“What is on the book this week?” Ben Reach asked Joanne when he arrived at the office Monday morning.
“You have new clients at ten this morning, Sally and Sam Collins, about their mother Mary’s estate. She died two weeks ago. I put her will and trust agreement on your desk along with a summary of her assets. Her accountant, Ron Cease, will be with them — he is a co-executor and co-trustee with them. I’ll bring you a cup of coffee.”
Ben picked up the file from his desk and walked to the library-conference room where he began to study the file’s contents. Mary Collins had not been Ben’s client. The lawyer who had prepared her will and trust agreement was recently deceased. He’d been technically capable but not always wise, Ben knew from thirty years seeing his work.
The estate contained about $4 million in assets, including a nice residence and a portfolio of securities. Her “tangible personal property”— furniture, jewelry, books etc. — was to be shared equally by her children, “honoring their preferences in the division so far as practical,” with Ron a final decider in the division.
Fair enough, Ben thought, then remembered his father’s long-ago admonition, “Beware the pots and pans,” sage advice about dealing with children on dividing a parent’s estate.
The will was the usual simple “pour-over” model, leaving Mary’s individually owned assets to her trust. In the trust agreement was where Ben found the hand grenade buried, not unexpectedly.
The trust agreement directed that Mary’s residuary assets be held in a single trust so long as both children lived. They would receive the income equally. Principal could be expended in the Trustees’ discretion for each child and any of his or her descendants “for their support, health or education.”
In that phrase lay the hand grenade, the seeds of family strife waiting to be germinated. Had Ben been Mary’s lawyer he would have advised her to create a separate equal trust for each child and that child’s descendants, with the child and Ron as Trustees. Ben was a firm believer in not involving children in one another’s financial affairs where possible, especially in a way so the spending or work habits of one family could affect the other.
When the three prospective clients (Sally, Sam and Ron) arrived, Joanne ushered them into the library-conference room where Ben waited, offering them water, coffee or tea plus the obligatory Coca-Cola (regular or diet) — this was Georgia of course. They refused, a sure sign of tension among them, Joanne knew.
Ben knew Ron who enjoyed a good reputation among his clients and fellow accountants — and lawyer as well. Ben searched his mind for a way to ease the tension between Sally and Sam, which was palpable. “Tell me about your mother, I understand she was quite a person,” Ben said.
That broke the ice. Sally and Sam began to tell funny stories about Mary that revealed their deep affection for her and all she had done for them. Then the first of the resentments popped out, from Sally.
“I just cannot understand why Mom did not trust us enough to leave it outright to us, we are not spendthrifts, we can certainly manage the funds on our own.”
“Well, she made you trustees, so she trusted your management,” Ben said.
“Based on experience, I expect she left it in trust instead of outright for fear of someone besides you,” Ben said.
“Like who,” Sam asked.
“Has either of you been divorced?” Ben asked. Sally and Sam looked at one another. The look told Ben that Mary had not liked her children’s spouses, or worse.
“There have been some problems of that nature,” Sally said.
“I expect your mother wanted to protect you,” Ben said.
“Why would she have done it with one trust for us both and our children?” Sam asked.
“Good question,” Ben said. “I expect she was advised by her lawyer one trust would be less expensive to administer than two. But the good news is we can fix that. We can divide the trust into two. One for each of you and your respective children,” Ben said.
Suddenly smiles erupted from all three of Ben’s prospective clients.
“And the trustees of each trust can be Ron and the child who is beneficiary,” Ben added. The smiles grew wider.
In twenty more minutes Ben answered the remaining question about Mary’s estate and trust and the new clients left with the roadmap they needed to administer Mary’s estate and trusts. Ben was commissioned to prepare the documents necessary to divide the trusts, and the old curmudgeon ushered them into Joanne’s care to collect their contact information.
“How did you manage to make them happy?” Joanne asked.
“Easy fix. Showed them how they could avoid dealing with one another in the future,” Ben said, and dialed Sam Nixon MD to schedule a bream fishing outing.