IT PAYS TO KNOW: Dividing the Estate — Not the Family

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By JUDD MATSUNAGA, Esq.

Hard to believe, but on the very next day after Mom passed away, her son backed a U-haul truck up to Mom’s house and emptied everything of value. He then left a voicemail message on his sister’s machine: “I’ve taken what I want from Mom’s house. You can have the rest.” He then drove away, leaving the sister to clean up the house.

These two siblings didn’t speak for years after that. But we had to settle Mom’s estate, so they spoke to each other in my office for the first time after years of resentment. The emotion in their voices, the trembling of their words — I’ll never forget it. In my opinion, this could have all been avoided if Mom had done some proper estate planning.

You would like to think, especially for members of the “model minority,” that children will remain close to their siblings after the loss of their parents. That’s the way it is for the Nisei — we just had a family dinner with my uncles, aunts and cousins. Unfortunately, for much of the Sansei community, that’s often not the case.

Maybe it’s the high level of education, the high level of success, or the high level of outmarriage, but quite often the loss of a parent brings more family division and strife than family unity. In fact, the courts are full of brothers and sisters fighting it out over the deceased parent’s property.

If your children get along and are close, count your blessings — you’re very fortunate. However, if your children have argued over everything since they were little, and generally make it a point not to agree on anything, then you still have some things to do, i.e., just hoping that your children remain close after your death is not enough.

This article is dedicated to the vast majority of Nisei who have kids who are kind of in between — that is not extremely close, yet not quarreling all the time either. I’m sure you would want to do everything possible so that your children will remain close even after you’re gone. These are my suggestions:

1.  MAKE A PROPER ESTATE PLAN. This means setting up a revocable living trust. If you fail to set up a proper estate plan, which means that your children will most likely have to fight it out in probate court, the chances that they will remain “close” after you’re gone is just about zero.

“But Judd, I have a will. Isn’t that good enough?” If you pass away with a simple will, you’re sending your family to probate court to settle your estate. If you pass away without a will, i.e., intestate, that’s even worse. Now, your children will fight over who becomes the administrator of the estate.

“But Judd, I’m not rich. I was told I don’t need a trust.” As an estate planning attorney myself, it really bothers me when I here this. There are many attorneys who would rather send your children to probate court because they make their money on attorney fees in probate court. They are happy to provide you with a simple will.

HEAR THIS: You don’t have to be rich to benefit from a trust. In California, if your estate is over $150,000, your children are going to probate court without a trust. That means if you own your own home (paid for or not), you need a revocable living trust. Besides avoiding probate court, you’ll save your children tens of thousands of dollars in probate fees.

2. CHOOSE YOUR EXECUTOR WISELY. Some of the common mistakes parents make when choosing an executor (or successor trustee) is naming two or more children “co-executors” (or “co-successor” trustees) because they don’t want to leave a child out. This is really not a good idea. If they can’t agree on something, it will delay the administration of the estate, drive up legal costs, and create a great deal of ill will.

Other parents will choose the oldest child, others the most successful child, thinking they will be the most capable for the job. However, they might not necessarily be the best choice.

Where does the oldest child live? If he or she lives out of state, you might want to choose a child who lives more locally.

One mother was so proud of her son-in-law that she choose him to be the successor trustee of her trust. After her death, the daughter and son-in-law got divorced. The son-in-law moved into the mother’s home with his new girlfriend. My advice is to choose one of your children; his or her spouse can always help.

3. FAIR DOES NOT MEAN EQUAL. There is a huge desire for Japanese American families to be fair. However, there’s no law that says that all your children must receive an equal share. “But I love all my children equally. Shouldn’t they get an equal share?” Of course you do, but there are some circumstances where fair does not mean equal.

One common example in the fair-versus-equal category is the child who becomes the primary caregiver for an elderly parent. Sometimes it’s because the other children live out of town, sometimes it’s because the other children don’t have the time. Either way, it may make sense for that child to receive a larger portion of the parent’s estate than his/her siblings.

Or you may have a child that may need more help than the other children. The other children may all be doing quite well, i.e., good jobs, own their own homes, etc. You would like to make sure that the one child who doesn’t own a home still has a roof over his (or her) head after you’re gone.

This can be accomplished. Perhaps you can give the family home to that child, and divide the savings between the other children. Or you may have one child that’s not good with money and you’re afraid he (or she) would lose it. Your estate planning attorney should be able to provide you with different scenarios that will accomplish your wishes.

4. PERSONAL PROPERTY MEMORANDUM. Research has shown that disputes over inheritance and property distribution are one of the major reasons for adult siblings to break off relationships with one another. Attorneys who work with estate planning say that often it is the personal property, not the titled property, that causes the most problems when settling an estate.

Why? Personal belongings usually have different meanings for each individual. The sentimental value or meaning attached to the personal property often may be more important than the financial or dollar value. Dividing items with sentimental value fairly to all parties can be very difficult.

That’s why I’m amazed when parents bring their old trusts to me to review. The division of the house and savings are clearly stated, but when it comes to non-titled personal property, it’s more often than not — silent. Who gets Mom’s diamond wedding ring, or Dad’s gold watch? These problems could be avoided using a personal property memorandum as part of parents’ estate planning documents.

5. NO CONTEST CLAUSE. Let’s say one of your children feels he or she is entitled to more than the equal share that you left them. Make sure your will or trust contains a “no contest” clause. That means, if any child (i.e., beneficiary) contests your wishes as set forth in your will or trust, they would get disinherited. This should discourage them from fighting.

This is especially important if you intend to disinherit an estranged child. First, make sure your will or trust mentions that the child is to receive nothing, or “one dollar.” If the will or trust is completely silent as to the disinherited child, they could end up with an intestate share, i.e., equal with the other children.

If a parent wants to leave 100% to one child and nothing to the estranged child, the disinherited child has absolutely nothing to lose if he were to contest. That means the good child will have to go to court to defend your wishes. Quite often, it’s best to leave a little amount to the disinherited child, e.g., say 5%, to reduce the risk of court contest.

Judd Matsunaga, Esq., is the founding partner of the Law Offices of Matsunaga & Associates, specializing in Estate/Medi-Cal Planning, Probate, Personal Injury and Real Estate Law. With offices in Torrance, Hollywood, Sherman Oaks, Pasadena Fountain Valley, he can be reached at (800) 411-0546. Opinions expressed in this column are not necessarily those of The Rafu Shimpo.

 

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