Many of us have heard about an accident, an unexpectedly early death or an extended stay in the nursing home that leads to a life savings lost or unnecessary hard feelings among kids and grandkids that last generations. None of us want outcomes like that. How do we avoid those negative outcomes?
I cannot overemphasize the need for a good lawyer’s advice to lead to positive outcomes in any aspect of life, business and death.
However, most of us like to have some thought frameworks (paradigms) before even starting to think about a plan. There are four primary frameworks to begin to prepare for life changes (such as accidents or the need for nursing home care) and our inevitable earthly death.
First, people sometimes identify some specific financial gifts they want to give upon their deaths. For instance, I may want $500 to be paid to my church or $100 to be paid to each of my grandchildren. Caution should be exercised for specific gifts like this, because many charities have similar names, and some gifts made to some groups without conditions may be used inconsistent with the giver’s expectations.
Nevertheless, our conservative natures often lead us to not want to identify specific dollar amounts in order to avoid appearing presumptuous if we die with less than enough money to satisfy those amounts. This concern is easily overcome with a statement that, if money is insufficient to pay all amounts, the amounts should be paid out proportionally.
Second, percentages can be used to distribute assets. For instance, 5 percent could go to my godchild and 8 percent to each of my siblings. Sometimes, people will put limits on the actual total amount. For example, I might give my niece 5 percent of what I have, up to $2,000 total.
LLCs can be helpful when distributing percentages or fractional interests. LLCs can organize co-ownership so that assets do not have to be sold to be split in a manner consistent with the percentages. Essentially, in this context, LLCs can help businesses, farms and other assets remain as one while allowing for co-ownership and sharing of proceeds/earnings/profit.
Third, individual assets can be earmarked for certain people. I used to joke that if I ever married a farmer’s daughter, I would hope that my father-in-law would say, “Here’s my daughter and 80 acres.” Unfortunately, I have neither a wife nor 80 acres. Nonetheless, many people will identify certain real estate, vehicles or other possessions to go to certain people.
Fourth, many clients will mix and match the three frameworks set forth above. However, in using multiple frameworks, precise organization is key. In this context, the overall desired distribution of assets should be carried out, regardless of almost any contingency.
There is no formula for this precision other than the real labor of logical thought. If I want my assets split evenly between two children along with $500 going to my church, the church’s $500 must necessarily be given before the assets are split between my children.
Lee R. Schroeder is an Ohio licensed attorney at Schroeder Law LLC in Putnam County. He limits his practice to business, real estate, estate planning and agriculture issues in northwest Ohio. He can be reached at Lee@LeeSchroeder.com or at 419-659-2058. This article is not intended to serve as legal advice, and specific advice should be sought from the licensed attorney of your choice based upon the specific facts and circumstances that you face.