June 1, 2006
Written by Staff at The Centre for Mediation & Dispute Resolution
How to Ensure that You Will Rest in Peace
Estate Mediation – Pre-Planning
Facing one’s mortality is difficult. Decisions about how to provide for your spouse, children, other family members and friends after your death can be paralyzing. Somewhat ironically, the decisions you make will live long after you; this is, in fact, your final chance to speak to your loved ones. The process you put in place and the decisions you make will have lasting effects on the relationships of your family members.
Case Study #1 – Harry and Wendy have four children. Two of their children have become successful in their chosen fields. One child works as a teacher without substantial compensation; the other is a financial manager who has achieved monetary success. The third child is a stay-at-home mother of three, and the fourth child has never found himself, drifting from one bad situation to another, despite some support (monetary and otherwise) from Harry and Wendy over the years. Harry and Wendy love their children equally, but cannot decide how to divide their estate? Do they leave their assets to their four children equally? Help those who need the help most? They are concerned that if their fourth child were to have access to assets, those assets would quickly be depleted. In addition, they realize that they have previously provided much greater financial support to this child than to the others. How do Harry and Wendy sort out these difficult issues?
Case Study #2 – Dave and Marge have enjoyed their vacation home in the mountains since their three children were small. Now that their children are grown, Dave and Marge spend significant time at the house with two of their children and the grandchildren. Unfortunately, those two children do not get along, and each would like to continue to enjoy the vacation home after their parents are gone. The third child has no interest in the outdoors and hasn’t been to the mountains since childhood. Dave and Marge do not want to exclude the third child, and they cannot see how the two other children will be able to work cooperatively owning the house jointly. Dave and Marge would like to see the vacation home remain in the family, but they do not know how to plan for this.
Case Study #3 – Paul and Mary have been married for twenty years. Paul has four children from his prior marriage and Mary has two children from her prior marriage. They have one daughter together, who is now almost 18. Some of the children have achieved financial independence. Paul and Marge have helped and continue to help the grown children who need assistance. They would like to make sure that their youngest child has the same advantages as her siblings. In addition, for twenty-five years, Mary has been the sole means of support for her disabled sister. Paul and Mary are struggling with how to provide fairly for all of their children and for Mary’s sister.
Questions to consider
To whom do you wish to leave your assets? If people have differing needs, should they be provided for differently? Who have you helped during your lifetime, and how does that impact your estate planning? Who would you like to receive your most prized possessions? Which mementos would you like family members to have? What are the messages you wish to convey? How does that impact your estate planning?
These questions do not need to cause gridlock in your decision making process. Estate owners (that’s you!) often wish to resolve the potential emotional issues before they are gone. Smart planning and effective communication on these heart-wrenching questions are the best gifts that you can give your family. Sometimes the issues are business-related (family business succession), financial-related (who is managing finances for the surviving parent, if necessary?), property-related (what happens to the family homestead, or the family vacation home?), or related to personal effects – photos, mementos, furniture, family heirlooms – valuable or not.
Estate Tax Laws:
Estate tax laws are changing. The Economic Growth and Tax Relief Reconciliation Act of 2001, created a series of changes to the federal estate tax laws. For example:
Federal estate tax exemptions increased dramatically, currently standing at $2,000,000 per individual.
In 2009, the individual exemption rises to $3,500,000.
Estate tax rates for the amounts above the enlarged exemptions have been gradually reduced, currently to 46%.
In 2007 marginal estate tax rates fall to 45%, where they will remain through 2009.
Under the current statute, in 2010 the federal estate tax is completely eliminated for that one year.
In 2011, the pre-2001 federal estate tax scheme springs back into effect, unless Congress acts.
In comparison, Massachusetts estate tax exempts estates up to $1,000,000.
In early June, the Senate soundly defeated a bill which would have permanently repealed the federal estate tax. (The House of Representatives had passed the permanent repeal earlier.)
Senators are trying to craft a compromise solution which would further revise the federal estate tax laws.
In the meanwhile, estate planners create estate plans for individuals and families striving to take advantage of tax laws to preserve as much of the estate as is possible for furure distribution. Few people want to pay more in taxes than is necessary. It is perfectly legal to plan one’s estate to take advantage of the savings provided for in the tax regulations.
Estate Pre-Planning Mediation
Tax planning is only one small piece of estate planning. While tax planning is crucial to ensure that you can preserve as much as possible to distribute, determining that other part – that is, how you would like your estate to be distributed – is far more emotionally important. Perhaps you and your spouse need to think through your estate planning desires with a trained professional. Perhaps you would like to talk these questions through with additional family members and heirs. Pre-planning estate mediation offers the opportunity for you to develop clear ideas and to communicate about your most cherished desires before you create your estate plan. (See this site next month for a consideration of ways in which the lack of sufficient pre-planning can lead to post-mortem estate mediation.)
Estate mediation provides a forum for you to evaluate and consider the emotional, psychological and practical aspects of these important decisions.
Estate mediation provides a neutral, professional, safe environment to resolve these issues. Trained professional mediators are able to help families work in a cooperative approach. Mediation is often more effective because mediators guide parties to consider their interests, rather than entrenched positions. There are often similarities of interests in estate mediation cases – keeping the vacation home in the family, preserving more of the estate for distribution, and most important, maintaining positive family relationships. Estate mediation is especially useful because the parties involved should have long lasting continuing relationships. Estate mediation can ensure that these relations remain – or become – relationships where there is a healthy productive framework for conflict resolution.
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