I recently described the marvelous manner in which George Washington used a simple bequest of his swords to express his devotion to freedom and liberty and to instill those values in those who followed.
His Last Will and Testament also stands as a shining beacon of how failure to think through consequences and the personalities of your loved ones can undermine a well meaning estate plan.
Washington’s Will provided that all his slaves were to be freed upon the death of his beloved wife Martha. On the surface this appears to be a reasonable and well conceived expression consistent with his desire to look after the comfort of Martha, but to ultimately underscore his love of freedom and liberty for all men, his own faithful servants included. It was a powerful political statement.
When Martha became aware of this provision she was afraid that she would suffer a fatal event at the hands of her slaves who could wait no longer for the promised freedom. The history books usually make a dramatic statement about Martha’s devotion to the ideals upon which our country was founded when describing her generous action of freeing her slaves soon after her husband’s death. Few realize that her reluctant action was in part motivated by fear of the consequences of not freeing them.
This is a dramatic example of a logical exit strategy gone awry. Today such mistakes remain all too common because of the mistaken beliefs that good estate planning is only for the wealthy.
One crucial fact often overlooked is the importance of making arrangements for minor children.
In today’s world where 1 out 2 marriages end in divorce, young children are often the natural objects of their parents affections and bounty. If any thought is given to changing beneficiary designations after a divorce, many people remove the spouse and name their minor children or their “estate” as the beneficiary of their retirement accounts and life insurance until a more formal plan can be established. That formal plan is often never implemented prior to a premature and unexpected death due to an accident or suddenly terminal illness. The importance of these details often becomes enmeshed with concerns about the cost or the need for a formal estate plan when there are often no other valuable assets other than the untouchable insurance proceeds or retirement plan accounts.
If a decedent’s beneficiary is a minor, often the only choice is to have a conservator appointed and the money placed in a restricted account until the minor is 18.
There is no money available to raise the minor because the money is under the strict supervision of the court. The other parent, however ill equipped financially to provide for the minor, quickly learns that a parent’s obligation of support means not using the minor’s own nest egg for the necessities of life.
And then the minor turns 18. Whamo! all of the proceeds plus the accrued earnings spill out into the minor’s hands subject to all the hopes, dreams, and aspirations of a youth to often raised in an environment of scarcity and often with scorn for the restriction learned from the surviving parent.
If ever there was a case for a protective trust or careful legal work in the planning for one’s demise, this is it. Don’t let this unhappy result become your child’s reality.