Reviewed in the United States on April 16, 2017
What if you have a hard-earned legacy to pass on, and a son/daughter-in-law that have done nothing but waste money from Day One? That certainly is an uncomfortable position, and the motivation for buying/reading this book. Author Condon, in cooperation with his father, has created thousands of inheritance plans over a combined 70 years of practice; they've also witness the impact of their advice. That's very impressive, and adds additional credibility. The original edition was published in 1995, this is the third.
Unfortunately, the reader will soon realize that setting up trusts, etc. is not for the average layman. The good news is that the reader will realize there are solid options and have some ideas with which to discuss more thoroughly with an attorney or potential trustee.
Author Condon has seen a long list of inheritance mishaps. A surviving spouse who lost the family money to the last caretaker, a daughter who lost her inheritance to her husband in a divorce, a son who disregarded the inheritance instructions made by his parents in their Living Trust, parents who gave substantial dollars to one child for his medical education but in failing to think through their simple 'divide equally' instructions, created major conflict, a charity that used his client's money to buy Cadillacs for its directors, children who had to give the IRS nearly half their inheritance in death taxes, a daughter who bestowed her entire inheritance to a cult, and a son supposed to handle his disabled sibling's share but instead put it into his own pocket. Having experience those and other problems hopefully provides Condon with the insight to avoid their repetition.
Most people only use their Will or Living Trust to say who gets what. Condon, however, recommends programming it to live on after your death. He then posits the 'Big Seven' goals of inheritance planning.
1)Program Your Inheritance Plan to Prevent Inheritance Conflicts Among Your Children.
2)Protect the Inherited Money from Your Children's Potential Problems - divorce, a bankruptcy trustee, a serious illness, a drug addiction fed by his inheritance, a financially immature daughter, etc.
3)Program Your Inheritance Plan to Ensure It Will Be Carried Out. Most clients select one or more of their children - that is not always wise.
4)Program Your Inheritance Plan to Protect Your Assets for Your Surviving Spouse. If he/she remarries, half the family wealth may end up with his/her new spouse she may have additional children (or stepchildren) - all of whom might share in your half, your children may pressure your surviving spouse for an 'early inheritance,' he/she may become physically or mentally incapacitated - leaving him/her and the family wealth at the mercy of the 'last caretaker' or 'final friends,' or your surviving spouse may not have the capability to manage the family wealth.
5)Eliminate the Death Tax - the IRS may make your children pay a 'death tax.'
6)Prevent the IRS from Getting Two Bites of the Same Apple - eg. when your children die, whatever is left of their inheritance will be taxed again.
7)Keep Your Children and Property out of Probate Court. Between attorneys' fees, executor fees, court costs, publishing fees, and appraisal fees, this can consume, on average, about 5% of your estate. It is also time-consuming, and can last from 9 months to two years - if there are no problems.
Leaving an unequal inheritance because of economic disparity between children can create a bitter rift. Talk with them first. Nine times out of ten the successful child will become angry and incredulous - if this occurs, you should reconsider. Another alternative is to make small lifetime gifts to your needier child, given an insurance policy to your needier child. Condon has found that equalizing after death does not work - eg. appreciation, using an educated guess, or better yet, let each share the risk.
Making one of two or more children the Successor Trustee of your Living Trust runs the same risks. Condon's suggestion - make them all successor co-trustees/executors (unless there's a problem with mental disability, financial immaturity, drugs, etc.). Don't let problems with distance dissuade you.
Sometimes the children agree that one should be the sole Trustee - usually because that one has more business experience. Condon, however, contends that is not the issue - rather, it is 'Would this agreement eliminate normal human suspicions and conflicts arising when one child has sole power?'
Another issue - assume the parents had three children and wanted to leave them equal shares in the apartment building they owned, and wanted to prevent their children from selling the building - preserving it for their future generations. As equal co-owners, each child would have the right to force a sale through court proceedings, even against the wishes of his siblings. A special Trust, however, would preserve the building in the bloodline until the death of the last Greenfield child.
On the other hand, if your children have differing economic goals for their inheritances, don't make them co-owners - leave each a separate property and require them to hire a licensed real estate appraiser to calculate the difference in values, then have the child with the higher-valued property even up the difference.
Another warning - don't die with your children owing you money. Instead, create a formal Promissory Note for your son (and his wife) to sign, collateralize that loan with a Mortgage or Trust Deed against their home, or forgive the loan and call it a gift. Alternatively, force equalization after death via the use of a real estate appraisal.
Another major issue - protecting an inheritance while it's in the hands of your child. Condon estimates one of every five families he's seen has a child with a self-evident need to have the inheritance protected. Mismanagement and squandering, and subsequent divorces/remarriages are significant issues. In your Will or Living Trust, you can include a 'Protection Trust' in which your money and property go to a Trustee of the Protection Trust. That Trustee must carry out any inheritance instructions you provide. Typically these direct him to give your child portions of the inheritance from time to time, and control the inheritance for the rest of your child's life.
On the other hand, many parents have a 'Depression-era' perspective - having saved religiously for everything owned. Another alternative to beginning your child's financial education early. A third is to require that Trustee to match every dollar your child earns.
Protecting the inheritance from your child's spouse is an important consideration. This could occur by inheritance, by gift (eg. a daughter putting an inheritance in her and her husband's joint names with right of survivorship), or by law (Hawaii declares that when one spouse inherits, the other automatically has rights to a portion). Some suggest a 'Transparent Trust' in which you establish a Living Trust and leave the inheritance to your child 'in Trust;' when your child dies, remaining assets will pass to your grandchildren. But, your child could spend all the Trust assets, amend/revoke the Trust terms, or terminate the Trust.
The 'good news' is that the Transparent Trust gives your child the power to say no to his spouse, the 'bad news' is that he or she still may be talked out of total control. Thus, the stronger irrevocable 'Protection Trust.' All the money and property goes to a third-party Trustee who controls them for as long as specified.
Author Condon states that 25% of the families he's dealt with have a 'disabled' child - alcoholism, drug addiction, gambling, won't stay on his medication, etc. His recommendation is an 'Irrevocable Protection Trust,' using a corporate Trustee. The downside is that the bank won't hold your disabled child's hand - eg. visiting every day to ensure all his financial needs are met.