Skip to comments.As inheritances fall, a boom in disputes
Posted on 11/30/2002 1:34:31 AM PST by sarcasm
NEW YORK -- As an estate planning attorney, Les Kotzer said he was taught to focus on helping clients save money. That view changed, he said, after a visit one day from a baby boomer couple.
The husband and wife, both in their 50s, were smartly dressed, but later revealed their luxury car was leased and their home "mortgaged to the hilt." When Kotzer asked what the husband did for a living, they explained he was a "waiter."
"The wife said, 'He's waiting for the inheritance,' " said Kotzer, of Thornhill, Ontario. "A lot of boomers are depending on what their parents have saved all these years to pay off their debts and loans.
"Within that dynamic, you see problems."
Kotzer, co-author of "The Family Fight: Planning to Avoid It," said the couple are typical of many boomers who expect to inherit money from their parents. They might be disappointed, he said, because the family assets have dwindled, or their parents haven't given them any information about their finances or about their wills.
And many times, boomers find they're fighting with siblings and other family members over who gets how much.
A whole industry of financial planning and attorney services has cropped up aimed specifically at avoiding such problems after a parent's death, ranging from extensive will planning to counseling on how seniors can best communicate inheritance decisions to their children.
The problems can start, some planners say, because boomers have a different attitude toward money than their parents.
"Where the older people were savers, because they were Depression-era children and adults, baby boomers had more. We tend to be more the credit card generation," said Debra Kroll, director of Temple Law School's Elderly Law Project in Philadelphia. "So baby boomers often depend on their parents' assets."
And many seniors actually have fewer assets to pass on. The bear market has ravaged many stock portfolios, while their other savings have been depleted by the high costs of nursing homes, long-term care and prescription drugs.
Problems also arise because of changes in the family structure. The increase in divorce and remarriage over the past two decades has created confusion as to the rights of stepchildren and second spouses in wills, experts say.
"This is a very financially lucrative area for attorneys. It didn't used to be," Kroll said. "Children are encouraging parents to do estate planning to wind up with the money. ... This field is expanding based on that."
The result: Lawyers and financial planners are starting to focus less on documenting exactly what a senior wants to say in a will, and are spending more time asking detailed questions about their boomer children, such as financial status, living situation and relationship with siblings.
Kotzer says he now counsels clients specifically with the goal of avoiding family disputes, even if the method of distributing assets results in higher tax costs.
For example, he notes that many parents wish to reward children who care for them in old age. He suggests parents give gifts to the child while still alive, even it means paying a hefty gift tax, and then allot equal shares in the will to avoid sibling disputes after death.
"Some of the times when people do planning to save taxes, they don't realize they could be hurting their family," Kotzer said. "My practice is geared toward saving the family."
Some financial planners also act as family counselors, encouraging parents to include children early on in estate planning meetings, so they understand exactly who is getting what and why.
Or, if that proves too uncomfortable for a senior, financial advisers suggest filming a videotape that can shown after a will is read to help explain the parents' decisions.
"I think the advisers can work with the family as a whole and that takes a different skill -- a counseling background or talent in bringing together people," said Sharon Burns, executive director of the Association for Financial Counseling and Planning Education, based in Upper Arlington, Ohio.
"Financial advisers need to thoroughly delve into the family issues, such as what are the relationships and whether there are children who have special needs," she said.
FDR changed that idea in the 30's, and it has only gotten worse since then.
Disagree with you. Seniors didn't buy on credit; didn't pay a lot of interest. Paid cash for things other than house, car.
Boomers use plastic for everything and pay as much to banks each month as to Uncle Sam.
Boomers suffer from "instant gratification" and aren't even aware of what they can afford from what they should live without.
Grannies knew the difference; did more with less, IMO.
Someone I know now has been keeping up an inheritance fight over her mother's estate for six years since her mother's death. She is entitled by the will to an equal share with her two sisters - uncommonly generous of mom considering that this one hardly visited while the two sisters shared the caretaking duties for a decade. The two sisters, being in the same state with mom's will and assets, are the executors. They pretty much offered a quick three-way division, but my friend is obsessed with the notion that the sisters have padded their expense accounts or something -- if they did, it couldn't be by much, they're charging a tenth of what a bank or lawyer would charge. My friend, against everyone's advice, is spending 100% of her money to fuss over 5% of her mom's money, and, while this prolonged litigation is going on, the entire estate is boiling away (because the sisters are legally entitled to pay their legal fees out of the estate) so even if she wins, my friend's one-third will be much less than what she was originally offered. I should add that by carrying on (and on and on) this lawsuit, my friend is no longer being spoken to by ANY of her relatives.
One of the reasons that inheritances are now so unreliable (if, indeed, they were ever reliable) is that people are now living so much longer after retirement. They live long enough to use up their savings. They could live for years in a nursing home environment, and nursing homes charge the earth (and to qualify for a public subsidy for nursing home care, the elderly person must become pauperized), leaving very little to inherit. There is also the possibility that an aged parent might remarry, which would shift the majority of the inheritance to the spouse.
For their generation, there was a direct connection between what they had and what they spent, always putting some aside. My mom's generation grew up during the depression of the '30s. She had no desire to depend on others for survival.
Good for them!! Better they spend the money on the world cruise they never took or a nice, safe car that will only be driven a few thousand miles a year then give it to the kids to spend on junk to fill their mini-mansions.
They could live for years in a nursing home environment, and nursing homes charge the earth (and to qualify for a public subsidy for nursing home care, the elderly person must become pauperized), leaving very little to inherit.
The solution here is simple. Some child could actually make a sacrifice, live with the elder folk, take care of their needs and take a fair montthly stipend to do that. Otherwise, let the nursing homes have the money.
There is also the possibility that an aged parent might remarry, which would shift the majority of the inheritance to the spouse
As far as that one goes, the kids should probably help plan the common law exchange of vows at the council on aging center, make it fancy, send them on a nice vacation, and make darn sure the wills are in order. No need to have more than one set of siblings fighting over the silverware.
Also voted straight Democrat in the last election. I have zero sympathy for such people.
Absolutely true! Some of these people bought their houses for around $5,000 back then. Added a few improvements throughout the decades, now same house would cost $100,000