Pitfalls in Designing a Legacy, Choosing Trustees

Dave was a respected physician and able to retire early. He was living large with healthy income from apartment buildings purchased as a part of his retirement plan. Dave had married for a second time and had children from both marriages. After a difficult divorce, Dave decided to put all his assets into a trust prior to getting married again. He also clearly established the trust as his separate property. Valuing his privacy and independence, Dave structured the trust himself and appointed his second wife as the successor trustee. His children were all financially secure, but his second wife had few assets of her own. So, the trust would, by default, transfer all the assets to her at Dave’s death. Dave discussed his plans with his second wife. However, he never found the right moment to discuss his plans or wishes with the rest of his family.

Choosing trustees emotionally

An unexpected diagnosis of terminal cancer forced Dave to face his own mortality. He decided to modify his estate plans without seeking professional counsel. Dave simply informed his wife she and his son from his first marriage would now be trustees. He also wanted to distribute a portion of his assets to the other children after his death. Dave, as the sole owner of the trust, assumed that his wife and children would honor his decision without contest. Sadly, the uncertainty, confusion, and fear about Dave’s wishes ultimately led to:

• Dave’s wife fearing for her own financial security, causing her to embezzle from the trust. She couldn't have an open dialogue with Dave and didn’t trust that a comprehensive plan included her.
• The rest of the children fearing for their own inheritance, with only one child inexplicably becoming one of the two trustees. Thus, they began fighting the co-trustee sibling and among themselves.
• Wide fractures within the family due to infighting, meaning that no children or grandchildren – other than the co-trustee son – visited Dave in the last 2 years of his life.

For many people, the subject of money is intertwined with strong feelings of security, freedom, and power. As a result, it is difficult for most people to talk about money in open and honest dialogue. Dave’s subconscious beliefs around money and inadequate planning created a system which put the family at odds with each other.

A better solution is available

Had David come to me when he was designing his legacy, things might have turned out differently. I would have conducted a discovery process with Dave to uncover what’s most important for him and help clarify his values before developing a plan. Then, facilitating more honest discussions and the compassionate sharing of feelings between the spouses would have made Dave’s wife feel cared for and have more confidence about her own future. I would have advocated for family meetings, which include the children, that emphasized strengthening family relationships while crafting the family mission. With proper planning, it would have been possible for Dave to avoid this sad situation and to have his family by his side at the end of his life.

Helping people achieve their life and financial goals is the central reason why I practice life and financial planning.

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