tax returns, continue to pay all bills and maintain the fiduciary value of those properties. In other words, the executor needs to make sure all financial matters in the estate run smoothly under his or her care, Vicario explains. “On a larger estate, this can be a very time-consuming undertaking,” she says.


It also exposes a loved one serving as the executor to financial and legal risk, especially if he or she isn’t familiar with the tax implications of executing an estate, says Louise Hildebrand, Regional Trust Manager for U.S. Bank Wealth Management’s

Fiduciary Services Division in Chicago.

One of the most common mistakes novice executors can make is yielding to family requests to distribute assets before all taxes and expenses are paid. Then when an outstanding bill arrives, they either need to ask for the money back or potentially face paying a liability out of their own pocket. 


“If a corporate fiduciary is your executor, it will be under less pressure to make a costly mistake and is familiar with the requirements for retaining funds to pay outstanding liabilities,” Hildebrand says.


A loved one serving as executor will be more likely to succumb to family persuasion to distribute assets prematurely and will not be prepared to be held accountable for funds that cannot be retrieved.


The executor is also responsible for managing the distribution and timing expectations of beneficiaries — which can be a thankless job, especially when they find out how long the distribution process takes.



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September 29, 2015

Many beneficiaries assume they will receive assets left to them as soon as the benefactor dies, but in reality it can take two years or more before the taxes are settled and approved by the IRS. And while a fiduciary might be able to release partial payments, final distributions cannot be made until all outstanding liabilities have been resolved.


“This can create a lot of tension and heightened emotions that the executor has to deal with,” Hildebrand says.


Set Expectations

To ease the risk of upset, Hildebrand encourages estate owners either to talk to their loved ones directly about who will get what, or to leave a letter explaining their reasoning.

“If you put your wishes into context, it can help people understand your motives,” she says.


It will also help the executor make the best decisions about the estate, like who should receive the family china or certain pieces of artwork. “It is important to provide that guidance to ensure your goals are met,” Hildebrand says.


You still can’t guarantee everyone will be happy with your decisions, but you can minimize the risk of conflict by choosing an executor who has the skills to manage your estate and who will keep your beneficiaries informed, Hildebrand says. “Good communication and planning are essential to making this process work.”


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Wealth Transfer