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Home / estate planning

How family dynamics can impact estate planning

By Shel Segal

Writing a proper estate plan is mathematically easy. It’s the people involved who can make it difficult.

That is why longtime estate planning attorney Samuel B. Ledwitz encourages you to talk about your entire family structure before you decide to state who gets what when you pass.

“We talk about what reality is for that family and address it,” said Ledwitz, president and managing partner of estate planning law firm The Law Firm of Bezaire, Ledwitz & Associates. “That’s why cookie cutting does not work. Each family is unique. You can’t make a one-size-fits-all template for all families.”

And when discussing your family with your attorney, Ledwitz said, you really need to soul search and be honest about the people in your life who are most dear to you. That means their strengths, weaknesses and overall realities.

“Your kids are not all equal,” he said. “One might have a bad marriage. One might have special needs. You might end up giving a kid who has a drug addiction money. So, the question becomes did I help them with all that money or did I injure them by fueling an addiction. We have to look at money as a potential good thing and bad thing and see how it’s going to work out.”

There are a number of questions Ledwitz said he asks to gain an understanding of your family structure before any important financial decisions are made.

“We talk about where your kids live, how do they act, do you have a good relationship with them, do they have a good relationship with one another,” he said. “No stone is left unturned. There are a lot of variables. It may be that this is a perfect family or it could be more difficult than that. And that’s why we talk about it.”

As most families are far from perfect, Ledwitz said there are a number of things you can do in a proper estate plan to protect your assets as they are passed down to your heirs.

“Let’s say you have a child of any age,” he said. “Giving them that money when they turn 18 is usually a disaster. Statistically they will be penniless by 19 or 20. So, we can create a spendthrift trust, which is where we can have a third-party person or a bank in charge of their money. That entity can dole out the money to let’s say when the person is 40 or whenever you think they will be mature enough.”

What is a spendthrift trust?

“A spendthrift trust is when the money goes into lockdown and you have a third party manage your money for the beneficiary,” he said. “The money will still be there year after year because a responsible party was looking after it.”

Ledwitz added spendthrift trusts can be used in other situations to protect all involved.

“If one of your children has a bad marriage, we might do another type of spendthrift trust to make sure your money doesn’t get blurred with the kid’s spouse that you don’t care for,” he said. “If they’re a disabled person we can talk about a special needs trust to make sure they stay eligible for government assistance. Also, if we think we have someone with a drug problem, we can put drug-testing language in the trust, That can go on for life or until that person turns a certain age.”

There is another benefit of the spendthrift trust that can help your heirs down the road

“It also protects if they get sued,” Ledwitz said. “Since the money is technically under lockdown it can’t be used as an asset against you, therefore protecting the money even further.”

Another situation that arises during the process is who is going to manage your estate upon your passing, he said. Assuming you have two or more children this can become a very contentious topic, which is why Ledwitz said he always discusses it with his clients in detail.

“I always ask the person, ‘Which child or person of yours is best to handle the money?’” Ledwitz said. “You can’t have two people making the decisions if they don’t get along. It’s not who you love the most. It’s who’s going to handle this in the most professional way. We always have a discussion about this.”

And why is it good to have just one person in charge? Ledwitz gave this anecdote.

“It’s akin to two people driving a car with one steering wheel,” he said. “Unless they’re absolutely on the same page, we’re going to crash.”

There’s another good reason to have just one person in charge, he added.

“Having just one person in charge also works for healthcare decisions,” he said. “Let’s say you have two children, one lives in New York and one lives here in California. It really should be the more geographically desirable person the one you pick to make these decisions.”

While Ledwitz said he listens and lays out the best courses of action, he leaves the ultimate decision on how to proceed to his clients.

“People tell me what they want to do and I advise them on whether or not I think it’s a good idea,” he said. “You got to say it in a nice way, but my job is to make sure their goals are accomplished in the best way possible with the least amount of friction or fighting. I’ve learned over time how to do that.”

In addition, Ledwitz said while he realizes stating where the assets will go is a big priority, he believes in putting people first and really understanding their situations before moving forward.

“A lot of other lawyers want to know about your money and maybe how it’s invested,” he said. “Yes, that’s important. But the most important thing after you die is not the money. It’s the family structure. It’s whether the family gets along, does it work.”

If you would like to discuss any aspect of a proper Estate Plan, please phone The Law Firm of Bezaire, Ledwitz & Associates at (626) 398-0100 or log onto www.SmartEstatePlans.com.

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